The struggle between local Chinese and the Big Four accounting firms has been going on since the return of public accounting to China in the early 1980s. China let the Big Eight firms set up representative offices beginning in 1980, and in 1992 allowed the Big Six to enter joint ventures with state controlled firms. About 2000, all CPA firms including the Big Four were separated from the state. In 2012, China required the required the Big Four to begin the transfer of the firms from expatriate partners to local Chinese partners.
Chinese authorities had welcomed the Big Four to China in hopes they would help with economic development, transfer knowledge to locals, and then leave. It was never the strategy of the Big Four to leave, since they saw China as a major market and an important link in their international networks. China launched programs to boost local firms. Looking back on the last decade, those programs have worked very well and China is on the cusp of breaking Big Four dominance of its accounting market.
For the past four years (2011, 2012, 2013, 2014) I have reported on changes in the rankings of China’s largest accounting firms based on the CICPA’s annual rankings. I base my rankings on revenue alone, whereas the CICPA aggregates a number of factors, including quality assessments. The revenue reported is audit revenue alone, since the firms tend to use different entities for consulting services.
The revenue reported is audit revenue alone, since the firms tend to use different entities for consulting services. Because dues to the CICPA are based on revenue, firms are discouraged from overstatements.
Revenue growth for China’s top 100 CPA firms slowed in 2015 to 17.2% down from the blistering growth of 32.8% in 2014. Nonetheless, the growth in accounting firm revenue far outpaced the growth in GDP, indicating that China continues to invest in accounting. The international Big Four firms grew at 7.5% in 2015, significantly down from 18.2% in 2014. Local firms continued to outpace the Big Four in revenue growth, logging a 21.5% increase compared to a 39.5% increase in 2014. That has led to a decline in the Big Four’s share of the Top 100 market to 28% from 31%, continuing a steady slide over the last few years.