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• First Person - John Stuttard
John Stuttard reflects on the development of his firm, Pricewaterhouse-Coopers, and the accountancy profession in China over the last 25 years.
In September 1979, soon after the "open door" policy was announced, the finance ministry in Beijing asked Coopers & Lybrand for help to develop the accountancy profession in China. So began an involvement which has led to Coopers & Lybrand's successor firm, PricewaterhouseCoopers (PwC), being today the largest firm in China, with almost 6,000 professionals in the PRC and Hong Kong.
Initially, a training course was held in international accounting and auditing in Shanghai for the top 100 senior cadets from the finance bureaus across China. For the previous 30 years, Western (double entry) bookkeeping had not been practised in China. The cadets, dressed in their Mao suits, knew about financial administration and tax collection but little about accounting standards and financial reporting. The world had moved on and China was desperate to catch up.
The course was tough to organise, with photocopying machines as well as lecturers and visual aids being flown in from around the world. But it was a great success. In gratitude, the firm was asked to establish a representative office in Shanghai in 1981, with powers to conduct business on its own account - a right not granted to other rep offices in China.
A second rep office followed in Guangzhou and others in Beijing and Shenzhen. During the ‘80s these offices remained small, largely assisting foreign companies negotiate agreements and establish operations. However, progress was slow and by June 1989, the firm had only 20 staff in China, while the total complement of staff employed in the PRC by all the global accounting firms did not exceed 100.
In 1990, at the time the West had temporarily withdrawn from investment in China, Arthur Andersen (now part of PwC in China) helped Zhu Rongji establish the Mayor of Shanghai's Advisory Committee. But it wasn't until after Deng Xiaoping's historic tour of Guangdong that significant investment by the global accounting firms was directed towards China.
The business grows fast
In 1994, when I became chairman, Coopers & Lybrand had 30 people working in the country. We had to increase our capability rapidly. Foreign-trained accountants and consultants were recruited to China to operate the fast-growing business, generated by the demand from multinational corporations who were investing billions. These companies needed help in every area: market research and market entry strategy, joint venture negotiation, due diligence, tax advice and compliance, registration, accounting and reporting, and auditing and certification.
PwC grew through a variety of legal arrangements: rep offices in some locations, joint ventures in others and, based in Pudong, a wholly owned subsidiary. The regulatory environment was complex and, at one stage, I counted that we needed no fewer than 35 licences to operate the business.
Relationships were developed with the leading universities. The first professorial chair in accountancy was endowed at Shanghai University of Finance & Economics. Hundreds of bright, English-speaking graduates were recruited from Beijing University, Fudan and Jiao Tong and were trained by the firm. The brightest and best were selected for overseas postings .
Today, 10 years on, many of these PRC nationals are working at a senior level within the firm in one of the nine offices established in Beijing, Guangzhou, Shanghai, Chongqing, Dalian, Shenzhen, Tianjin, Wuhan and Xi'an. We have 3,000 employees on the mainland.
The business, which began by helping foreign companies establish their operations and grow in China, also started, from 1994, helping Chinese companies seeking a stock exchange listings. Major companies such as China Eastern and PetroChina became global stocks following due diligence and independent reporting by the firm.
PwC and the other accountancy firms have played a very major part in the economic success of China over the last 25 years. The two recent premiers, Li Peng and Zhou Rongji, used the term the "bridge" to describe the firm's role in connecting international business with China. We are pleased to have been able to play this role.
John Stuttard is senior client partner of PricewaterhouseCoopers in the UK and
formerly chairman of PwC in China (1994-1999).
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