Thousands of junior accountants in Hong Kong have reason to worry about their job security after the Ministry of Finance proposed new rules last week that would effectively ban the city's bean counters from working on the mainland.
Posted on the ministry's Chinese-language website, the rules would, if implemented as scheduled this year, change the rules of the game for Hong Kong accountants.
The proposed rules, out for consultation until the end of the month, require an international accounting firm to team up with one of the 100 domestic accounting firms to perform audits for mainland firms planning to list offshore, including in Hong Kong, and also in order to perform annual audits after the firms are listed.
The new rules would also prohibit international accounting firms from sending their staff to the mainland under temporary licences.
As a result, the Big Four and other international firms are likely to scale down their hiring in Hong Kong but increase hiring for mainland operations.
The proposed changes spell the end of a golden era for Hong Kong accountants.
Over the past 20 years, many of the city's accounting graduates found it easy to get a job at international accounting firms which needed an army of junior auditors to send to mainland clients' factories or offices to help them prepare to list in Hong Kong.
Stock exchanges in Hong Kong and the United States require mainland companies planning to list to hire international accounting firms as their auditors. This is huge business for the Big Four firms, which have hired large teams from Hong Kong that they send to the mainland to do the auditing.
The new rules clearly aim to break this tradition and channel the business to the mainland's own accounting firms instead.
Why now and not before? The answer is that the mainland did not have enough accountants trained to cope with the volume of audits.
In 1993, when Beijing first allowed H-shares to list in Hong Kong, the mainland did not have many accountants who knew how to handle audits for new listings and so had to rely on Hong Kong accounting professionals.
Today, the mainland has more than 300,000 locally trained accountants, almost nine times the 35,000 or so accountants that Hong Kong can muster.
The more senior Hong Kong accountants should keep their jobs, because the offshore exchanges would still need international firms to sign off on the audits done by staff from their mainland partner firms.
But the city's junior accountants face a bleak future if they are not allowed to do field audits on the mainland. There are simply not enough auditing jobs in Hong Kong to keep them busy.
The opportunities would now be passed to junior accountants who work for mainland accounting firms that enter into partnerships with international firms.
If junior accountants want to speak up against the proposed rules, to save their jobs, they should voice their support to the Hong Kong Institute of Certified Public Accountants, which is lobbying the ministry to amend its proposals.