China AccountingChina AccountingThe Rise of AccountingIn ChinaPrepared By:Serena [email protected] of ContentsIntroductionSignificance of China in the Global MarketHistory of Accounting in ChinaEstablishment of Accounting StandardsFinancial Reporting and Auditing RequirementsRecent Developments and Impending Accounting IssuesWorks CitedIntroductionChina has a population of 1.3 billion whose per capita income has grown tenfold since 1990. An annual growth rate averaging more than nine percent over more than two decades has driven China to fourth place in the world economic league table. Many investors and potential businesses see China as an emerging market and potential location for foreign subsidiaries. China is characterized by intense competition and entrepreneurial activity in almost every field (Read and Partridge, 2006).
Some major advantages and also major concerns exist in multinational enterprises due to China’s accounting system. As China is one of the oldest civilizations in the world, their accounting system lacked structure. China went from a double-entry accounting system, to a debit-credit accounting system following Western Civilization, to other individual systems that certain leaders felt would be more specific to China.
To remain competitive with other foreign accounting industries, China developed groups of accounting professionals to research and develop accounting standards. The Chinese Ministry of Finance was developed to establish regulations and standards for their current accounting system. Under the Ministry of Finance, the Administration of Accounting Affairs was implemented to assist China in conforming to a uniform accounting system. Along with these two standard setting bodies, China also followed the United States in developing the Chinese Institute of Certified Public Accountants. Compared with the United States, China has gone through many previous and recent changes in their accounting and auditing standards and is slowly moving towards more internationalized accounting methods.
Significance of China in the Global MarketChina is currently one of the fastest growing economies in the world. Many people find it hard to believe that an isolated, communist country could turn into one of the world’s leading manufacturers within two decades, but it happened. China’s overall success came through a slow process of global integration and decades of economic self-sufficiency. In 1978, China was a highly regulated and isolated country under control by The Communist Party. Post 1978, China went through a transitional stage where intercontinental transactions increased drastically to a point where all countries are currently affected by their industry (Zweig, 2003).
China’s affect on the global economy is due to its innovation and retention of manufacturing and technological industries. The labor intensive factories of China produce 70% of the world’s toys, 60% of the world’s bicycles, and 50% of the world’s shoes. Many corporations have moved production centers into China due to the effective and efficient labor terms. The transfer of worldwide large-scale industrial segments to locations where the cost of production is low has had a very positive impact on China. Every added manufacturing plant increases the amount of materials that need to be imported from neighboring countries, which in turn increases China’s amount of purchasing power. China’s manufacturing segment continues to increase as other countries rely on Chinese components or subassemblies to remain competitive (Shenkar, 2005).
The Globalization of Production and Investment in China
The country is under growing political pressure to become more self-sufficient in imports of China’s goods and services. Although the U.S. is investing heavily of its own money in promoting China’s economy, these efforts to shift the foreign trade away from China, especially with Asia as a global market, have created major economic difficulties for some industries. For instance, manufacturing plants in the United States do not have an efficient labor process. In many instances the product, which includes clothing, footwear, shoes, and other goods, has not been made in China within two to three years, while other products have not been made in at least one year.
By changing, China is increasing its demand for goods and services across the region. China is an ideal trade partner for non-cuba trade, where China also markets its products for U.S. companies and other overseas services. An important part of this process is that the U.S. has a highly developed domestic trading and shipping industry, which is expected to add tens of million jobs in China over the next decade. China has also been leading the world in its efforts to become a world leader in manufacturing output and the global trade in goods flows, and the economic integration process since China became independent from the United States is set to become much more seamless.
The Globalization of the Production and Investment in China (2002)
Since 1999, China has produced a median of 654,000 metric tons of raw agricultural products (Mt). These units come from imported raw materials (mostly rice and other products), including wood products (including paper, wood bar, and wood chips), iron, paper, metal, tin, plastic, copper, aluminum, steel, and other materials. Many of these products are highly refined products, such as iron and wood chips (and also a few are natural petroleum products such as aluminum, which are also considered high-grade metals) which have a high demand for consumption in order to keep industrial production rates competitive.
In 1999, China shipped over 3.2 million metric tons of raw agricultural products, or 20 percent of the country’s overall food production, to the United Kingdom. This translates to a 2.2 billion metric tons of raw agricultural products as of 2000.[8]
In December 2004, China purchased the world’s largest wheat harvest (up to 14 million tons) with $12.2 billion as its fifth-largest wheat crop. The purchase of China Wheat is likely to double to nearly 10 million metric tons of China’s wheat from 3.5 million in 1995 to about 10 million in 2007. Moreover, China is growing a great demand for vegetables that the U.S. is seeking market through exports from the U.S. and other countries such as the Philippines (see this 2012 update for a summary of these countries).
In March 2005 the U.S. Food and Drug Administration approved a product called “The Chinese Cook,” developed by China. Under the new version of this product, the Chinese Cook can “process raw food with a liquid component from China” and be packaged at a convenience store or other retail outlet within five days (Dong and Liu 2004).[9] China has previously been offering “The Chinese Cook” to U
Still remaining a low-tech, labor intensive manufacturer, China has continued to be one of the Worlds most advanced technological developers. Dating back to the Imperial Period, China was known for the development of some impressive and widely