Answers to Articles

3 September 1994 pp.

48-57 Accounting Standards in the People's Republic of China: Responding to Economic Reforms Gary M. Winkle, H. Fenwick Huss, and Chen Xi-Zhu Gary M. Winkle and H Fenwick Huss are both Professors at Georgia State University, Chen Xi-Zhu is an Associate Professor at Zhengzhou Aeronautical College.

SYNOPSIS: Economic reforms in the People's Republic of China are continuing to move the Chi- nese economy toward a market model. Much of China's output is now generated outside of the state sector. Privatization reforms include a share system of ownership, development of organized stock exchanges, and listing of shares in Chinese companies on Western exchanges. A revision of Chinese accounting standards is essential for the success of these reforms, and China's Ministry of Finance has begun a comprehensive revision of reporting requirements. Recent regulations are examined, differences between these regulations and Western reporting standards are identified, and an evaluation of China's progress toward internationally accepted norms is made.

Data Availability: All data used are publicly available. Copies of the Chinese standards and trans- lations are available from the authors upon request.

Since the end of the Cultural Revolution in China in 1976, economic reforms have moved the Chinese economy from a planned, socialist model to a "socialist market economic system" (the Chinese description of a planned economy with market adaptations).

Under the economic reforms, private enterprises, co-op- eratives and foreign joint ventures co-exist and compete with state-run entities. Recent estimates indicate that at least 50 percent of "China's industrial output is now generated outside the state sector" (Tanzer 1991, 74).

The economic reforms have increased China's eco- nomic strength and raised the living stan- dards of the Chinese people, evidenced by "an annual growth rate averaging more than nine percent... and ...

living standards douhle what they were in the early 1980s" (Lachica 1992).

In November 1993, the Central commit- tee of China's Communist party endorsed the concept of a more rapid transition to a mar- ket economy, suggesting that additional com- prehensive economic reforms are forthcoming in 1994. Extensive privatization is expected although state ownership is expected to re- main as the "mainstay" of the Chinese economy (Leung and Chen 1993, A8).

Central features of the economic reforms are the share system of ownership, the development of or- ganized stock exchanges, and the listing of shares in Chinese companies on Western exchanges.

The movement in China toward private ownership that is often separate from man- agement requires a revision of China's finan- cial reporting system.

This revision in account- ing and disclosure standards is essential for the success of China's economic reforms. This The assistance of Cai Fan, Graduate Research Assistant at Georgia State University is gratefully acknowledged. Accounting Standards in the People's Republic of China: Responding to Economic Reform.

49 paper examines privatization in China, the re- development of the share system, and the dif- ficulties with traditional Chinese accounting that have brought about the need for revisions in financial disclosure requirements. Recent accounting releases by the Ministry of Finance are described, and differences between the new Chinese standards and U.S. reporting standards are identified.

PRIVATIZATION IN CHINA Economic reforms in the People's Repub- lic of China continue despite the ideological struggle between conservatives and reform- ers.

After the founding of the People's Repub- lic of China and the completion of socialist transformation, the share system was consid- ered "capitalist" and inevitably perished. Dur- ing the reform period, the question of whether the share system should be possessed solely by capitalist systems was again put forward in China. The debate centered on whether a share system of private ownership could be included in China's socialist economy. The Chinese have concluded, apparently, that the share system is an organizational mode of business consistent with their social system.

As a result of this reconciliation of private ownership with the Chinese social system, China's economic reforms have broken up pure state ownership. The government has begun to extricate itself from control of some enter- prises, and ownership is often separated from management.

STOCK MARKETS IN CHINA Before the founding of the People's Repub- lic of China, an influential stock exchange ex- isted in Shanghai.^ In Communist China, be- fore the current reforms, raising capital by stock issuance was prohibited and the stock exchange was closed. During the recent eco- nomic reforms, however, a number of firms in cities such as Shanghai, Shenyang, Guangzhou, and Shenzhen have begun issu- ing shares to raise capital, often from the workers in the enterprises. After a short pe- riod without much regulation of stock issu- ances, the National Central Bank in late 1984 began a system of regulation. These branch banks are responsible for exercising control functions on stock issuances and exchanges.

The further development of this regulatory system is seen by the Chinese government as essential for the success of the economic re- forms.

Similar to the intent of the American securities laws, the Chinese govemment rec- ognizes the importance of reinforcing inves- tor confidence in the integrity of the private markets.

A principal component of this regu- latory system is the development of financial reporting standards to fairly present the fi- nancial position and performance of enter- prises participating in the share system. The importance of the revisions in disclosure stan- dards is evident from the difficulties in evalu- ating Chinese businesses using financial statements based on traditional Chinese accounting.

EVALUATING CHINESE BUSINESSES Chinese companies are seeking to list their shares overseas or to sell shares to foreign investors in the markets of Shanghai and Shenzhen (Sender 1992, 59). The challenges in developing a stock market in China are sig- nificant; for example, "foreign underwriters have found themselves wrestling with a host of problems, including China's antiquated ac- counting practices ..." (Duckworth and Leung 1991, Alia).

The likelihood of success for firms attempting to go public depends on "how well Western accounting firms manage to recon- cile two business cultures that are worlds apart" (Sender 1992,59).

The accounting stan- dards left over from the era of state-owned en- terprises operating in a command economy presently are inadequate for investors enter- ing the emerging Chinese stock markets and for Chinese companies attempting to list on foreign exchanges.

Regional differences in ac- interesting historical note is cited by Kaye and Cheng (1992,48):

In 1927, when China's civil war was raging, the Communist party issued stock to raise much-needed cash.

Cadres simply sold shares of farm- ers' banks in the liberated areas' under their control.

Party leader Mao Zedong signed some of the script himself. 50 Accounting Horizons / September 1994 counting standards may exist (Sender 1992) with accounting standards varying from "prov- ince to province and even city to city" (Sweeney 1993, 29).

Companies that offer B-shares (which are shares available only to foreigners) on the de- veloping Chinese stock markets must provide financial disclosures that are understandable by international investors. Investors in the emerging Chinese stock market have difficulty in assessing the financial health of companies listed on the exchanges (McGrath 1993, 9).

Because of the lack of specific disclosure re- quirements, the financial position and oper- ating performance of a company may be mis- represented. Financial statements of compa- nies going public must be "reinterpreted line by line to conform with international norms" (Kaye and Cheng 1992, 50) because the an- nual reports under the socialist system are more like statements of sources and uses of funds which concentrate on production rather than profits (Kaye and Cheng 1992, 50). The difficulty in analyzing Chinese companies is not the lack of information since "the Confu- cian imperative to keep historical records flourishes at most Chinese companies" (Sender 1992, 59). Rather, the difficulty is in the orientation and focus of the existing finan- cial statements.

The difficulties with accounting make privatization "a painful process" (Sweeney 1993).

Chinese companies have not been op- erated on a profit and loss basis; moreover, the enterprises have been engaged in a num- ber of services including housing, education for workers' children, communications, and administration of the community (Sweeney 1993).

In short, the previous accounting sys- tem was designed to refiect the goal of the enterprise "to meet the country's planning tar- gets and take care of people" (Hwauk, quoted in Sweeney 1993, 30).

Restating Chinese financial statements into Western terms is a labor intensive pro- cess.

Brilliance China Automotive (BCA) was able to complete an $80 million initial public offering on the NYSE in November 1992; the IPO, lead by First Boston, was an 18-month transaction (Wells 1992). Restructuring the company and presenting the company's finan- cial statements in accordance with Western standards required 11,000 hours (Sender 1992, 59).

Often the application of Western account- ing standards results in a lower company worth than under Chinese standards (Sender 1992).

The results of operations and financial position are often overly optimistic because provisions against profit for future events were not recorded. For example, Chinese ac- counting standards did not require an adjust- ment for bad debts or obsolete inventory, therefore the accounts receivable and inven- tory reported on the balance sheet may not reflect realistic values (McGrath 1993, 9).

Pro- visions were not made for accelerated depre- ciation of fixed assets. In other words, the con- servatism concept is largely absent fi-om Chi- nese accounting.

Determination of asset values in China is difficult since, for example, land is not usu- ally privately held and a secondary market is just now developing (Sender 1992, 60). Also, in traditional Chinese financial statements, cash balances and accounts receivable are of- ten not independently verified (Sender 1992, 60).

In addition, the true economic perfor- mance often is not refiected in the financial statements since subsidies in the Chinese economy often distort the allocation of re- sources. For example, steel used in the Chi- nese automotive industry may have been pro- vided at just a fraction of the market price (Sender 1992).

The absence of Western-style accounting standards (Kaye and Cheng 1992) presents a critical problem for accounting firms who are now involved in auditing companies offering shares in the Chinese market.

FOCUS ON ACCOUNTING Economic changes in the People's Repub- lic of China have brought increased attention to the importance of the role of accounting and financial reporting in the development of a nation's financial structure. The sharp in- creases in foreign investment in China, Accounting Standards in the People's Republic of China:

Responding to Economic Reform 51 coupled with the establishment of stock ex- changes which are open to Chinese citizens as well as foreigners, have heightened the need for a uniform national accounting system.

Traditional Chinese accounting practices have been influenced by the information needs of a planned economy and rest heavily on stewardship objectives. Some notable features are a standardized system with a uniform chart of accounts, a fund-oriented source, and appUcation-tjTJe balance sheet, a somewhat conventional income statement and numerous analjd;ical supplementary schedules.

The Chi- nese system has been well documented in western accounting literature (see e.g.

Enthoven 1987; Skousen and Yang 1988).

Characteristics of traditional Chinese account- ing are summarized in table 1.

Within the general climate of accounting uniformity, however, Chinese accounting is complicated by financial and accounting rules TABLE 1 Characteristics of Traditional Chinese Accounting ORIENTATION • Primary objective directed toward accountability and stewardship consistent with the needs of a planned economy.

• Utilizes a t5T3e of fund accounting.

• Emphasis on uniform accoiinting system for all enterprises to facilitate integrating information into the national economic plan.

• Accounting principles are formalized into national law.

ASSETS • Viewed as applications of funds provided by the state or other sources.

• Values based on historical costs. Long-term assets depreciated using straight-line method.

• Inventories valued at planned price in accordance with the central economic plan.

• Transactions cleared through the state bank on a cash basis resulting in very small amounts of receivables.

LIABILITIES • Viewed as fund sources by the enterprise.

A fund source is matched with each asset group.

• Major liabilities consist of funds received from the state and bank loans.

EQUITY • Strict distinction between liabilities and equity typically not maintained due to state ownership.

• Profits allocated to state funds or enterprise's funds.

REVENUE/EXPENSE/PROFIT • Accrual basis used for revenue and expense determination.

• Standard prices utilized, based on economic plan.

FINANCIAL REPORTING AND DISCLOSURE • Financial statements include a balance sheet reflecting fund applications and sources, an income statement, and numerous detailed supporting schedules and cost analyses.

• Conventional footnote disclosure lacking due to uniform accovuxting system and extensive reporting detail.

• Financial reports required monthly, quarterly and/or annually. 52 Accounting Horizons / September 1994 that differ among enterprises with different types of ownership; among those in different industrial sectors and among those with dif- ferent business natures (Xinhua 1992). Fur- ther, enterprises subject to the uniform sys- tem can make individual modifications with the approval of the Ministry of Finance (Zhou 1988).

While the traditional accounting sys- tem in China may be effective in meeting the internal reporting needs of economic planners, its lack of conformity to internationally ac- cepted accounting conventions makes it diffi- cult for overseas investors to obtain a clear financial picture of their Chinese investments.

IMPORTANCE OF THE ACCOUNTING REVISIONS The difficulties in determining perfor- mance and financial position along with con- cerns about the adequacy of governmental regulation have caused the B-share market to lose some of its appeal (Wells 1992). Part of the incentive for the Chinese government to revise the accounting standards may also be to increase tax revenue collections, since "tbe lack of specific rules also gives accountants greater flexibility in juggling numbers to re- duce tax bills" (McGrath 1993, 9). Moreover, under the present system, state-owned com- panies may "understate their performance to avoid government-mandated increases in out- put, production and employment targets" (Sweeney 1993, 29). Tbese opportunities for income manipulation furtber contribute to declining investor confidence in traditional Cbinese financial statements.

Western accounting firms are participat- ing in audits tbrougb joint ventures witb Cbi- nese accounting firms. One reason cited for tbe joint ventures will be tbe "upgrading of accounting standards" wbicb will assist tbe country in its efforts to "attract capital tbrough its stock markets and in Hong Kong" (Accounting Today 1992, 44). Tbe effort "is consistent witb tbe open economic policies advocated at tbe recent National People's Con- gress, and sbould belp to inspire confidence on tbe part of foreign companies wisbing to invest in Cbina" (Accounting Today 1992, 44), according to a Western accounting firm part- ner involved in tbe venture.

DEVELOPING NEW ACCOUNTING STANDARDS Tbe Cbinese Ministry of Finance is respon- sible for the promulgation of accounting stan- dards.

Tbe revision of Cbina's accounting stan- dards and tbe upgrading of tbe accounting profession is supported by a $2.6 million World Bank loan.

Deloitte Tbucbe Tbbmatsu is work- ing witb tbe Ministry of Finance to meet tbe 1995 target date (Bangsberg 1993, Xinbua 1993).

Tbe primary focus is to develop a set of national standards "in line witb internation- ally accepted norms" (McGratb 1993, 9). Tb date, tbe Cbinese government bas formulated accounting rules for several specific types of business entities operating in tbe country.

During 1992, tbe Cbinese Ministry of Fi- nance released four accounting regulations wbicb were designed to standardize account- ing practices in Cbina and to bring tbem into closer conformity witb Western financial re- porting. Tbree of tbese regulations were an- nounced in May 1992, and became effective early tbat year. Tbe fourth and most general in applicability of tbe regulations was released in December 1992, and became effective July 1, 1993.

The Early 1992 Regulations Tbe most comprebensive and detailed of tbe early 1992 regulations was entitled "Tbe Accounting System of Experimental Stock Companies" (Ministry of Finance 1992a).

Tbis regulation is meant to provide a regulated structure for tbe accounting metbods used in tbe new corporate entities being allowed to operate in tbe country.

Article 1 of tbe regula- tion states tbat, "in order to improve tbe ac- counting of stock companies and to protect tbe legal rigbts and interests of tbe investors and creditors, tbis accounting institution is regu- lated in accordance witb tbe Accounting Law of tbe People's Republic of Cbina and otber national laws and regulations." Examination of tbe document sbows tbat tbe regulation gives a detailed set of instruc- Accounting Standards in the People's Republic of China: Responding to Economic Reform 53 tions for tbe proper accounting treatment to be afforded numerous financial statement items, instructions for profit distribution, fi- nancial statement formats, auditing require- ments and otber matters.

In general, tbe docu- ment outlines an accounting format mucb like conventional Western practice witb a number of inclusions peculiar to tbe Cbinese system.

Many of tbe most notable differences are seen in tbe equity section of tbe balance sbeet and in tbe profit distribution requirements. Tbe differences in tbe equity section are due to ter- minology differences and tbe presence of sig- nificant state ownersbip. Tbe profit distribu- tion requirements are complex due to tbe gov- ernment ownersbip element and tbe appro- priation of amounts fi"om profit for public ben- efit purposes.

Tbe second and tbird of tbe early 1992 regulations are in tbe form of "Regulative Opinions" on two different types of corporate entities allowed to operate in tbe country.

Tbese two releases provide significant addi- tional detail in tbe areas of stock ownersbip, owners' equity accounting, profit distribution, etc.

Tbe second release, "Regulative Opinions on Limited Stock Companies" (Ministry of Fi- nance 1992b) describes tbe requirements to be followed by tbis type of entity. Tbe Cbinese Limited Stock Company is a corporation wbicb is allowed to issue stock to tbe public and may be listed on eitber of tbe two Cbinese stock excbanges located in Sbangbai and Sbenzben.

Tbese corporations can issue common and pre- ferred stock and tbere is no stated maximum number of sbares tbat can be issued. Tbe four types of sbares allowed are classified by own- ersbip: state owned sbares, legal-entity owned sbares, shares owned by individual Cbinese citizens and sbares owned by foreign inves- tors.

Tbe first tbree categories are designated "type A shares" and tbe last category, "type B shares." Only Cbinese citizens and institu- tions may own type A sbares and, as noted earlier, only foreign investors may own type B sbares. Botb types of sbares may be listed on tbe two Cbinese stock excbanges in Sbang- bai and Sbenzben.

Significant confusion bas been reported among investors because of tbe dual stock list- ings of tbe A and B sbares. All B-sbare com- panies also bave A-sbare listings.

However, A- sbare financial results are based on Chinese accounting principles and reported on that basis.

B-sbare results are reported on tbe ba- sis of international accounting standards.

"Tbe companies bave to prepare two sets of financial figures based on tbe two different accounting principles" (Cbu 1993). Anotber reported difficulty is tbat tbe two different reports are often released at different times and contain different levels of information.

Typical investor complaints are tbat tbe A sbarebolders receive financial information earlier tban B sbarebolders and tbat tbe A sbarebolders receive "a mucb broader disclo- sure of tbe company's performance" (Cban 1993).

Tbe tbird release is "Regulative Opinions on Responsibility-Limited Companies" (Min- istry of Finance 1992c).

Tbese companies bave a restricted capital structure and cannot be traded publicly. Tbe Responsibility-Limited Company must bave more tban two and less tban 30 sbarebolders. Witb governmental ap- proval, bowever, tbe maximum number of sbarebolders allowed may be increased to 50.

Tbese corporations afford limited liability and otber corporate benefits to entities wbicb are essentially privately and/or government owned. Tbis second-tier corporate legal entity is analogous to tbe dual corporate forms wbicb exist in western Europe and Japan.

The December, 1992, Standards Tbe appearance of "Accounting Standards for Business Enterprises" (Ministry of Finance 1992d) was described as "a landmark move to accelerate tbe process of switcbing to a mar- ket economjr" (Xinbua 1992).

Tbe overall stan- dard is tbe most general in content and ap- plies to all Cbinese business enterprises. Tbis latter set of standards became effective on July 1, 1993.

Tbe purpose of tbese new standards, as described by Liu Zbongli, Cbinese Finance Minister, is "to standardize tbe financial be- bavior of Cbinese enterprises and bring Cbina's accounting system in line witb inter- national practice" (Xinbua 1992). 54 Accounting Horizons I September 1994 Tbese regulations represent parts of wbat will eventually be a complete code of account- ing and financial reporting practices for Cbi- nese enterprises. Tbese standards are to ap- ply to all enterprises operating in Cbina, as well as to Cbinese investment enterprises op- erating outside tbe country.

Among tbe accounting cbaracteristics specified in tbe standards are double-entry.

accrual basis records, consistency, conserva- tism, comparative financial statements, ac- ceptable reporting formats and explanatory disclosures. Tbe standard requires that enter- prises prepare balance sbeets, income state- ments and statements of cbanges in financial position or casb flow. Table 2 summarizes tbe "Accounting Standards for Business Enter- prises" issued in December, 1992.

TABLE 2 Characteristics of "Accounting Standards for Business Enterprises," December 1992 ORIENTATION • A uniform accounting system conforming to intemational standards designed to meet the needs of China's socialist market economy.

• These standards are incorporated into law.

• The accrual basis, the concept of consistency, the matching of revenue and expenses and the quality of objectivity are all required hy the standards.

ASSETS • The use of historical cost for assets is specified and a clear distinction between revenue expenditures and capital expenditures must be made.

• Assets should be classified into the usual categories consistent with U.

standards.

• Inventories may be valued using most conventional methods, including LIFO.

• Fixed assets may be depreciated using the straight-line or the activity method. If the enterprise receives approval, accelerated depreciation may be used.

• Intangible assets, including goodwill, are recognized and are to be amortized over the period benefited.

LIABILITIES • Liabilities may be classified as current or long-term and hability accounting generally follows U.

standards.

EQUITY • Equity is classified into Invested Capital, Capital Reserve, Surplus Reserve and Undistributed Profit.

Invested Capital represents the face value of stock issued and government investment. Capital Reserve represents stock premium, asset revaluation increments, donated capital, etc.

Surplus Reserve is analogous to appropriated retained earnings in U. S. practice and Undistributed Profit is analogous to unappropriated retained earnings.

REVENUE/EXPENSE/PROFIT • Revenues are determined using the accrual basis consistent with U.S.

practice, including the completed contract and percentage-of-completion methods for long-term projects.

• Expenses are determined using the accrual basis and actual costs incurred. Enterprises using standard or estimated costs must adjust variances to actual at the end of the current month.

• The plan for distribution of profits must be shown in the income statement or the notes to the financial statements.

FINANCIAL REPORTING AND DISCLOSURE • Required reports consist of a balance sheet, an income statement, a statement of changes in financial position (or cash fiow statement), supporting schedules, notes and explanatory statements.

• Comparative financial statements are required.

• Consolidated financial statements are required in cases of 50% or more ownership except for enterprises not suitable for consolidation.

• Notes to financial statements must disclose accounting methods adopted, changes in accounting methods, descriptions of unusual items and other details and explanations. Accounting Standards in the People's Republic of China:

Responding to Economic Reform 55 While the standard is meant to give gen- eral guidance to companies, a number of spe- cific accounting practices are described as be- ing either required or allowed. Some of those mentioned are the allowance method for bad debts, LIFO and other inventory valuation methods, the equity method, capitalized lease accounting, accelerated depreciation, goodwill accounting, consolidation of financial state- ments and the percentage-of-completion method for long-term projects.

An examination of the standards indicates that financial information developed in accor- dance with their provisions should conform to the expectations of outside investors although there are some differences between U.S. ac- counting practices and the new Chinese stan- dards. Table 3 identifies several selected dif- ferences, including the higher degree of gov- ernmental control over accounting matters in China and the strict adherence to historical cost in reporting assets.

TABLE 3 Selected Differences Between U.S.

Accounting Practices and Chinese "Accounting Standards for Business Enterprises" ORIENTATION • In terms of orientation and purpose, the December 1992 Chinese standards parallel U.S. and intemational practices.

• While the Chinese standards provide for an increased level of accounting decision-making at the enterprise level, there is to be a continued higher degree of governmental control over accounting matters than is found in tbe U.S.

• Tbe standards represent a "first effort" and while including many detailed requirements, do not incorporate tbe vast complexity of U.S.

accounting rules.

ASSETS • Tbe standards specify a strict adberence to bistorical cost metbods.

No provision is made for lower-of- cost-or-market or mark-to-market valuation.

LIABILITIES • Tbere are no explicit differences between tbe Cbinese standards and U.S.

practices. Tbe standards do not address, bowever, many complex liability issues sucb as interest imputation, lease obligations, contingent liabilities, etc., wbicb will invariably arise as tbe enterprises become more deeply involved in tbe intemational market economy.

EQUITY • Differences between U.S.

practice and tbe Cbinese standards are readily observed in tbe equity section of tbe balance sbeet because of terminology differences and tbe presence of significant state ownership.

REVENUE/EXPENSE/PROFIT • Tbe Cbinese income statement, or tbe footnotes, must explain tbe profit distribution plan. Tbis plan may be more complex tban tbe profit distribution in a U.S.

corporation due to tbe govemment ownersbip element as well as amounts appropriated irom profits by law for public benefit purposes.

FINANCIAL REPORTING AND DISCLOSURE • Tbe Cbinese standards allow tbe option of a statement of cbanges in financial position or a casb fiow statement, U.S. standards do not provide tbis option.

• Consolidation of enterprises 50% or more owned is required by tbe Cbinese standards.

U.S.

standards require consolidation for over 50% ownersbip. Tbis bas implications for differences in accounting for joint ventures under tbe two systems.

• Cbinese standards allow subsidiaries wbose line of business is not suitable for consolidation to be excluded and reported separately. U.S. standards are more restrictive regarding tbe exclusion of subsidiaries fi-om consolidation. 56 Accounting Horizons I September 1994 It seems likely that, at least for the non- governmental sector of the Chinese economy, this reporting framework will entirely sup- plant traditional Chinese financial reporting.

COMMENTARY One need not be a visionary to predict the emergence of China as an economic super- power. In a recent report, the International Monetary Fund estimates that China's economy may have become the third largest in the world, behind the U.S. and Japan but ahead of Germany (International Monetary Fund 1993). The role of accounting is crucial in the progress of any developing economy.

Indications are that the government of The People's Republic of China recognizes this and is making efforts to promote accounting de- velopment alongside economic development.

At the 1993 meeting of the United Nations Intergovernmental Working Group of Experts for International Standards of Accounting and Reporting (ISAR), a call went out for improve- ment of accounting on a global basis (Cheney 1993).

The profession needs to adapt to the changing business environment. The impor- tance of the global financial markets is evi- dent in the activities of the International Or- ganization of Securities Commissions (IOSCO) which has as one of its major objectives "fa- cilitating cross-border securities offerings and multiple listings without compromising the presentation of financial statements" (Wyatt and Yospe 1993, 82).

In this regard, China has a long way to go, but it certainly is farther down the path than the former Soviet Union and Eastern Europe.

One of the great impediments to growth is the lack of qualified public accountants.

Deloitte Touche Tohmatsu, under a contract with the World Bank, in addition to drafting a set of accounting standards to propose to the Ministry of Finance, is assisting in continu- ing professional education development for the Chinese Institute of Certified Public Accoun- tants.

It is likely that the efforts to create a new accounting system for China will have a significant impact not only on business enter- prises and Certified Public Accountants in China, but also on the country's educational system for accountants. While some colleges and universities in the country offer courses in "Western Accounting," the major orienta- tion of accounting curricula has been toward traditional practice (Winkle et al. 1992). It seems assured that accounting educators trained in accounting practices used in mar- ket-oriented economies will be needed to pro- duce qualified graduates to work in the new Chinese economy.

REFERENCES Accounting Today.

1992.

Andersen, Peat Both Open Chinese Joint Ventures. (May 11): 44.

Bangsberg, P. T. 1993. Chinese Plans to Modernize Accounting Standards Advance. The Journal of Com- merce (February 9): 2A(1).

Chan, C. 1993. B for Vacuum Effort. South China Morning Post (March 24): 12.

Cheney, G. A. 1993. Can Accounting Keep Up? New Accountant (September): 22-24.

Chu, K. 1993. Misleading. South China Morning Post (March 28): 1.

Duckworth, M., and J. Leung. 1991. Share Offering in China Takes a Rocky Road. The Wall Street Jour- nal (November 18):

Alia.

Enthoven, A. J. H. 1987. A Review and Some Observations. In Accounting and Auditing in the People's Republic of China.

A joint research study by Shanghai University of Finance and Economics and Center for International Accounting Development, University of Texas at Dallas: 205-226.

International Monetary Fund. 1993. World Economic Outlook (May): Annex 4.

Kaye, L., and E. Cheng. 1992. Babes in the Bourse. Far Eastern Economic Review (July): 48-50.

Lachica, E. 1992. China Approaches Market Economy, Bank Official Says. The Wall Street Journal (March 30):

B12a. Accounting Standards in the People's Republic of China: Responding to Economic Reform 57 Leung, J., and K. Chen. 1993. China Endorses Enacting Swift Market Reform. The Wall Street Journal (November 15):

A8.

McGrath, N. 1993. Sorting out the Numbers. Asian Business (May): 9.

Ministry of Finance of the People's Republic of China. 1992a. The Accounting System of Experimental Stock Companies.

. 1992b. Regulative Opinions on Limited Stock Companies.

. 1992c. Regulative Opinions on Responsibility-Limited Companies.

. 1992d. Accounting Standards for Business Enterprises. Beijing: Publishing House of Law.

Sender, H. 1992. Pin-Striped Pioneers. Far Eastern Economic Review (November): 59-60.

Skousen, C. R., and J.

Yang.

1988.

Western Management Accounting and tbe Economic Reforms of Cbina.

Accounting, Organizations and Society 13 (2): 201-206.

Sweeney, P. 1993. Making Sense of Chinese Books. Global Finance (April): 29-30.

Tanzer, A.

1991. The Mountains are High, the Emperor is Far Away.

Forbes (August 5): 70-75.

Wells, K. 1992. BCAs Leap to the New York Stock Exchange Paves the Way for More Chinese Issues to Come. Global Finance (December): 15-18.

Winkle, G. M., H. F. Huss, and Q. Tang.

1992.

Accounting Education in tbe People's Republic of Cbina: An Update. Issues in Accounting Education (Fall): 179-192.

Wyatt, A.

R., and J.

Yospe.

1993. Wake-Up Call to U. S. Business: International Accounting Standards are on tbe Way. Journal of Accountancy (July): 80-85.

Xinhua General Overseas News Service. 1992. Cbina to Adopt New Financial, Accounting Standards.

(December 3).

. 1993. Bank Loans to Upgrade China's Accounting Standards. Beijing (February 5).

Zbou, Z. H. 1988. Chinese Accounting Systems and Practices. Accounting, Organizations and Society 13 (2):

207-224.