Passage 1Respected Chairman, Ladies and Gentlemen,
I am delighted to attend the first in a series of international events to mark the 125th anniversary of the Institute of Chartered Accountants in England & Wales (ICAEW). The Chinese Institute of Certified Public Accountants (CICPA) enjoys a long-term solid relationship with the ICAEW. Hereby, on behalf of the CICPA I would like to extend our warm congratulations to ICAEW on the convening of the conference.
The theme of the conference—Global Capital Markets: Challenges for Business, Governments and the Professions—is an issue of global concern. I would avail myself of this opportunity to talk about the development of the Chinese capital market and the construction of the Chinese accounting profession.
The Chinese capital market has progressed in parallel with the Chinese economic structural reform, which is now an important component of the Chinese socialist market economy system. The rapidly growing capital market has played an important role in restructuring state-owned enterprises (SOEs) and the financial market, optimizing resource allocation, and promoting economic growth and structural adjustment.
Due to its late start, the Chinese capital market still lags behind developed capital markets in terms of market scale and transaction volume. With over a decade's development, however, it has grown in both size and investment varieties.
By the end of 2004, there were 1,377 companies listed in China (A and B shares) with total market capitalization amounting to RMB3.71 trillion, with RMB1.17 trillion being negotiable market capitalization and the number of accounts opened by investors reaching 72.11 million. Also, there are totally 111 companies listed overseas.
Government bonds and financial bonds dominate the Chinese bond market with corporate bonds taking up a minor proportion. In parallel with gradual expansion of the Main Board, the GEM Board has also made progress.
A remarkable change of the Chinese capital market over the recent years has been the expansion of the community of institutional investors. Limitation has been relaxed on market entry of social security funds, corporate annuities and commercial insurance funds. Since its trial operation in December 2002, the system of Qualified Foreign Institutional Investors (QFII) has developed rapidly, with many a foreign institutional investor acquiring this qualification. By encouraging such institutional investors to enter the capital market, China has enabled rapid growth of the community of institutional investors, changed the previous mix that was dominated by small and medium investors, facilitated the reform of investment philosophies and enhancement of efficiency to some extent and promoted market standardization and stability.
While actively promoting the development of the capital market, China has paid great attention to legal construction of the market. At the moment, a preliminary legal framework for the Chinese capital market has taken shape. In addition to key laws such as the Company Law, the Securities Law and the Law on Securities Investment Funds, it also consists of a series of administrative regulations, sector rules and standard documents covering multiple areas such as securities, futures and securities investment funds. The establishment of such a legal framework plays an important role in implementing the guiding philosophy of regulating the market by law, standardizing behavior of the market subjects, preventing and dissolving market risks, and effectively protecting legitimate rights and interests of investors, especially those of public investors'.
As China accelerates its economic structural reform, the operating environment of its capital market has undergone profound changes. At this significant historical transition stage, the Chinese capital market faces unprecedented challenges and opportunities. The sustained and rapid development of the Chinese economy indicates that the Chinese capital market will embrace a promising future.
To healthily develop the capital market is an important strategic aspect that China must fulfill in its process of improving its socialist market economy mechanism and an important component of China's efforts to improve its financial system. China has set up the strategic goal to quadruple its GNP and build a well-off society on all fronts in the first 20 years of the new century. Development of the capital market is of great significance in this regard.
In consideration of the current situation and by drawing upon practices of overseas mature markets, China is actively putting forward a series of measures to reinforce infrastructure construction of the capital market, establish and improve various systems for the development of the capital market, and create a favorable environment for stable and healthy development of the capital market.
Development of the capital market has changed traditional accounting concepts, demanding that techniques and methodologies that fit the operation of the capital market should be applied to accounting information processing and that accounting information should be of higher quality. As such, developing the accounting profession has become an indispensable element for ensuring truthfulness and reliability of accounting information, protecting interests of investors and creditors and safeguarding market fairness and equitability.
China restored the CPA system in 1980. The Chinese government and the CICPA have implemented a series of reform measures to promote standardization of the profession, rectify order of the accounting market, promote development of professional integrity and upgrade public credibility of the profession.
Development of the Chinese accounting market has gone hand in hand with reform and opening up of accounting. Liberalization of the market has achieved incremental progress. At the moment, there are in China seven Sino-foreign cooperative joint accounting firms, 27 member firms of international accounting firms, seven liaison firms of international accounting firms and 20 representative offices of international accounting firms. Several hundred overseas candidates have passed CICPA exams. Over 30 of them have succeeded in applying for the Chinese CPA qualification.
In the future, we will continue our focus on development of professional integrity, pay equal attention to professional construction and improvement of the practicing environment, and open up the domestic market. Meanwhile, we will enter the international market, push forward both institutional and technological innovation and promote credibility and competitiveness of the profession in an all-round manner. As the statutory professional organization of Chinese CPAs, the CICPA will proactively promote the development of the accounting market and the accountancy profession.
This conference provides us with a rare opportunity to learn from each other and explore relevant issues in a joint manner. Accounting services are interactive. Accounting itself is an international business language. We, the Chinese accounting community, are more than happy to join our international colleagues and exert concerted efforts to face globalization of the capital market, grasp opportunities and respond to challenges.
I would like to wish the conference a great success.