- change ups
Chinese Securities Official Faces A Tough Task
Bao Ensi, division director of the China Securities Regulatory Commission, visited Grand Rapids as a guest of BDO Seidman during World Trade Week.
Bao will be in the United States for a year observing accounting practices, spending six months in BDO’s Los Angeles office and the next six months in the executive office in Chicago.
During his stay Bao said he hopes to focus on practices of the U.S. Securities and Exchange Commission and develop a better understanding of the many forms the commission uses.
“I also hope to improve our systematic disclosure system in China, and so I was sent here to learn the different forms of the SEC and to bring that knowledge back,” Bao said.
While that will be a long process, he said he has already begun to notice the differences in accounting practices here and in China.
One major difference is the notion of generally accepted accounting principles and generally accepted auditing principles. In China, he said, the government regulates accounting and auditing as a matter of law.
One thing Bao said the Chinese government is working hard on is a disclosure procedure, similar to the one the United States has in place.
“We would like to set up, and are in the process of setting up, systematic disclosure requirements,” he said. “While I am here I hope to learn more about the process here and take some of those things back to China with me.”
He noted that in China the stock market is only 10 years old. “Here you have a very advanced stock market that is hundreds of years old; we can learn from that and help our market to grow.”
While the stock market is new and disclosure requirements are not fully laid out, Bao firmly believes that Americans who invest in China have nothing to worry about.
“The market and requirements are growing and advancing at a fast enough speed to keep up with investors,” Bao said. “The basic requirements are set up and the development is keeping pace with the development of the financial market.”
He also feels secure in the fact that because the financial market and disclosure practices are still being developed, an Enron situation wouldn’t happen in China.
“We don’t have companies that big in China,” said Bao. During past trips to the United States, Bao noted he read many articles in the Wall Street Journal to follow the Enron story and observe how the SEC dealt with the situation. He applauded the SEC’s handling of the process.
“It is possible that this could happen on a lesser level, but I would have to know the entire process (of what happened). We have many more government-regulated processes,” Bao said.
And those government-regulated processes stand for public companies in China, as well.
While BDO Seidman has firms in Beijing, Shanghai, Shenzhem, Xiamen and Hong Kong, there are only 78 firms that have special licenses to work with public companies — out of over 3,000 accounting firms in China.
“There are not that many public firms and so there aren’t that many public accounting firms,” Bao said. “It is a very closely monitored process, and there are many rules that go into it.”
From accounting practices to business practices, Bao said China could learn from the United States. He noted one difference is that in the United States a lot of business is done through the Internet and by credit. He sees that as an expedient process and one he hopes to see China adopt one day.
“In China we do business by mail. Your business is faster, and I think the credit system works well. However, we do have our businesses open longer, and here you can’t go to the store late at night if I need something,” joked Bao.
Other aspects of Chinese business needing improvement, Bao admitted, are the bank, telephone and cargo systems. “If we want to do more efficient and better business, these aspects need to improve,” Bao said. “We will be at a higher level and can learn from different practices you have in place here.”
He noted he also hopes to learn the aspects of higher technology we have in place, as well as wealth management.
“In China we have low wage labor, but intelligent workers and hard workers,” said Bao. “I think we can complement each other with those aspects. Our low labor workers who wish to make money can fit in well with your high capital and technology skills. It is important to understand each other’s strengths and weaknesses.”
In the end, Bao noted that while there are similarities, differences can be good as well.
“In the ways we are similar it is good,” he said. “It will help foreign investors and make trading easier, but the differences are good so we can complement each other.
“After all, the rules are the same; just the way we make the rules is different. I think it will help us to learn from the way they do things here at BDO and also in other areas of the United States.”