The development of a regulatory accounting system in China

Abstract

The article reveals the development of a regulatory accounting system in China. National accounting standards are a system of regulations, enshrining the basic principles and rules of national accounting. The author illustrates the features of the traditional Chinese accounting system, the practice of first using Western accounting tools, the adoption of the Soviet model, the era of Maoism, reforms of Deng Xiaoping, the current state, and the difficulties of the transition to international standards. The author focuses on the factors that have shaped the national characteristics that distinguish the Chinese accounting system from others. These features should be leveled out by international accounting standards, harmonization with which China began in the 90s of the twentieth century in order to increase the transparency of financial reporting and reduce the cost of attracting foreign capital. The article emphasizes the fact that the Chinese accounting regulatory system for many centuries developed in its own way, fulfilling the tasks that were necessary for the state. The Chinese experience of borrowing elements from other legal models demonstrates the negative economic consequences that occur when China attempts to abandon their own traditional practices. The fact that reforms are led by the Ministry of Finance of the PRC, through “regulations” and “recommendations” rather than by the national professional accounting community, has a strong influence on the reform processes in China. A series of comparative tables of the main provisions of regulatory acts forms an idea of the convergence process of Chinese national standards with international ones. Particular attention is paid to how the Chinese side competently behaved in the negotiation process with the International Accounting Standards Board. Following the results of the material presented, the author concludes that the development of the Chinese accounting regulatory system is a good example of the fact that it is not possible to unify national traditional principles and regulations by adopting international standards. And with the support of the traditional economic principles that have been fixed in the regulatory system, China for several decades has managed to transform from an investment object into the world’s largest investor.

Keywords:

regulation, accounting, national standards, International Financial Reporting Standards, harmonization, Chinese experience