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Corporate governance in China – some improvements, but...

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18 Apr 2007

The CFA Institute Centre for Financial Market Integrity has published a study on corporate governance in China.

The findings show that while the Chinese government has done much to put in place a sound corporate governance framework, observable changes are still not evident in financial disclosures and transparency, which are viewed by the survey respondents as very important for decision-making. The CFA Institute represents 89,000 professional financial analysts. With regard to accounting standards, the report notes:

In February 2006, the Ministry of Finance released the Basic Accounting Standards for Business Enterprises (ASBE), consisting of 38 standards to be applied to all listed Chinese companies. The aim of this initiative is to facilitate further development of a market-like economy in China, raise the quality of financial information, and boost investor confidence. The new ASBE standards are intended to bring Chinese accounting practices largely in line with the IFRS. Although there are concerns that these new Chinese standards do not completely replicate the IFRS as intended by the international accounting standard setters, they have incorporated many of its key principles....

A significant concern of both foreign and domestic investors in Chinese companies relates to the adequacy and transparency of disclosures. In view of this, the government has moved recently to strengthen disclosure rules. Moving forward, investors will have more information available in quarterly and annual reports.

Click for: Please note that the report is copyright CFA Institute and has been posted on IAS Plus with their kind permission.

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