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SCMP Reporter

SMALLER international accounting firms will have a chance to share in the booming China market under a government policy to relax approval criteria for foreign accounting firms setting up joint ventures.

   Only seven foreign firms are now allowed to set up joint ventures in China - the six largest international firms and Kwan Tong Tang & Fong of Hong Kong.

  The big six include KPMG Peat Marwick, Ernst & Young, Deloitte Ross Tohmatsu, Coopers & Lybrand, Arthur Andersen and Price Waterhouse.

  Among the seven firms, four are based in Beijing, two in Shanghai and one in Shenzhen.

  In the General Agreement on Tariffs and Trade (GATT) talks in Geneva in November last year, China agreed to further relax its tight grip on the accounting sector as part of a package to open up the service sectors.

  China has said it would allow 15 foreign accounting firms to set up joint ventures in the country, including the existing seven.

  Under the new policy, accounting firms which intend to enter the China market should have an annual revenue of at least US$20 million and a team of professional staff of not less than 200.

  They will have to open a representative office first for the authorities to assess their operations. They can look for Chinese partners to form joint ventures after obtaining approval from government authorities.

  Foreign firms have to rely on their Chinese partners, who are certified public accountants in China, to sign statutory financial reports for their clients, either listed companies or other types of joint ventures.

  Peter Wan, managing partner of Coopers & Lybrand CIEC, said it would take some time before additional foreign accounting firms could be admitted and help alleviate the serious shortage of accounting professionals in China.

   Although some firms might satisfy the new requirements, they would only consider entering China if there was a demand from their existing clients because of the huge investment.

  ''Setting up a joint venture is a long-term investment. It takes a lot of effort to upgrade the standard of local staff,'' Mr Wan said.

  He said it was costly to maintain a joint-venture firm in China.

  ''On the one hand, it is extremely difficult to recruit qualified staff, and on the other hand, the staff turnover rate is very high because of competition from other firms and from clients,'' Mr Wan said.

  ''So it remains to be seen if some foreign firms are willing to make the long-term investment,'' he said.

  Coopers & Lybrand opened its Beijing office in 1981, followed by Shanghai and Guangzhou offices.

  But the joint-venture firm was not formed until April last year. The Chinese partner is the CIEC Certified Public Accountants under the China International Trust and Investment Corp.

  Mr Wan said the deal was unusual in that it involved the merger of Coopers & Lybrand's operation in China and the CIEC firm as a whole.

  ''This arrangement has the benefit of making full use of the resources and expertise of both sides,'' he said.

  When the merger took place, the joint venture had about 30 staff, but it has since expanded to employ more than 70 staff.

  Mr Wan said plans were under way to establish Coopers & Lybrand CIEC branch offices in major Chinese cities, including Shanghai, Guangzhou, Shenzhen and Dalian to provide more efficient services to clients.

        The first one is expected to be launched this year after some minor technical problems are resolved.



Entry made easier for accountants