Strong growth presents need for sound advice in all sectors
Given the mainland's sustained momentum for economic growth, many businesses are expected to benefit from strong inbound and outbound investment, creating enormous fund movement and more opportunities for the accounting sector this year.
Leading international accounting firms, or the big four, are faced with multiple challenges despite bright growth prospects. Because the central government has been updating and aligning its financial regulations, with international ones, the country's regulatory environment will become increasingly complicated.
International firms mainly focus on auditing, taxation, restructuring and advisory in areas such as mergers and acquisitions. They provide services to corporations in many sectors, including financial, industrial, property and retailing.
Benny Liu, audit partner in charge at KPMG China, expects double-digit business growth this year. He is optimistic because the mainland market for initial public offerings has been reinvigorated. Meanwhile, domestic enterprises have become better developed and many are already listed on stock exchanges abroad.
'These companies need more advisory services from international accounting firms in addition to auditing and taxation services. They may need to strengthen their internal control and risk management processes following expansion. Sectors such as retailing and consumer products are likely to continue their robust growth this year because the central government encourages domestic consumption,' Liu says.
PricewaterhouseCoopers' (PwC) mainland operation expects its growth to keep pace with that of China's economy. PwC China focuses on all main industries on the mainland, including finance, consumer-related businesses and resources-related enterprises.
PwC China markets leader Frank Lyn says: 'We also provide services to the growing domestic private equities and venture funds, which have diverse investment interests in many different areas. Given the minimum 8 per cent gross domestic product growth in China, we pay great attention to the country's capital markets and mergers and acquisitions, where demand from various industries is expected to remain strong. As China is still a developing economy, the infrastructure and construction sectors are also important for us.'
PwC also sets its sights on the emerging industries, including renewable energy, automobile, biotechnology and hi-tech equipment.
Agnes Chan, regional managing partner of Ernst & Young, sees growth across all lines of business at the firm. More mainland enterprises will seek international taxation services because many have been expanding operations overseas. Advisory on mergers and acquisitions is also expected to be a fast-growing area, thanks to the increasing awareness among executives of domestic enterprises of the importance of advisory from international firms. 'They realise this advisory helps them enhance their companies' management and lift profit levels,' Chan says.
As Beijing is updating its financial regulations to bring them in line with international ones, the regulatory environment for accounting firms and their clients is becoming more complicated.
'The regulatory consideration is increasingly complex,' Lyn says. 'We focus on enhancing our understanding of China's development on all fronts through our operations in major cities and through continuous localisation of the workforce.'
The complex regulatory environment has a silver lining. More domestic banks are expected to seek advisory services from accounting firms on regulations and internal control. International firms can also provide banks with a more globalised perspective for their operations, Liu adds. The supply of accounting professionals has not kept pace with rapid business growth and has given rise to intensifying competition for fresh graduates and experienced hires, Chan says. 'Because the younger generation has a different work attitude and expectations, staff retention is also a challenge.'