Home Page | Photos | Video | Forum | Most Popular | Special Reports | Biz China Weekly
Make Us Your Home Page
Most Searched: Bo Xilai  Floods  Chinese dream  Cyber security  Li Keqiang   

Xinhua Insight: Big Four no longer the biggest

English.news.cn   2013-08-26 13:24:40            


BEIJING, Aug. 26 (Xinhua) -- Though the Big Four have lost their dominance over China's accounting market, industry insiders remain confident about the firms' traditional advantages and potential growth.

PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young and KPMG are the four biggest accounting services networks in the world. But they no longer hold the top four spots among certified public accounting firms in China, according to a ranking by the Chinese Institute of Certified Public Accountants.

Ruihua Certified Public Accountants is now the third largest firm in China, ahead of Ernst & Young. KPMG has dropped to sixth.

"The Big Four peaked in their dominance of China's accounting markets in 2007, when they had 55 percent of the market. They are down to 34 percent," said Paul Gillis, a professor at Peking University and adviser to the Public Company Accounting Oversight Board, which oversees accounting firms in the United States.

The Big Four have been growing slower than the economy since 2008, according to Gillis, who served as a long-time partner and member of the China executive board of PwC before retiring.

A senior partner at one of the four firms acknowledged the Big Four were generally not competitive in the local market. He requested anonymity in discussing the matter.

The lion's share of the Big Four's Chinese clients are big companies with overseas exposure, which tend to hire internationally recognized auditors to assure global investors,

"Auditing these companies requires a vast amount of expertise on regulations and market practices in various countries and jurisdictions, as well as an understanding of our clients' complex cross-border operations," said David Wu, lead partner of Government and Regulatory Affairs at PwC China.

But relying heavily on these clients risks alienating small and medium-sized companies that are expanding rapidly, industry insiders said.

"Unless the Big Four find a way to be competitive on local stock listings, they will continue to lose market share. They will continue to dominate the multinational market, but that is not going to grow much faster than the economy," Gillis said.

But executives at the four firms argued that not all companies required a Big Four firm.

"Auditing is a homogeneous, undifferentiated commodity, and in China's domestic market the services offered by local and the Big Four firms are indistinguishable", said Schulz Zhang, who spent eight years working at KPMG and now serves as the chief finance officer at Handuyishe, an e-commerce company.

The biggest obstacle is the considerably high fees charged by the Big Four, compared with their competitors.

"Not being wanting to dominate the market, it's because we've been following our clients who want to expand globally and need a global firm to serve them. So there is a cost attached to us," said the senior partner who requested anonymity.

While highlighting their global expertise, the Big Four stressed the local nature of their firms in China, in particular their recent transition into Special General Partnerships (SGPs) in China.

The SGP structure, required under guidelines issued by the Chinese authorities earlier this year, puts ownership in hands of partners who run the Big Four's China business.

According to the guidelines, the four in China will see an increasing percentage of partners with local accounting qualifications in their management, like in most other countries.

Previously, many management positions were taken by Hong Kong residents and foreign nationals with accounting qualifications obtained outside the Chinese mainland's jurisdiction.

"The staff are mostly localized today, but the partner ranks, and particularly the senior partner ranks, remain heavily foreign," said Gillis, who saw this part of transition especially challenging.

"The existing foreign partners don't want to turn over power until their careers are over. It might be too late for the firms if they wait for existing leaders to retire," Gillis added.

But experience is highly valued in this industry, as seasoned hands are required to carefully examine books, as well as maintain and develop relationships with clients.

Getting someone who is inexperienced to run the firm will be very dangerous, the senior partner cautioned.

It took at least ten years to train a partner, and another ten years to develop them to management roles, he said.

And given that only a few years into the 1990s Chinese mainlanders began their Big Four career, "Five or ten years down the road, we maybe have a Chinese local mainland chairman," the senior partner said.

"Despite all the issues people talk about, (including) the localization, if you look back over the ten last years, all the Big Four are doing well," he said, "and over the next ten years I think they will continue to do well, because China is still growing very quickly."

David Wu said, "To put the potential for growth in perspective, consider that today China's GDP is more than half that of the US, while at the same time, the number of partners and staff in PwC China is only one-third that of the US firm.

"We at PwC are fully confident that China's economy will continue to expand, and we have committed significant investment to support that growth."


China's outbound M&A value hits record high: PwC

BEIJING, May 22 (Xinhua) -- The total value of China's outbound mergers and acquisitions in 2012 reached a record-high 65.2 billion U.S. dollars, marking a five-fold increase from 10.3 billion U.S. dollars in 2008, a PricewaterhouseCoopers (PwC) report said Wednesday.

Since 2009, China has been leading the trend among emerging markets in carrying out mergers and acquisitions in the markets of developed countries, accounting for nearly 70 percent of the total M&A transaction value among emerging markets, including Brazil and India, according to the report. Full story

Ernst & Young raises British growth forecast to 1.1 pct

LONDON, July 15 (Xinhua) -- British GDP will grow by 1.1 percent this year after a 0.2-percent rise in 2012, Ernst & Young ITEM club, a London-based economic forecaster, said on Monday.

The current modest pick-up in the economy is driven by the consumer in general and the housing market in particular, it added. Full story


Editor: Bi Mingxin
Related News
Home >> China            
Most Popular English Forum  
Top News  >>
Photos  >>
Video  >>
Top China News Latest News  
  Special Reports  >>