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Essay on China's Evolving Accounting System
Deficiencies in the accounting system notwithstanding, China's economy has grown at a rapid pace throughout the 1990s. Real growth in GDP averaged 12% from 1991 to 1995, and 9.2% in 1996 and 1997.
Despite China's overall economic success, many SOEs have continued to show poor productivity. In 1994 the state sector, which absorbed 56.9% of fixed asset investment and employed more than 66% of the industrial labor force, produced only 34.1% of total industrial output. A full 45% of SOEs lost money in 1996, up 45% from the previous year (China Daily, 1997b).
Five thousand SOEs were expected to register for bankruptcy by the end of 1996, with an increase in bankruptcy projected for 1997 (Shi, 1997). In contrast, the non-state sector continued its rapid growth. From 1990-1994, industrial output of enterprises not owned by the state increased at an average annual rate of 37.3%, while their share of total industrial output expanded to 65.9% in 1994 from 45.4% in 1990.
Clearly, this dynamic sector is expected to be a major source of growth for China in the future.
In view of these outcomes, the Ninth Five-Year Plan (1996-2000) reaffirms two factors which will lay the foundation for China's economic development in the next twenty years: continuation of the ongoing transformation from a centrally-planned economy to a market-oriented one; and a more restrained approach to economic development, with greater emphasis placed on efficiency rather than speed; that is, a shift of economic emphasis from an extensive growth pattern to an intensive growth pattern (Beijing Review, 1996).
In particular, the Plan specifically calls for expanding accounting services and standardizing financial, insurance, and information ventures. Methods include strengthening economic legislation and following international economic conventions. In addition, the banking sector is to be gradually opened to foreigners....
