Environmental Factors in China's Financial Accounting Development since 1949

The difference in environmental factors is one of the main reasons for the accounting difference among countries. It is also one of the critical factors to be first considered when studying and understanding one country’s accounting activities, and also when trying to harmonize and internationalize one country’s accounting system. In international accounting research, accounting environment is the precondition to research and understand one country’s accounting pattern, at the same time, such problems as which environmental factor decides national accounting style has been the arguing point. The research on environmental influences could not only find the solutions as what factors decide the differences among countries, but could answer the questions as if global accounting is going to remain the same, if each country will retain its own particular accounting pattern. It could not only help the outsiders to have a good understanding on one country’s accounting theory and practice, but also could help the standard setters make a correct judgment and decision when setting and revising their accounting standards and harmonizing the international accounting standards by considering their own environment thoroughly. China’s accounting has been the central point the outside stakeholders concern. As one of the countries with the fastest economic growth since its reform and open door policy was implemented in 1979, China has begun to attract foreign investment from many different countries, and in various forms. The global economy has become more and more integrated, and as a result China has succeeded in joining the WTO, which means that China has embedded itself in the international economic environment, its economy unavoidable has to be developed more towards a global one. Under this kind of environment, it has become increasingly urgent both to China and to overseas investors as well as to the other stakeholders to have a better understanding of China's accounting system and practice, and to harmonize China’s accounting practice with international accounting traditions. The progress of global economy convergence has enforced the issued of global accounting convergence to be listed into the agenda, the international accounting community has been paying closer attention to the problems of harmonization and convergence, and the EU has decided that its listed companies are going to employ IAS accounting standards commencing from 2005. Exposed in this circumstance, China has already made a corresponding reaction in it accounting system reform. Though its accounting system has being reformed and revised since 1992 to adapt the national and international economy changes accordingly, but a gap still exists. How long and to what extent will China’s accounting be in convergence with international traditions, is still in question.

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