‘Bigger and stronger’, the mantra of the Chinese Government’s
ambitious plan for the domestic accounting profession, nicely sums
up a consolidation rush by the nation’s largest accounting firms in
the past year.

Three international mid-tier networks have made significant inroads
into the Chinese market by teaming up with large, reputable Chinese
firms. Mid-tier networks are attempting to merge their Chinese
firms into single practices to provide greater scale, depth,
cohesion and global capabilities. Integration is going to become an
important buzzword for Mainland firms over the coming year because
of plans by regulators to open up audit of Hong Kong Stock Exchange
participants to Mainland firms for the first time (see
below
).

Firms also want to muscle in on the government’s ambitious plans
for a Big 10.

Grant Thornton International has admitted former BDO
International member firm Zhonghua. The firm, headquartered in
Shanghai, will operate under the name Grant Thornton Zhonghua and
adds 22 partners and 350 staff. Grant Thornton Zhonghua is a strong
domestic firm that audits several A-share listed public companies.
The addition of the firm is the first step in a strategy to build a
national firm with strong domestic and international capabilities.
Zhonghua provides a solid platform for Grant Thornton to grow its
domestic market share.

“During 2008 we worked on two things,” Grant Thornton China
Management Corporation chief executive Stephen Chipman explained.
“One was growing our existing practice organically but we also
pursued a more aggressive merger and acquisition strategy as we
started to shift our focus from not just serving our inbound
clients but really starting to develop a presence in the domestic
Chinese market.”

Grant Thornton Zhonghua will immediately begin integrating into
existing Grant Thornton practices. This will create a firm of 34
partners and 590 staff headquartered in Shanghai and with branch
offices in Beijing, Guangzhou, Shenzhen, Chengdu and Qingdao. In
Mainland China, Grant Thornton has a workforce of 940 staff, which
increases to 1,740 when Hong Kong and Taiwan are included. The
firm’s Greater China revenue was CNY535 million ($78.3 million) in
the year ended 31 December 2008.

BDO International has also made significant movements in China
with the addition of Shu Lun Pan Management Company (SLP ManCo)
earlier this year.

SLP ManCo has firms in Beijing, Nanjing, Shanghai, Fuzhou and
Guangzhou, and branch offices throughout the country. BDO has
additional members in Beijing, Shenzhen and Wuhan. There are plans
to consolidate the network under the SLP ManCo banner.

SLP ManCo has 1,150 people spread across China and BDO’s
combined workforce across the Mainland is about 4,000 people. The
combined annual revenue of BDO’s Mainland China firms is about
CNY920 million.

The third major network addition, which occurred last March, was
Zongrui Yuehua CPA joining RSM International. Zongrui Yuehua, one
of the largest CPA firms outside the Big Four, added more than
1,000 staff and the firm has 19 offices across Mainland China. RSM
China’s revenue was CNY600 million in the year ended 31 December
2008.

BDO China co-ordinator Katherine Liu predicted consolidation
will continue to be a hot issue for firms this year.

Arvind Hickman