Student Seminar on China’s Entry to the WTO: Challenges & Opportunities for Hong Kong Accountants

Student Seminar on China’s Entry to the WTO: Challenges & Opportunities for Hong Kong Accountants 「中國入世﹕香港會計師的機遇與挑戰」研討會 19 October 2002 Edward K. F. Chow Vice President of HKSA

China’s economic development and business opportunities – pre WTO and post WTO - 1 -

Pre-WTO • Transition from planned economy to socialist market economy. Via 5 year plans. • GDP growth during 9-5 (1996-2000) averaged 8%. • GDP growth during 10-5 (2001-2005) to average 7%. 2002-7.9%. • Encourage domestic consumption. • Export less than 10% of GDP. • Foreign direct investment growth 15% plus. Significant proportion from Hong Kong or via Hong Kong. - 2 -

Development of the capital market and accounting / reporting standards in China • All happened within last 15 years. • Accounting Standards, Auditing Standards. • Opening of Shanghai and Shenzhen Stock Exchanges. • Equity (PO) shares traded only. Debt market developing. • Banking and insurance market opening very slowly. - 3 -

Basic structure of a functioning economy formed • Manufacturing base • Consumer market • Banking industry • Equity market • Housing market • Social welfare system • Taxation revenue collection satisfactory • One of highest foreign currency reserve countries • Except: RMB not yet freely convertible - 4 -

WTO Membership • To be part of international community • To raise profile of China and Chinese people • Two types of agreements: — bi-lateral agreements (between two countries) — The WTO Treaty (Doha November 2001) - 5 -

WTO Membership means : • Opening up of markets • Reduction of import duties • Implementation time-table • Treaty legally binding. Can be sued. • Examples: * Import of cars * Steel * Agricultural products - 6 -

* Service industries – accounting, legal, banking insurance * Telecom industry * Ports * Oil and Gas Refer to Guidance Index on Foreign Investment – effective 1 April 2002. (MOFTEC website) - 7 -

The role of Hong Kong companies and accountants in the economic development in China • Guandung Province has highest GDP in all China • FDI mostly from Hong Kong • 100,000 Hong Kong people stationed / commute to / from Guandung - 8 -

The challenges ahead : attributes and skillsets required - 9 -

執業非執業 Audit Business Consulting Executive Directors Tax JV Negotiation / Formation Independent Directors/ Audit Committees Reporting Accountants Corporate Finance Management (GM) Insolvency Recruitment CFO / FC / CA Corporating Reporting / Investor Relations Company Based Individual Based 功能分析 - 10 -

優化管理 ? 成本效益 ? 協助 ? How do we add value 如何令僱主，客戶增值 ? Do we have a competitive advantage ? - 11 -

有 / 冇 有 / 冇有 / 冇有 / 冇有 / 冇 Advantage 優勢 Capital (資本) ﹕FDI Skills Sets • Technical Skills • Soft Skills • Experience & Exposure - 12 -

突出專業人士 OUTSTANDING PROFESSIONALS - 13 -

有 / 冇 有 / 冇有 / 冇有 / 冇 Skills, Experience & Exposure • H. K. SSAPs • I A S • Conducting / preparing for Meetings • Shareholders • Board / Audit Committee • Other Committees • (Corporate Governance aspects) 4. Process of Management - 14 -

Process of Management Corporate 有 / 冇有 / 冇有 / 冇有 / 冇有 / 冇有 / 冇有 / 冇有 / 冇 • Corporate planning / strategic planning • Risk management / compliance / internal controls • Preparation of business plan • Preparation of budgets? • Preparation of monthly reports — ? • Preparation of financial statements / annual report • Preparation of announcements • Review / deciding on the above - 15 -

Process of Management Operations • M I S / I T • Supply chain / sourcing / out sourcing • Integration — forward, backward, horizontal, vertical • Branch networking • Cross border — markets / M & A outside Chinese Mainland - 16 -

Soft skills, Experience & Exposure • Linguistic skills — English • Investor relations / road shows • Hong Kong and International contacts — business & others • Banking, corporate and project finance, financial services experience • Have passport, will travel - 17 -

— probably listed or planning to list — where funds are expected to be raised — add value /knowledge /experience — with potential to list Target Companies / Employers / Clients — go with the FDI investors, shareholders • Sino-foreign JV Companies B. Large S. O. E.s or red chips (國企) C. Privately owned enterprises with potential (民企) - 18 -

BEWARE OF DIFFERENCES IN • Culture • Social Behaviour • Political ideology • Manpower policy • Economic ideology • Management style • Pay / remuneration parity • (or disparity) 一國兩制知己知彼了解國情 - 19 -

How the Society’s Qualification Programme (QP) can help equip students with the skills necessary for a career in China ? P Q - 20 -

The QP Programme is prepared by Hong Kong and International Experts • It is recognized INTERNATIONALLY • HKSA will sign Mutual Recognition Agreements with CAGE group November 2002 - 21 -

4 Modules Module A : Financial Reporting Module B : Financial Management Module C : Auditing and Information Management Module D : Taxation - 22 -

Module Assessment • Self-study • Four 3-Hour workshops led by experienced practitioners • 2 Hour open book examination - 23 -

Final Professional Examination • Integrate knowledge and skills • Two 3 hour sessions - END - - 24 -

Student Seminar on China’s Entry to the WTO: Challenges & Opportunities for Hong Kong Accountants