Innovating Development Philosophy
Serving Economic and Social Development
Speech at the 17th World Congress of Accountants
By Mr. Jun Wang
Vice Minister, Ministry of Finance, P.R.C.
November 14, 2006
Istanbul, Turkey
Distinguished Mr. President,
Ladies and Gentlemen,
It is of high significance and a great event for the global accounting profession to gather together for discussing world economic issues and mapping out development strategies in this grandiose and historic city that connects Asia and Europe and bridges the east and the west. I would like to extend my sincere gratitude for being invited to attend the meeting and share with you my observations on China’s economic development, the important role of the accounting profession in promoting China’s economic and social progress, and future development of the global accounting profession.
Since 1978 when the reform and opening up policy was unveiled, China has scored remarkable economic and social achievements. The socialist market economic system has been basically established; the all-dimensional opening-up pattern has taken shape; the economy has maintained sustained, stable and rapid growth; social productivity and overall national strength have been significantly enhanced; all the social undertakings have been promoted in full swing; and the Chinese people have witnessed a historical transformation from minimum living conditions with only adequate food and shelter to a better-off life today. China’s Gross Domestic Product (GDP) has maintained an average annual increase of 9.6%, and the number of farmers living below the poverty line has decreased from 250 million to 23 million. In 2005, China’s GDP reached to USD 2.2257 trillion, 15 times that of 1978. The total amount of import and export went up to USD 1.4221 trillion, 69 times that of 1978. Fiscal revenue amounted to USD 391.9 billion, 28 times that of 1978. In the last 5 years, the urban per capita disposable income and rural per capita net income increased by 58.3% and 29.2% respectively in real terms, and 42 million urban residents got their first jobs. Consumption in housing, telecommunications, automobiles and services increased at a large margin. China’s economy on the whole runs well at present and it is stepping towards the set objective of macro regulation. In the first three quarters this year, China’s GDP stood at USD 1.791 trillion with a year-on-year increase of 10.7%.
The sustained, rapid and stable economic growth of China has contributed a lot to the global economic development. The contribution rates of Chinese economy to global economic growth and international trade increase have been 10% and 12% respectively since China’s implementation of reform and opening up policy. Since China joined in the WTO in 2001, its average annual import of goods has valued over USD 500 billion, having created over 10 million job opportunities for the related countries and regions. Keeping its promise, the Chinese Government constantly opens its market. In the area of services trade, China has opened its markets of tourism, telecommunication, transportation, accounting, auditing, law services and others. The degree of openness in these areas has almost caught up with the level of advanced countries.
In the process of China’s modernization development, we have realized that it is critical to focus on “development” and emancipate productivity, so as to strengthen our overall national strength and enhance the well being of the Chinese people. It is also important for us to break all barriers to our economic development, get actively involved into economic globalization, take every opportunity to concentrate on economic development and create abundant material base, in accordance with the Chinese conditions and features of our time. Without a certain rate of economic growth, it would be difficult to either address people’s concerns like employment and livelihood, or mitigate social problems. Developing overall national strength would therefore be nothing but empty words.
We have been fully aware that in order to create a beautiful future, it is necessary for us not only to concentrate on and put every effort in development, but also to understand and realize the scientific connotation of all-around development. Economic growth is an important part of development. However, if we concentrate purely on economic increase, it would be an inconsistent, non-comprehensive and non-scientific development that might lead to severe problems, like serious wealth gap and environmental pollution. Therefore, the Chinese Government has always attached great importance to harmonized economic and social development, and defined its own development philosophy in accordance with the national specifics and requirements of the time. That is to say, it is important to establish and implement firmly the scientific outlook on development that puts people first and pursues comprehensive, harmonious and sustained growth. The scientific outlook on development serves as a guidance on the overall economic and social development that centers on balancing urban and rural development, balancing regional growth, balancing economic and social development, creating harmony between man and nature, and balancing domestic development with opening up. At the same time, the Chinese Government will double its efforts to solve problems regarding people’s livelihood, correct imbalanced development, take resource conservation and environmental protection as its primary state policy, build a conservation-oriented and environment-friendly society, and achieve comprehensive, coordinated and sustainable development, so as to build a harmonious socialist society.
At present, China is confident in its advancement on the road of scientific development and harmonious progress. Under the guidance of scientific outlook on development, the Chinese Government has put forward the 11th Five-year Plan of National Economic and Social Development (2006-2010), which is an overall and strategic plan for China’s economic and social development in the next five years. The Plan underpins two important targets. Firstly, the average annual increase of GDP in the next five years will be 7.5%, and per capita GDP in 2010 will double that of 2000. And secondly, energy consumption per unit of GDP in 2010 will be reduced by 20% compared with that of 2005, and discharge of major pollutants down by 10%. By 2020, China will put more efforts in building a harmonious socialist society with a sound democratic and legal system, fairness and justice, friendship and trustworthy, vitality and good order, and harmony between man and nature, so as to further strengthen China’s economy, improve democracy, promote science and education, enrich cultural activities, create social harmony and bring a better-off life for the Chinese people.
Ladies and Gentlemen!
As the Bridge of Bosphorus serves as an important bond linking Eurasia and economic globalization, accounting profession, an economic bridge, promotes communication and exchanges of business information in market economy. The progress of accounting profession, and economic and social development reinforce and complement each other. Accounting profession identifies its historical position in the process of inclusive social and economic development, and expands its frontier for further progress. At the same time, the development of accounting profession has provided a strong institutional guarantee and information support to economic and social development. I firmly believe and I always firmly believe that accounting profession is an important and great force to dispel the dark side and bring about the bright side in economic globalization. It is guardian of the capital market.
The practice of Chinese accounting profession echoes the above-mentioned conclusion. In the process of China’s economic and social development, China’s accounting profession has made an important contribution to and played a key and irreplaceable role in facilitating the successful economic transition, improving socialist market economy, fostering capital market, restructuring state-owned enterprises (SOEs), optimizing investment environment, enhancing efficiency of resource allocation, guaranteeing quality of economic information, and strengthening confidence of domestic and foreign investors. Meanwhile, China’s accounting profession has achieved outstanding progress. To meet the demand of reform and opening up, China recovered its certified public accountant (CPA) system in the early 1980s. In the early 1990s, China opened its accounting market. And in the new century, the country is actively promoting international convergence of accounting and auditing standards in accordance with the development trend of global economy and international standards. Currently, we have realized the international convergence of accounting and auditing standards on the basis of successful transition of China’s accounting system from planned economy to market economy. We have set up and improved the legal and administrative system for accounting profession based on the principles of “regulation according to law, supervision by government, and self-discipline of accounting profession”. The number of accounting professionals has constantly increased. By the end of 2005, over 10 million people have got the Accounting Qualification Certificate, more than 140,000 people have had CPA qualification, and around 5,700 accounting firms have been established in China. The service provided by CPAs in China has been extended from foreign-invested companies at the beginning of reform and opening-up period to all the areas at present including SOEs and listed companies. Besides the traditional auditing services of financial statements, the Chinese CPAs now also provide services like internal control examination, review of financial statements, assets appraisal, management consultancy and others.
In the era of economic globalization and rapid development of technology, accounting technology has scored leap-frogging development. Only by adapting itself to the new situation, meeting new challenges, and coming up with new ideas, can the accounting profession create new vista for further development. Based on the comprehensive national development strategy and our study on the new demands on accounting profession by the global economy and capital market, as well as on the experience and law of development for accounting profession, we will keep on carrying out the three main development strategies for the accounting profession, namely “Strategy of Talent Cultivation, Strategy of International Convergence of Standards, and Strategy of Developing Larger and More Competitive Public Practices”, so as to further comprehensive, sustained, and sound development of China’s accounting profession.
---- Strategy of Talent Cultivation. To accelerate the pace of talent cultivation is the basis for promoting all-round progress of the accounting profession, and to cultivate future leaders of the profession is the key for upgrading the overall quality of the sector. At present, on the basis of overall planning of strengthening the development of accounting and CPA talents, we are exerting efforts in promoting cultivation project of future leaders of CPA profession, enterprise accountants, accountants working for administrative department or institutions, and accounting researchers, creating conditions to encourage CPAs to take on-the-job degree education such as MPAcc and EMBA, supporting Chinese CPAs to obtain overseas CPA qualifications by using the education and training system of overseas professional organizations, helping domestic professional talents acquire oversees practicing qualifications, opening up the channels for receiving overseas training, and selecting top-notch talents through examination to provide them with targeted and follow-up training, so as to cultivate a group of future leaders of accounting and CPA profession with high moral ethics, professional skills and global thinking. We will support setting up overseas venues for Chinese CPA examination, expand the influence of the examination, and nurture more overseas members.
---- Strategy of International Convergence of Standards. Realizing that the international convergence of professional standards is not only the inevitable demand of the development of China’s economy and its integration into the world economy, but also the objective necessity of the development of Chinese accounting profession and its participation in the competition of international market, we have put forward the following principles and propositions of Chinese accounting and auditing standards to realize international convergence: convergence represents progress and direction for future development; convergence does not mean being identical; convergence is a process; convergence underscores interaction. Through our efforts over the past year, and through in-depth communications with international accounting and auditing standards setters, we released 39 accounting standards for business enterprises and 48 auditing standards on February 15th this year, realizing the convergence with the international accounting and auditing standards. The guidance of the accounting standards and auditing standards has already been formulated and will be issued soon. The international society has responded actively and given high appraisal for China’s international convergence of accounting and auditing standards systems. It believes that it is an important step for China to promote economic development and play its role in international capital market, that it will boost investors’ confidence in China’s capital market and financial statements, bringing about more domestic and foreign investment, and that China’s progress has set up a good example for developing countries and transition economies.
---- Strategy of Developing Larger and More Competitive Public Practices. Developing larger and more competitive public practices is an important element in improving the competitiveness of Chinese accounting profession. To develop larger and more competitive accounting profession, we should firstly help create larger and more competitive accounting firms, and secondly bring the accounting profession’s role into full play, strengthening internal control, and serving the development of larger and more competitive enterprises. The core issue is to improve governance of accounting firms and internal control of the enterprises. Therefore, at present and in the near future, we will lose no time in studying and formulating regulations and guidelines for accounting firms, guiding them in setting up scientific governance institution, and promoting them to improve their ability of high-quality control and risk prevention. We encourage the competitive firms to grow bigger and stronger and sharpen their competitive edge in the world market. On the other hand, we will accelerate research and formulation of internal control system of enterprises, motivating companies, enterprises and other institutions to improve their governance structure and internal restriction mechanism, and to enhance their competence of sustainable development. Our objective is that through years of efforts, we will basically establish an internal control standards system for enterprises that take preventing risks and controlling fraud as the central task, that regard control criteria and assess standards as the main content, and that are featured by rational structure, clear management level, orderly connection, complete content and scientific methods, so as to promote enterprises to improve their governance structure and internal restriction mechanism, and enhance their management level and sustainable development ability. At the same time, we will study to formulate a standards system that regulates the governance and management of accounting firms, establish a governance mechanism for accounting firms that features scientific governance, strict quality control, effective risk prevention and fair rights and interests, and truly raise the quality and social credibility of the accounting profession. In a word, we will try our best to establish a sound “man-made immune system” for the sustained and steady development and effective risk control of enterprises and accounting firms.
Strategy is a review and summary of previous actions, and a precursor and direction of future moves. We believe that the implementation of the three strategies will actively promote not only the development of Chinese accounting profession, but also the upgrading of the competence of Chinese enterprises and the economy.
Ladies and Gentlemen!
Economic globalization is one of the primary features of the current world economy. Various production factors and resources are allocated across the whole world, and production, distribution and consumption are developing more globally. This brings the accounting profession new opportunities and challenges. If accounting profession wants to grasp the opportunities and prevail in the challenges and development, it must actively study, sum up, and set store by the development tendency and characteristics of accounting profession in the context of economic globalization, so as to realize breakthroughs and progress in accounting technology, methods and philosophy.
In our opinion, in economic globalization, the accounting professionals all over the world, with more urgent sense of mission and broader vision, should abide by the three principles of opening development, interactive development and prudent development, and work together to meet the new challenges.
Firstly, maintaining openness for development, and promoting international accounting services. Globalization facilitates international development of accounting profession and allocation of accounting services resource worldwide. The world in front of us is an open market. Accounting services will come into every corner of the world. Reversing this trend and being in isolation does no good. Against this backdrop, how to establish an international network of accounting services, and how to guide and motivate accounting profession to serve the global capital market is the major issue that the Chinese and global accounting profession has to ponder.
Secondly, promoting interactive development, and accelerating international convergence of accounting and auditing standards. In economic globalization, international financing becomes unprecedentedly active, and transnational mergers and acquisitions are cropping up. Capital market requires high quality accounting information, especially consistency and comparability of information, so as to provide universal commercial language for capital transactions, and then to maintain financial stability of the world, accelerate development of capital market, increase confidence of investors, and protect public interests. That poses more demanding requirements on strengthening coordination of accounting and auditing standards for international convergence. At the same time, economic globalization has created a series of new transaction methods, new technological transformation and new policy measures. Only when the global accounting profession further international exchanges and cooperation, share experiences and information, coordinate actions and narrow differences, can it effectively deal with new challenges in the new situation.
Thirdly, promoting steady development, and intensifying risk prevention of accounting profession. Economic globalization magnifies market risks that accounting profession faces. These risks become more difficult to be predicted, easier to be enlarged, and clearer to demonstrate “butterfly effect”. As a virus may soon spread all over the world on the Internet, a business risk of one company may cause grave chain reaction in a country or a region, in a cooperation area, or even in the global capital market. Therefore, economic globalization is not only globalization of development, but also globalization of risks. The importance of establishing a global market system that is open, transparent, and competent to prevent and control risks is self-evident. As an important system of information and monitoring, accounting shoulders more prominent responsibility to disclose risks. That requires continuously enhancing professional qualification, optimizing risk prevention mechanism, and ensuring standardized, healthy and sustainable development of accounting profession.
Fourthly, developing through cooperation, and strengthening international accounting exchanges and cooperation. Economic globalization has brought about a series of new transaction methods, new technologies and new policies and measures. Only through strengthening international exchanges and cooperation, sharing experiences and information, coordinating actions and narrowing differences, can the global accounting profession effectively meet new challenges in the new situation.
Ladies and Gentlemen!
China’s economy and the accounting profession have moved into a new period of development. The Chinese government will as always spare no effort in supporting fully-fledged economic and social development, promoting progress of accounting profession, and endeavoring to build a well-off and harmonious society in all aspects. The Chinese accounting profession will also abide by the principle of being flexible, practical, and interactive for mutual benefits, strengthen close communication and cooperation with the international accounting profession, and jointly create a more brilliant future for the global economy.
In conclusion, I wish the World Congress of Accountants a great success!
Thank you Mr. Chairman. And thank you all!
