Move to localise Big Four managers
Beijing's latest measure to localise the mainland operations of the Big Four accounting firms have been welcomed by several of the firms and the Hong Kong Institute of Certified Public Accountants (HKICPA).
The new rules will dilute the control that Hong Kong and foreign accountants exert over the firms' mainland operations.
The Ministry of Finance yesterday released new regulations for Sino-foreign accountancy joint ventures.
The only such joint ventures on the mainland are those of Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers.
One of the new rules is that within three years the top management in the mainland joint ventures must be Chinese nationals with Chinese accountancy qualifications and have at least eight years of accounting experience on the mainland.
If the top management fails to meet the criteria, they must be replaced with Chinese nationals.
Under the new rules, the proportion of partners from Hong Kong, Macau, Taiwan, and other countries in the Big Four accounting firms' mainland joint ventures without Chinese qualifications will be limited to 40 per cent this year, declining to 35 per cent at the end of 2014, 25 per cent at the end of 2016, and 20 per cent at the end of 2017.
From the viewpoint of Hong Kong accountants working for the Big Four firms on the mainland, the new rules were better than expected, said Winnie Cheung, chief executive of the HKICPA. 'Initially there was concern whether all partners in the Big Four joint ventures in China would have to be fully local and locally qualified.
'The worry was, 'what about the Hong Kong partners?' The new rule addresses these concerns.'
Cheung said she hoped the new quota for foreign partners would be extended to all accounting firms on the mainland.
'The institute has been pushing very hard for that,' she said.
She also said she had expressed this wish to chief executive-elect Leung Chun-ying last month during talks on difficulties experienced with the Closer Economic Partnership Arrangement (Cepa).
Cepa grants to Hong Kong's service-sector professionals, including accountants, preferential access to the mainland market.
'If they can bring in Hong Kong auditors with a 40 per cent quota, that will be great,' Cheung said.
'It will open the mainland market for Hong Kong accountants and integrate the accounting professions of Hong Kong and the mainland.'
Ernst & Young KPMG and PwC said it welcomed the announcement.
'The new measures are in line with [our] strategy to accelerate localisation of our fast-growing business in China, reflecting our deep commitment to the development of our China practice and its people,' the firm said.
It said its senior leaders for China were closely involved in discussions with the Ministry of Finance, and were pleased to have 'a definitive framework for progress'.