Description
Drawing on actor network theory (ANT), this paper analyses the role of Chinese characteristics
in the emergence of three accounting regulations for foreign invested firms (FIFs) as
part of China’s recent transformation to become part of the ‘‘world order”. The paper examines
how international accounting standards (IAS) and existing Chinese accounting were
translated into new regulations for FIFs, and how these translations were shaped by malleable
interpretations of Chinese characteristics. Chinese characteristics were a discursive
obligatory passage point (OPP) rendered malleable through cognition and the sanctions of
political authority to suit the interests of actors seeking to produce new accounting regulations.
The development of accounting regulations for foreign invested
?rms in China: The role of Chinese characteristics
q
Mahmoud Ezzamel
a,b,?
, Jason Zezhong Xiao
a
a
Cardiff Business School, Cardiff University, Wales, UK
b
IE Business School, Madrid, Spain
a r t i c l e i n f o
Article history:
Available online xxxx
a b s t r a c t
Drawing on actor network theory (ANT), this paper analyses the role of Chinese character-
istics in the emergence of three accounting regulations for foreign invested ?rms (FIFs) as
part of China’s recent transformation to become part of the ‘‘world order”. The paper exam-
ines how international accounting standards (IAS) and existing Chinese accounting were
translated into new regulations for FIFs, and how these translations were shaped by mal-
leable interpretations of Chinese characteristics. Chinese characteristics were a discursive
obligatory passage point (OPP) rendered malleable through cognition and the sanctions of
political authority to suit the interests of actors seeking to produce new accounting regula-
tions. Chinese characteristics were a signi?er that carved out a space for local networks to
attain their identity and retain some measure of independence from global networks, shaped
the construction of each accounting regulation for FIFs into an attractive package, and in?u-
enced the adaptation and transformation of those elements of Western accounting that
arrived into China. In turn, IAS became part of the discursive ?eld on accounting regulation
that helped mediate the shifts in the interpretation of Chinese characteristics over time.
Ó 2015 Elsevier Ltd. All rights reserved.
Introduction
This paper draws on actor network theory (ANT) to
examine the role of Chinese characteristics in the develop-
ment of three accounting regulations for foreign invested
?rms (FIFs)
1
in China as part of China’s recent
transformation to become part of the modern world order.
The paper explores how International Accounting
Standards (IAS) and existing Chinese accounting were trans-
lated into accounting regulations for FIFs and the mediating
role played by Chinese characteristics therein. The produc-
tion of each regulation is conceptualized as a trial of strength
in which reformers built networks around interests con-
structed as commonly shared between network members.
Chinese characteristics were a malleable, discursive obliga-
tory passage point (OPP) de?ned and rede?ned by actors’
cognition, interest, and the sanction of political authority
whereby political acumen and timing contributed to facili-
tating the acceptance of new regulations.
Increasingly, countries have been undergoing signi?-
cant transformations in order to become a part of the mod-
ern ‘‘world order” as a consequence of the ‘‘interrelated
processes” of globalization that are ‘‘operating across all
the primary domains of social power” (Held & McGrew,http://dx.doi.org/10.1016/j.aos.2015.05.005
0361-3682/Ó 2015 Elsevier Ltd. All rights reserved.
q
This paper is part of a larger research project funded by the Institute
Chartered Accountants of Scotland (ICAS). We are grateful to ICAS for
funding, and to all the interviewees for their cooperation. Earlier drafts of
this paper were presented at UESTC, Chengdu and Xiangtan University,
China, and the European Accounting Congress, Rome, 2011. We are
grateful to Keith Robson, Paolo Quattrone and to the participants at these
venues for their comments. We are also grateful to the many constructive
comments provided by the two reviewers and the editor.
?
Corresponding author at: Cardiff Business School, Cardiff University,
Wales, UK.
E-mail addresses: [email protected], [email protected]
(M. Ezzamel), [email protected] (J.Z. Xiao).
1
See Appendix A for a list of abbreviations used in this paper.
Accounting, Organizations and Society 44 (2015) 60–84
Contents lists available at ScienceDirect
Accounting, Organizations and Society
j our nal homepage: www. el sevi er. com/ l ocat e/ aos
2000: 6; see also Held, McGrew, Goldblatt, & Perraton,
1999). Yet, counter pressures seek to preserve cultural
identity and ways of doing things (Tomlinson, 2000).
Recent developments in China are an example of such rad-
ical transformation which entailed gradual customization
of Western ideas coupled with a desire to preserve
Chinese cultural identity. Our argument is that Chinese
characteristics played a key role in the effort to reconcile
these seemingly irreconcilable pressures for pursuing
international conformity while preserving cultural iden-
tity, and they impacted the way in which elements of
Western accounting were customized and arrived into
China. In turn, IAS became part of the discursive ?eld on
accounting regulation that helped mediate the shifts in
the interpretation of Chinese characteristics over time.
‘‘Chinese characteristics”, or ‘‘Chineseness” (for the lat-
ter see Coase & Wang, 2013) are dominant expressions in
discussions of China’s recent transformation. Of?cial
Chinese discourse talks of ‘‘socialism with Chinese charac-
teristics”, whereas elsewhere the discourse is on ‘‘capital-
ism with Chinese characteristics” (e.g., Breslin, 2004;
Coase & Wang, 2013; Huang, 2008; Karmel, 1994; Peck &
Zhang, 2013; Yang, 2007).
2
The addendum ‘‘with Chinese
characteristics”, has been attached to issues such as agrarian
reforms (Zhang & Donaldson, 2008), political ideologies
(Nathan & Shi, 1996), the global model (Mohrman, 2008),
civil services (Aufrecht & Bun, 1995), ownership (Dorn,
2003), and human resources (Warner, 2008). It is therefore
not surprising that Chinese characteristics played a key role
in the development of the accounting regulations we anal-
yse. Remarkably, however, Chinese characteristics are
hardly articulated and/or problematized in the literature.
In this paper, we re?ect on what Chinese characteristics
mean, how their meaning shifted across individuals/groups
and over time, and how they mediated the production of
each accounting regulation and the adaptation and transfor-
mation of Western accounting ideas in China.
This study differs from research on accounting change
in transitional economies such as the Czech Republic
(Seal, Sucher, & Zelenka, 1995); Poland (Krzywda, Bailey,
& Schroeder, 1995); and Vietnam (Phuong & Richards,
2011). While these studies provide timely updates of cur-
rent developments in accounting regulations, they present
accounting change as purely technical and unproblematic,
with little attention accorded to the impact of cultural and
political issues. While Chow, Chau, and Gray (1995) focus
on the role of the Chinese government in the development
of accounting standards and Xiao, Zhang, and Xie (2000),
Xiao, Weetman, and Sun (2004) examine factors that moti-
vated the development of Chinese accounting and auditing
standards in the 1980s and 1990s, studies neglect the
dynamics of change and the translation of accounting
ideas. In one of the few exceptions that problematizes
the travel of Western ideas to a former socialist context,
Mennicken (2008) examines the process of using interna-
tional auditing standards in a post-Soviet Russian audit
?rm and emphasizes the fragility of international harmo-
nization projects.
We examine the networks formed and the media used
to bring about new accounting regulations (actants) with
a speci?c focus on the role of Chinese characteristics. We
conceptualize the travel of accounting ideas as both the
process and outcome of actor-network formation, which
involves a chain of activities performed by actors/actants
through which ideas or visions are translated into practice
(Callon, 1980, 1986; Latour, 1987, 2005). We theorize
Chinese characteristics as a discursive OPP, pointing to
their malleability to political acumen and actors’ interests,
and explore the implications of this theorizing for ANT.
By studying the machinations of the regulatory envi-
ronment in the context of China’s transformation, we add
to the sparse literature that problematizes the travel of
ideas to different socio-political contexts. We show how
China’s unique socio-political and cultural contexts,
summed up by the term Chinese characteristics, impacted
the process and outcomes of accounting regulation. Some
socialist elements have remained an important part of
the Chinese political agenda despite the continuing march
towards greater marketization, with the Chinese govern-
ment continuing to have a major interventionist role in
accounting regulation. We show how differing forces acted
to shape accounting regulations for FIFs, and how these
forces, especially Chinese characteristics, underwent fre-
quent translations and was susceptible to political manip-
ulation. Chinese characteristics operated as a discursive
OPP by acting as a gatekeeper that impacted the way the
West arrived in China by permitting some Western ideas,
suitably translated, but not others, to enter China. The mal-
leability and shifting meaning of Chinese characteristics
helped create a space for actors with differing agendas to
become part of the network that produced the accounting
regulations, and made it possible for local entities to pro-
tect their identities and independence while engaging the
so-called global. As IAS became part of the discursive ?eld
on accounting regulations, IAS interacted with, and helped
reshape, the interpretations of Chinese characteristics so
that parts of Western accounting that were barred in the
1985 regulation were included in later regulations. We also
note the value of acumen and timing in rendering the
moments of translation more effective. Finally, we argue
that the process of producing accounting regulations for
FIFs galvanized the interests of diverse actors, bonding
them together in their drive to adapt and translate ele-
ments of Western accounting.
This study also contributes to the literature on account-
ing change informed by ANT. Briers and Chua (2001) exam-
ine the implementation of activity-based costing as a set of
trials of strengths, Christensen and Skaerbaek (2010) study
how consultants ‘purify’ accounting technologies to reduce
resistance to change, and Dambrin and Robson (2011)
focus on the ambivalence, opacity and performativity of
?awed measures. While providing powerful insights, these
studies focus on either single case studies (Briers & Chua,
2001; Christensen & Skaerbaek, 2010) or individual indus-
tries (Dambrin and Robson, 2011) in advanced capitalist
countries. In contrast, we examine the state transformation
of a socialist economy towards greater marketization and
show how Western accounting ideas travel to that context.
This helps clarify the extent to which ANT illuminates how
2
One of the few exceptions is Harvey (2007: 122).
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 61
different machinations, political discourses, and Chinese
characteristics became enmeshed in the processes of pro-
mulgating new accounting regulations.
This study has close af?nity with Mennicken (2008) but
differs from it in three respects. First, this study focuses on
the level of the state compared to her focus on a single,
large audit ?rm; hence issues such as state politics and
policies are brought to the fore more directly in our case.
Second, the Chinese context differs signi?cantly from the
Soviet context of her study. Third, our focus is upon
accounting regulation in contrast to Mennicken’s interest
in audit regulations. Our study also differs from Ezzamel,
Xiao, and Pan (2007) who examined how discourse shifted
from conceptualizing accounting as ideologically-laden
under Mao to a neutral technology under Deng. However,
their study did not address the emergence of accounting
regulations for FIFs, even though FIFs play an important
role in China’s transformation and in the globalization of
business (Harvey, 2007),
3
nor did it examine the role of
Chinese characteristics in impacting accounting regulation.
The remainder of this paper is organized as follows. The
next two sections present our theoretical framing and
research method. This is followed by an examination of
the context in which FIFs were developed as background
to studying accounting regulations. Thereafter, a major
section analyses the trials through which the three
accounting regulations for FIFs emerged. The ?nal section
discusses the main arguments and concludes the paper.
Theoretical framing
In this section we describe some elements of ANT that
are central to the arguments of this paper followed by a
preliminary discussion of Chinese characteristics.
Under ANT, ideas and practices emerge in network
building involving humans (actors) and non-humans
(actants). Actors seek to enlist the support of others to their
cause, and if successful an actor-network emerges. Actants,
such as accounting regulations, are made to act through
agency whether the latter is true or false (Latour, 2005:
54–55), and are ‘‘occasions given to different entities to
enter into contact” (Latour, 1999a: 141, original emphasis)
in networks. Networks, translations and inscriptions are
central elements in the process of building alliances
(Callon, 1986). ANT is about ‘‘the summing up of interac-
tions through various kinds of devices, inscriptions, forms
and formulae, into a very local, very practical, very tiny
locus” (Latour, 1999b: 17, original emphasis), and in this
paper we focus on the interactions that occurred in the
development of accounting regulations for FIFs.
A network is a concentration of resources (Latour, 1987:
180); it is a ‘‘co-ordinated set of heterogeneous actors
which interact more or less successfully to develop, pro-
duce, distribute and diffuse methods for generating goods
and services” (Callon, 1991: 133). It is ‘‘a tool to help
describe something, not what is being described”, a means
to ‘‘designate ?ows of translations”, a ‘‘trace left behind by
some moving agent” (Latour, 2005: 131; 132), and a ‘‘series
of transformations –translations, transductions” (Latour,
1999b: 15, original emphasis). Network members act to
‘‘modify other actors through a set of trials” (Latour, 2004:
75, original emphasis). Actors are ‘‘network effects” (Law,
1992: 383), and trials allow for network membership to
expand and regenerate and are the sites in which heteroge-
neous and con?icting interests are negotiated. Networks
are inevitably fragile and unstable; in each trial relations
are renegotiated because networks create patterns of
heterogeneous materials (Law, 1992: 381). Yet, despite
their inherent instability networks can appear stable as
the patterns of links are held together (Law, 1999: 6–7)
in the interest of demonstrating unity.
Harman (2009: 16) notes ‘‘For Latour the world is a ?eld
of objects or actants locked in trials of strength-some
growing stronger through increased associations, others
becoming weaker and lonelier as they are cut off from
others”. Trials of strength are about actants and actors
being in action and are the means through which actants
are re-constructed. We conceptualize the process of devel-
oping each accounting regulation as a trial of strength,
whereby actors interested in mobilizing support for a
new regulation seek to test and persuade others with their
views. During trials of strength spokespersons emerge to
speak on behalf of their constituencies who may not be a
coherent entity, and different spokespersons may pursue
different agendas (Latour, 1987: 78). Further, dissenters
aim to severe the link between the spokespersons and their
constituencies.
Translation is a process of aligning different interests,
claims, ideas and intentions of different actors. It consists
of four moments: problematization, interessment, enrol-
ment, and mobilization (Callon, 1986). Problematization
involves a focal actor de?ning the interests of other actors
in a way consistent with his/her own interests, and estab-
lishes itself as an OPP, thus rendering itself indispensable
(Callon, 1986). For example, when China launched the
open door policy and formed FIFs, new interests consti-
tuted existing accounting regulations as ill-suited to FIFs
(problematization). Interessment entails convincing other
actors to accept the problematization of the focal actor
while in enrolment actors are persuaded to accept the
interests de?ned by the focal actor (Callon, 1986; Callon
& Law, 1982). Mobilization involves the enrolling agencies
monitoring those enrolled in order to perpetuate represen-
tations of interests. This depiction of the moments of trans-
lation is not intended to signal a linear trajectory; the
moments overlap and frequently there are multiplicities
of translations because ‘‘translation is contingent, local,
and variable” (Law, 1992: 387). We draw on these four
moments to organize the narrative of our case study.
Inscriptions (scripts, diagrams, charts, etc.) are the
means by which moments of translation are performed,
networks formalized, and trials of strength executed (see
also Qu & Cooper, 2011). They provide a record for mem-
bers of a network and their target audience, and they are
means of forging alliances and bonding heterogeneous
members together. Dambrin and Robson (2011) usefully
3
FIFs in China have three forms: Chinese-foreign joint ventures with two
or more partners each with a given share of capital; Chinese-foreign
contractual joint ventures with two or more partners jointly controlling
assets or operations from which they bene?t; and wholly-foreign-owned
?rms (Ezzamel & Xiao, 2008).
62 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
show how inscription devices, even when interrupted and
imperfect, enable practical actions and fragile networks to
perform. In this paper, inscriptions include documents on
Chinese accounting, IAS, the new accounting regulations
for FIF’s, development of Special Economic Zones (SEZs)
and open door policies, and publications by the govern-
ment agencies, and other network members either in sup-
port of or against accounting reform.
An OPP is a point of negotiation centred on a primary
actor through which other actors must pass and are able
to achieve their interests as de?ned by the primary/focal
actor (Callon, 1986). An OPP mediates all interactions
between actors in a network and de?nes the action pro-
gram, affects future alliances in networks, and controls
the resources required to achieve the outcomes desired
by actors. It is a ‘‘single locus that could shape and mobilize
the local network” and it has ‘‘control over all transactions
between the local and the global networks” (Bijker & Law,
1994: 31). Finally, an OPP creates negotiation space, mak-
ing it possible for local networks to attain their identities
and independence from global networks. We argue that
Chinese characteristics played these roles in the develop-
ment of accounting regulations for FIFs.
In Mandarin, ???? (Zhongguo tese) is widely trans-
lated as ‘Chinese characteristics’, and occasionally as ‘the
Chinese way of doing things’ (Warner, 2008: 771).
Although known before the Mao era, it was not until the
Deng era that Chinese characteristics began to be used in
the discourse on transforming China. The formal Chinese
discourse on ‘‘socialism with Chinese characteristics” is
intended to reconcile what seems irreconcilable: combin-
ing ‘‘‘foreign’ (even ‘capitalist’ and therefore ‘non-
socialist) practices with indigenous Chinese institutions
based on Chinese values, whether traditional or commu-
nist” (Warner, 2008: 772). This brings together the oppos-
ing ideological values of capitalism and socialism, and
combines ‘‘individualist/foreign” and ‘‘collectivist/Chinese
” values (ibid).
For some commentators, ‘‘capitalism with Chinese
characteristics” is a means of combining public and private
ownership and management with responsibility (Karmel,
1994: 1105). For others, ‘‘Capitalism with Chinese charac-
teristics is a function of political balance between two
Chinas – the entrepreneurial, market-driven rural China
vis-à-vis the state-led urban China” (Huang, 2008: xvi).
For still others, it is a system ‘‘where the state creates the
space for the private sector to dominate and regulate the
market to ensure that the new bourgeoisie can appropriate
surplus value thanks to the bourgeoisie’s close relationship
with the party state” (Breslin, 2004: 29). These statements,
however, do not articulate what Chinese characteristics
mean.
Building on Ogden’s (1989) work, Aufrecht and Bun
(1995) examine Chinese characteristics in the context of
civil service reforms. Ogden (1989) contends that all deci-
sions of the Chinese government are underpinned by three
competing values: economic development, socialist values,
and Chinese culture (the most dominant of the three val-
ues). Aufrecht and Bun argue that the factors that re?ect
Chinese cultural values are: Confucianism, guanxi/person-
alism (a network of personal favours and obligations
underpinned by ties such as those of family and region),
and civil service examination and scholarly rules; those
that re?ect socialist values are: the Communist Party of
China (CPC) cadre (those who work in different ranks in
the party, government, the military, and social, economic
and educational institutions), work unit, and equity; and
?nally those that re?ect economic development values
are: China’s size, poverty, and education levels (1995:
176). Our analysis is not intended to directly tap these fac-
tors, but rather seeks to trace shifts in meaning in the dis-
course on Chinese characteristics that impacted
accounting regulations for FIFs during our period of study.
Research method
Our data collection entailed inspecting published
inscriptions and conducting 65 interviews. From 2004 to
2010, we undertook 56 interviews with: regulators
involved in drafting and implementing accounting regula-
tions, government of?cials (to identify how the scope of
accounting regulation for FIFs expanded, how they were
consulted about relevant regulations, and how they
participated in the regulatory process), academics who
participated in the regulatory processes, and accountants
in FIFs or their audit ?rms. From 2012 to 2014, we
conducted nine more interviews in order to ?ll in some
gaps (see Appendix B).
We gained access to interviewees through personal
contacts with the help of of?cials and academics.
Interviews were conducted by the researchers in English
or Mandarin, face-to-face except for two: one where a
written response to our questions was obtained and one
conducted on the telephone. Each interview lasted
between one and two hours. Notes were taken during the
interviews, and the interviews were tape recorded and
transcribed, and those conducted in Mandarin were trans-
lated into English. The interviews explored issues relevant
to our research themes and theoretical framing, mainly: (i)
the development of FIFs since the founding of the People’s
Republic of China in 1949; (ii) Chinese accounting before
reforms began, the emergence of three accounting regula-
tions for FIFs (MoF, 1985, 1992, 2000a), the actors involved,
the inscriptions and networks that developed, and how the
regulations were promoted; and (iii) the impact of eco-
nomic reforms, open door policy, and Chinese characteris-
tics on accounting regulations for FIFs. In order to preserve
the anonymity of our interviewees, we refer to each of
them in the masculine ‘he’.
We also drew on primary documents and secondary
inscriptions on Chinese political and economic policies,
accounting regulations, and convergence to IAS. We traced
the discourse on Chinese characteristics in publicly avail-
able sources and interviews, and how this discourse varied
across actors and over time and how it impacted account-
ing regulations for FIFs. We connected research issues and
the theoretical themes to these inscriptions and the inter-
view data. We conceptualize the episodes of the three
accounting regulations for FIFs as trials of strength
whereby IAS, Chinese accounting, and each new regulation
were actants, with spokespersons seeking to persuade
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 63
others of the strength of their cause. Each trial of strength
was a process in which actants were constructed through
multiple translations in the struggle to prevail over other
actant(s). Each reconstruction entailed revisions that
re?ected compromises to achieve consensus among the
target audiences and to overcome resistance against the
new regulation by claiming adherence to Chinese charac-
teristics whose meaning shifted across actors and over
time.
In ANT networks are a concept, ‘‘not a thing out there”
(Latour, 2005: 131). Hence, the challenge for us was to des-
ignate certain actants, actors and associations as networks:
‘‘In order to trace an actor network, what we have to do is
to add to the many traces left by the social ?uid through
which the traces are rendered again present, provided
something happened in it. . . The whole question is to see
whether the event of the social can be extended all the
way to the event of the reading through the medium of
the text.” (Latour, ibid: 133, original emphases). We follow
Latour’s lead by identifying traces of networks and events
in the social domain of regulating accounting for FIFs in
China that were connected to events in the source
material.
The use of ANT as a theoretical framing for this paper
poses a challenge in relation to writing style. ANT advo-
cates are critical of the use of categories of the social (e.g.
society, the state, capitalism) as if they pre-exist any form
of analysis by the researcher (Callon & Latour, 1981).
Rather, the social is a reassembling of different material
and social things through collective action. This reassem-
bling, argues Latour (2005: 75), ‘‘will thread a trajectory
through completely foreign modes of existence that have
been brought together by such heterogeneity.” What is at
stake here is the insistence that macro social phenomena
are not already assembled ‘‘out there”; in essence they
are micro phenomena connected to many others ‘‘through
some medium transporting speci?c types of traces” (ibid:
176). The emphasis is upon the connections and associa-
tions through which the social is related which researchers
should uncover: ‘‘The macro is neither ‘above’ nor ‘below’
the interactions, but added to them as another of their con-
nections, feeding them and feeding of them.” (ibid: 177).
Our focus is upon developing Chinese characteristics as a
discursive OPP and the connections between local actors
in understanding the emergence of accounting regulations
for FIFs in China. However, we do not go as far as reassem-
bling all the terms we use, but we stress that we under-
stand terms such as ‘‘the state”, ‘‘socialism”, ‘‘capitalism”,
etc., as re-assemblages of connected sites of the social.
The rise and growth of FIFs
Up to the late 1970s China’s relations with Western
countries were limited because of ideological differences
(CPC Central Committee, 1981; Mao, 1951; Mao, 1952),
with only a few international joint-ventures (IJVs) between
Chinese and foreign partners formed in the early 1950s.
Following Mao’s death in 1976, China was assessed to be
short of capital, technology and know-how (Expert
Group, 1995). In 1978 a conference held by the CPC
concluded that the CPC must seek truth from facts in order
to revise Marxism and Maoism. Deng (1978: 150), then
Vice-Chair of the CPC Central Committee, called for eco-
nomic reforms including learning from abroad. Deng’s
views set the tone for the 3rd Plenum of the 11th
National Congress of the CPC which stipulated a shift from
class struggle to economic development and promoted
economic reform and open door policy in order to develop
socialist productive forces (CPC Central Committee, 1978;
Xi, 1998). Consequently, SEZs began to be established
(Expert Group, 1995).
Following several conferences and deliberations from
January 1979 onwards, the CPC resolved in December
1980 that special policies and ?exible measures for SEZs
be developed. A conference organized by the CPC in May
1981 concluded that establishing SEZs has support in
Lenin’s view that foreign resources and management
expertise could be used to serve socialism, and that SEZs
are a means of improving the economy and achieving the
four modernisations needed in industry, agriculture,
defence, and science and technology. The conference stip-
ulated new policies to encourage foreign investment (CPC
Central Committee and State Council, 1981). But after vis-
iting the SEZs, reform opponents argued that only the
national ?ag remained red. Liu (1995: 434), then Deputy
Director of the CPC Revolutionary Committee of the
Guangdong Province, recalled that after he and a colleague
proposed that Guangdong should experiment with SEZs:
‘‘A Vice Premier immediately ‘threw cold water’ on it.
The Vice Premier said that ‘if Guangdong did this, then
there would be a need to put a 7000 kilometres iron net
to separate Guangdong from its neighbouring
provinces.’. . . Obviously, he was concerned that once
the door was opened, capitalist ideas would ?ood the
province and thus there would be a need to insulate
the neighbouring Fujian, Jiangxi, Hunan and Guangxi
Provinces from Guangdong.”
However, SEZs continued to gain of?cial support (Yu,
1998: 147) and to attract signi?cant investments (Cheng,
2000: 106). Between 1979 and 1988, one law for each of
the three types of FIFs and tax and accounting regulations
were promulgated. To counter critics, the CPC Central
Committee (1984) issued Decision on Economic Structural
Reforms in which it drew on Marx and Engels’ (1848) argu-
ment that because capitalism has developed a world mar-
ket, the previous self-reliance situation has been replaced
by exchanges between different economies, rendering the
production and consumption of all countries global:
People were used to the ideas and practices under the
planned economy systems and were in?uenced by the
‘‘leftist” ideas for a long time. They were thus used to
think about, and try to understand, economic matters
from these perspectives. When they were encouraged
to do something different, how could they be con-
vinced? If the new idea or practice is advocated by
Marx and Engels, then it would be easier for many peo-
ple to accept it because the planned economy ideas or
practices were also based on Marxist theory.
[Regulator 5]
64 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Reform critics considered high performing IJVs a threat
to state owned enterprises (SOEs) and a means of spread-
ing ‘‘spiritual pollution” (i.e., capitalist life style, Li & Li,
1999). In contrast, international investors complained
about restricting FIFs domestic sales, foreign exchange
problems, poor infrastructure, corruption and bureaucracy
in local government, and inconsistencies in accounting reg-
ulations (Xiang, 1999a), which led to FIFs receiving tax
incentives.
4
From 1984 onwards, the government began to
reduce its intervention in pricing and investment in joint
stock companies. The CPC embraced the ‘Theory of
Planned Commodity Economy’ which stated that there is
no con?ict between planning and developing a commodity
economy as long as public ownership is preserved. In
1987, the 13th CPC National Congress recommended
strengthening productive forces given China’s primitive
stage of socialism (Zhao, 1987).
Following the 1986 student movement demanding
more democracy, the CPC launched a national campaign
of ‘‘Anti-Capitalist-Freedom-Thinking” in 1987 and
emphasized the Four Cardinal Principles of Chinese social-
ism: Marxism, Leninism, and Mao Zedong Thought;
Socialism; Proletarian Dictatorship; and CPC Leadership
(Tang, 1998). As the underlying problems (e.g., corruption)
were not addressed, the Tiananmen Square demonstra-
tions erupted in June 1989 and China became isolated
internationally because of the way it handled the crisis.
Reform critics called for a return to pre-reform days. In
response, Deng (1992) urged the government to speed up
economic reform and develop a market economy because,
he argued, markets could support socialist productive
forces. Thus, the CPC resolved that a socialist market econ-
omy is the goal of China’s economic reform (Jiang, 1992):
In China, if the central government decided to do some-
thing, then people will follow. Before 1992, there was
debate all the time, but debate is one thing, action is
another. Therefore, Deng said, ‘‘do not debate”.
[Regulator 6]
Our informants suggested that Deng’s support for SEZs
seriously weakened reform opponents (Practitioner 18).
After Deng’s intervention, accounting reforms began to
unfold, and the Department of Accounting at the Ministry
of Finance (MoF) that was dissolved under Mao was
restored. In 1980, the MoF became responsible for issuing
accounting regulations in consultation with the relevant
ministries. In 1990, China opened the Shanghai Pudong
Development Zone and expanded the scope for FDI to
include more industry sectors. From 1989 to 1992 FDI rose
from US $3.4 billion to US $11 billion (Expert Group, 1995).
By 1993 the prices of most commodities became deter-
mined by the market. The CPC Central Committee (1993:
289) produced the Decision on Issues Relating to the
Establishment of a Socialist Market Economy which consid-
ered the open door policy key to reform because it con-
nects domestic and international markets and optimizes
resource allocation. In 1997, the 15th CPC Congress per-
mitted different forms of ownership judged to suit the
development of socialist productive forces (Li, 1997).
These initiatives expedited the development of the capital
markets in Shanghai and Shenzhen.
The three accounting regulations
5
‘‘A single inscription would not inspire trust” (Latour,
1999a: 28)
The 1985 regulation
Informants suggested that the establishment of FIFs
created demand for information from government depart-
ments, Chinese and foreign partners, and FIFs managers
which required a new accounting regulation. Several
options of regulation were available to the MoF: account-
ing systems of the investor’s country, Chinese accounting,
a hybrid of both, a new regulation, IAS, and developing dif-
ferent regulations for different industries (Regulator 5).
Problematization and interessment
The problematization of the Chinese Uniform
Accounting System (UAS) began with the MoF inviting tar-
get audiences to seminars aimed at promoting accounting
reform:
Before the accounting regulation for IJVs was stipulated,
many seminars were held in Beijing and Guangzhou on
foreign investments sponsored by the government.
Participants included representatives from the MoF,
the Ministry of Foreign Economic Relations and Trade,
the State Tax Bureau, the State Foreign Currency
Management Bureau, SEZs of?cials, lawyers, and
accounting ?rms.
[Regulator 5]
Reform advocates (e.g., regulators, foreign investors)
constituted the UAS as unacceptable because it was not
based on IAS (Regulator 1). The UAS based ?nancial state-
ments on Funds System
6
; ‘‘funds” were used instead of
‘‘capital” because the latter was construed as capitalist ter-
minology. Further, reformers argued that the UAS was dom-
inated by tax and ?nance regulations with little scope for
companies to develop their own accounting policies. This
problematization was debated in the seminars:
At these seminars, accounting and tax issues were hot
topics. Many questions were asked by foreign investors
and accounting ?rms about how IJVs should book
assets, value assets, and be taxed on the income of the
4
Initially, IJVs were exempt from corporate income tax in the ?rst year
when pro?t was made and given 50% tax reduction in the next two years. In
1983, these provisions were revised to provide foreign investors with better
privileges: from the year when they made pro?t, IJVs enjoy free corporate
income tax in the ?rst two years and 50% reduction from the third to the
?fth year. Export-oriented FIFs using advanced technologies enjoyed
favourable utility rates, land use fees, working capital loans, lower income
tax, preferential import and export rights, foreign currency rates, and high
managerial autonomy (State Council, 1986).
5
Details of the three regulations are available in Ezzamel and Xiao
(2008).
6
The Funds System had three sections: ?xed funds and ?xed assets,
current funds and current assets, and special purpose funds and special
purpose assets.
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 65
company. When we tried to answer the questions, we
realized that we had accounting regulations for domes-
tic ?rms, but we could not use them in IJVs, we needed
to rede?ne assets, liabilities, things like that. And in
China, we did not have balance sheets; instead, we
had a funds statement at that time. . . [which] was a
product of the planned economy, we learned it from
the Soviet Union. When we tried to answer the afore-
mentioned questions, we found we could not use such
concepts because foreign investors did not understand
them. We started to learn fromIAS and tried to use their
concepts as much as possible.
[Regulator 5]
It was also suggested that foreign investors had little
con?dence in Chinese accounting (Regulator 2, interview).
Further, two problems were encountered in negotiations
with foreign investors:
The ?rst related to accounting standards. Chinese
accounting regulations were centred on a planned
economy with unitary state ownership. . . The existing
systemcould not measure foreign investments and allo-
cate pro?t according to investments, nor was it able to
record fully assets, liabilities and equity. The second
problem was auditing. Under the planned economy,
SOEs’ ?nancial statements were reviewed by the MoF
or a local ?nance bureau according to the size of the
?rm. But for an IJV, the foreign partner demanded a
third party audit. This raised the issue of independent
auditing at the same time when the accounting stan-
dards problem was raised.
[Regulator 6]
These seminars were also means via which the MoF
sought to align the interests of network members to its
own interests by discrediting the use of UAS for FIFs,
emphasizing the need for a new regulation that imports
some Western accounting elements:
. . .perhaps the most important function of the seminars
was to unite people’s thoughts. This involved two
aspects. For one thing, we needed to explain some reg-
ulatory requirements, techniques and concepts so that
people could understand them. For another, some new
and foreign techniques and concepts (e.g., the capital
concept) might be seen inappropriate for China. This
required us to convince people that they are useful
and workable in China.
[Regulator 5]
Initially, IJVs prepared two sets of accounts, one
based on Chinese accounting and one on IAS and foreign
investors’ national rules, but the MoF wanted IJVs to
prepare only one set of accounts (Regulator 5). FIFs also
encountered dif?culties with accounting for intangible
assets:
During the formation of Shanghai Zhongrui Co. Ltd, a
joint venture between a Chinese company and a
German company, the latter proposed to invest intangi-
ble assets into the joint venture. . . and required that the
investment be recognized as an intangible asset.
However, in Chinese accounting regulations and
practice intangible assets were not recognized and
recorded.
[Regulator 2]
Thus, network members articulated different concerns
regarding the suitability of the UAS for FIFs, and the MoF
sought to align these interests by emphasizing the need
for a new accounting regulation that addresses some of
these concerns.
Given the above problematization, various scenarios of
interessment were attempted. For example, under the aus-
pices of the MoF, the Accounting Society of China (ASC),
7
Cooper & Lybrand, the Chinese Society of Fiscal Studies,
the Shanghai Institute of Finance and Economics, and the
Shanghai Bureau of Finance, organized training in IJV
accounting in 1980 (Xiang, 1999b). In 1981, the ?rst issue
of the academic journal Accounting Research published two
articles introducing international accounting developments.
Its second issue contained an article introducing IAS, a
report on a national accounting and auditing conference
organized by the American Institute of Certi?ed Public
Accountants (AICPA), and an introduction to Western trans-
fer pricing, followed by articles on Western ?nancial man-
agement in three subsequent issues. The journal’s fourth
issue in 1981 published the ?rst Chinese translation of IAS
on post-balance sheet date events, followed by a series of
translations of IAS on income tax, and the presentation of
current assets and current liabilities. Articles written by
Lou, Shi, and Pei (1982, 1983), Lou, Shi, Pei, and Feng
(1984)
8
published in Accounting Research compared account-
ing in the USA and China. There were also articles on
Japanese accounting standards and accounting curricula in
USA universities. These inscriptions were mobilized by the
MoF to problematize the UAS, and to convince its target
audience of the usefulness of Western accounting and of
the need for producing an accounting regulation for FIFs.
Chinese characteristics
The problematization of the UAS and the existence of
Western accounting raised two main questions: Could
Western accounting be used to make the UAS appropriate
for FIFs? Should Western accounting be copied wholesale,
or should only parts of it be borrowed? Which parts of
Western accounting could be made compatible with
Chinese characteristics?
Interviewees linked accounting and Chinese character-
istics: ‘‘When Deng used ‘socialism with Chinese charac-
teristics’, accounting of?cials began to think whether
there is accounting with Chinese characteristics”
(Regulator 5). In 1980, Xie (1983, 1987), a Vice-Minister
of Finance and Vice-president of the ASC argued for the
need for a system of accounting with Chinese characteris-
tics that emphasizes economic ef?ciency, stating that
7
The ASC’s involvement in accounting reforms is because it is under the
auspices of the MoF and many government of?cials are among its
members. The president of the society is a current or retired Minister of
Finance while the Secretary-General is the Director-General or Deputy
Director-General of the Department of Accounting at the MoF.
8
Also Vice President of the ASC, and a member of the Chinese advisory
panel for setting accounting standards in the 1990s.
66 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Western accounting has to be carefully analysed and inte-
grated with Chinese Characteristics. Political leaders, regu-
lators, academics and practitioners debated how
accounting with Chinese characteristics can be developed,
yet no effort was made to de?ne Chinese characteristics
directly, although some emphasized the necessity of
accounting complying with state laws and ?nancial regula-
tions and protecting state interests (Yang, 1983).
Yang Jiwan, Director-General of the Department of
Accounting at the MoF and Vice-president of the ASC, sta-
ted that developing accounting with Chinese characteris-
tics was espoused at the 1983 annual conference of the
ASC in a proposal: ‘‘to establish a system of accounting the-
ory and methods with Chinese characteristics centred on
improving economic effectiveness” (Xia & Ma, 1993: 24).
Yang emphasized three issues. First, accounting must be
responsive to both Chinese characteristics and economic
effectiveness. Secondly, Chinese characteristics do not
exclude foreign ideas; China can use foreign methods while
maintaining independence. Thirdly, Chinese characteristics
have their support in Deng’s theory of developing socialism
with Chinese characteristics. Ding (1984), an accounting
regulator and of?cial in the MoF, stated that the develop-
ment of accounting with Chinese characteristics should
embrace learning from foreign experiences based on analy-
sis and critique rather than wholesale adoption.
Other actors deployed stricter arguments, emphasizing
the importance of observing Marxist political economy
and China’s socialism, meeting the needs of the four mod-
ernisations (see earlier), and drawing on China’s past
accounting experiences, and thus arguing that China
should not ‘‘blindly copy” foreign accounting (Ding, 1984;
Lou & Shi, 1981). Others stated that accounting with
Chinese characteristics should be ‘‘consistent with the
Soviet model because the two countries are in the socialist
camp” (Regulator 12). Chinese characteristics were there-
fore assumed to re?ect whatever Chinese attributes were
construed to be relevant from a particular perspective,
including Marxist political economy, Mao Zedong
Thought, economic ef?ciency, central planning, state inter-
ests, and Chinese experience rooted in the past while being
forward looking (e.g. Ding, 1984).
Translation was a big challenge both technically and
politically: which Western accounting elements could be
adapted and ‘‘attractively packaged” (Djelic, 2008) to travel
to China?
. . .Western accounting practice. . .can’t (be used) directly.
It has to be adapted and customized to the Chinese con-
text. The problem is how far you can use all this Western
thing, you know. This is a question with no answer. So
customization was a really important factor. And some-
times you need the decision maker to put some input. . .
It could be a political issue, not just purely technical,
especially at that time people used to think of issues,
problems from a political perspective, you know, at that
time, not long after the Cultural Revolution.
[Regulator 5]
In the above quote, the term ‘‘Chinese context” is
another way of invoking Chinese characteristics.
Customization, or to use ANT terminology translation, of
Western accounting to China was not only about attending
to technical issues but also had to be politically sensitive.
The translation of actants is not only a matter of making
things doable in practice but also of packaging them in a
way that makes them politically acceptable. One dilemma
regulators faced was how Western accounting vocabulary
can be rendered consistent with Chinese characteristics?
At the beginning of the development of the accounting
regulation for IJV, when many people heard the word’
‘capital’, they did not feel comfortable. Because they
have been under the in?uence of Maoist education for
so many years, they could not accept foreign ideas
and concepts. This naturally created debate and even
resistance which in turn distracted and delayed
reforms.
[Regulator 2]
Regulators were nervous about using a vocabulary such
as ‘‘capital” on their own initiative, but felt that producing
the new regulation required it. Support came to them from
higher authorities:
Mr. Xie Ming, Vice-Minister of Finance, was in charge of
accounting at that time. During the process of drafting,
when capital was used, he specially asked us to explain
it as registered capital, and paid capital etc. He did not
oppose the use of the concepts and allowed us to use
them boldly. If there was any problem, leaders would
bear the responsibility. As to what represents capital-
ism that was only the view of some people but not
the mainstream. Central government considered that
any market economy concept and method can be used.
[Regulator 6]
In the early 1980s, China was still coming to terms with
the aftermath of the Cultural Revolution: reformers
wanted to de-emphasize class struggle and promote eco-
nomic development, while critics remained wedded to
Maoist ideas. The issues of whether or not ‘‘capital” is con-
sistent with Chinese characteristics, and whether account-
ing is a tool for exploiting the working classes or a neutral
technology were strongly contested. But the discursive
?eld was shifting slowly in favour of reform. It is in this
context that the intervention by Xie Ming should be under-
stood. Regulators were aware of potential hostility from
critics, and the intervention of formal authority in the
translation process reassured the regulators that any
blame will reside with high authority rather than with
them. Xie Ming’s intervention exhibited some measure of
political acumen invested in knowing how far the vocabu-
lary of ‘‘capital” and ‘‘capitalism” can be pushed, and when
it is best to do so. By that time, the problematization and
interessment promoted the accounting reform agenda
through university education, published debate, seminars
and conferences.
The translation of Western accounting vocabulary and
methods (e.g., changing the accounting equation from
‘‘fund sources = fund application” to ‘‘assets = equity capi-
tal + liabilities”) suggests that ideological arguments began
to give way to the claimed needs of FIFs:
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 67
Ideology can give way to the requirements of economic
development. Irrespective of whether it is capitalist or
socialist, if it (an accounting concept or method) can
help create social wealth and social resources, it can
compete with others.
[Regulator 12]
Thus, although under Mao Western accounting and its
vocabulary (e.g., capital) were inconsistent with Chinese
characteristics, the rise of FIFs and shifts in the discursive
?eld facilitated their partial acceptance. However,
Chinese characteristics prevented the adoption of other
elements of Western accounting: ‘‘we did not allow JVs
to provide for bad debts in the 1985 accounting regula-
tion. . . because the possibility of having bad debts was very
small because in the Chinese economic environment for-
eign investors sold their products to foreign countries by
prepayment or to SOEs; this was Chinese characteristics”
(Regulator 5).
Enrolment and mobilization
In February 1980, the MoF undertook a ?eld survey of
IJV accounting, tax and ?nance practices in Guangdong
and produced The Accounting System for Chinese-Foreign
Industrial Joint Ventures (Exposure Draft) in June 1980.
Regulator 5 recalled that the project team charged with
producing the regulation started with a ‘‘white paper” (a
blank paper) on which they drafted an outline of the
1985 regulation. Members of the project team visited
FIFs and various government departments. The
Department of Accounting at the MoF organized a work-
shop where staff explained the need for the new regulation
and introduced its Exposure Draft.
It was a really open process that consulted technical
experts who knew Western accounting practices very
well and had a lot of access to FIFs to ?nd out about
problems, then produced an outline regulation that
was discussed with small groups of experts. This led
to an Exposure Draft which was further disseminated
to people who were invited to comment on it from aca-
demia, FIFs, and provincial ?nance of?ces.
[Regulator 5]
The MoF distributed the Exposure Draft to central and
local government departments for comment. Government
of?cials, academics and practitioners published articles
promoting the Exposure Draft. For example, Gao (1984),
Guangdong Finance Bureau, published an article in the
Guangdong Finance and Accounting journal that discussed
the contradictions between the Exposure Draft and exist-
ing accounting practice and the relationship between the
Exposure Draft, tax laws and ?nancial regulations. This,
and similar publications, provided input into the regula-
tory process, claiming that the Exposure Draft has survival
capabilities in being malleable and ?exible and thus gain-
ing strength through negotiation and revision. Regulator
6 indicated that ‘‘From 1980 to 1985, the Draft was used
in negotiations with foreign investors.” Feedback was also
received from two groups of local bureaus of ?nance: the
western part and the coastal provinces. As the former
group had no knowledge of Western accounting, the MoF
arranged training for them. The coastal group, with knowl-
edge of Western accounting, provided comments on the
Exposure Draft. This divide between the two groups sug-
gests that enrolment and mobilization were more dif?cult
in some regions compared to others.
The Accounting Department (MoF) had several mem-
bers who previously studied, taught or practised
Western accounting: Mo Qiou,
9
Lu Zhongwen
10
; Hu
Baochang,
11
and Yang Jiwan (Regulator 4).
12
It was sug-
gested that the expertise of these members endowed
the Exposure Draft with legitimacy in the eyes of foreign
investors:
Mo Qiou and I visited an IJV in Shanghai which manu-
factured elevators. We studied and were able to under-
stand its accounting system in detail quickly. Without
these experts, it would have taken much longer to
understand the system. Moreover, even if the regulation
was eventually produced, if the regulators were not
authoritative, it would be subject to questioning and
suspicion, especially by foreign investors.
[Regulator 2]
In March and April 1985, the MoF issued The
Accounting System for Chinese-Foreign Industrial Joint
Ventures and The Chart of Accounts and Financial
Statements in Chinese-Foreign Industrial Joint Ventures.
This regulation adopted matching costs and revenues,
accrual accounting, Debit-Credit bookkeeping, accounting
for intangibles, and expensing ?nancial and administrative
costs: ‘‘[The 1985 regulation] laid the foundations for
future reforms in accounting regulation.” (Yang, 1994:
32). The UAS was embraced to enhance information com-
parability because most IJVs’ transactions occurred with
SOEs. The 1985 regulation was strengthened by its associ-
ation with other actants, in particular IAS, but was
also impacted by Chinese characteristics as suggested
earlier.
The debate over the nature of accounting in?uenced the
assessment of the 1985 regulation, with critics questioning
the relevance of Western ideas to socialist China
13
:
At the beginning, when the IJVs’ accounting system was
?rst introduced, people could not accept the concept of
capital. They thought capital represents capitalism and
9
Mr. Mo Qiou was the chief accountant of the American owned
Zhongmei Fuyou Co. before 1949. He joined the MoF in 1953, and became
responsible for developing enterprise accounting systems including the
Accounting System for Joint Ventures. He translated Accounting System for
Foreign Contracted Firms from Chinese into English.
10
Professor Lu Zhongwen was an academic, chief editor of three journals
in the 1950s-1960s, and participated in the development of accounting
systems.
11
Hu Baochang was an academic, then member of the Department of
Accounting in 1979. He translated with Mo Qiou Yugoslavian Bookkeeping
Bureau Regulations. He participated in the development of accounting
systems.
12
Professor Yang Jiwan was an academic before 1949. In 1949 he joined
the MoF then became Director General of its Department of Accounting and
advisor to the MoF.
13
The debate was not only academic because the MoF controlled media
such as the journal Accounting Research where articles on accounting
regulation for FIFs were published.
68 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
funds represent socialism. The concepts of registered
capital and actually received capital etc., were not
accepted. At that time, Increase/Decrease bookkeeping
represented socialism while Debit/Credit represented
capitalism.
[Regulator 6]
Thus, despite formal support, critics continued to con-
strue terms such as ‘‘capital” and ‘‘debit-credit” as capital-
ist terminology and being inconsistent with their
interpretation of Chinese characteristics. By imparting ide-
ological values to accounting vocabulary, the aim was to
discredit the 1985 regulation and to destabilize its
network.
To promote the 1985 regulation, the MoF expanded the
network by enrolling further members, including local
government of?cers, university professors and students,
accountants in IJVs and SOEs, and domestic and foreign
investors. The MoF translated the regulation into English,
French, German, Japanese and Spanish and published it
in Beijing Review, China Daily, Finance and Accounting jour-
nal (edited by the MoF), Accounting Research journal (edi-
ted by the ASC) and booklets. The MoF and local ?nance
bureaus (LFBs) organized workshops on the new regula-
tion, with participants drawn from ?nance, tax, enterprise
supervising departments, accounting ?rms, and IJVs in
cities opened to foreign investors (Finance, 1985), and
courses on accounting for IJVs were introduced in
universities:
In 1985 I was at Graduate School so my Professor taught
us how to do accounting for foreign currencies and how
to prepare consolidated statements.. . .. After 1985, they
taught not only accounting for capitalist enterprises,
but also accounting for IJVs.
[Regulator 3]
In 1986, Mo Qiou (see f.n. 8) and his colleagues pub-
lished textbooks based on the new regulation (e.g., He &
Lin, 1993; Wang & Shen, 1987). By that time, almost every
province, major city, and government ministry had estab-
lished an accounting society af?liated to LFBs as branches
of the ASC in order to forge strong links between academics
and practitioners (Regulator 5), and issued journals such as
Shanghai Accounting which published articles explaining
the 1985 regulation (Chen, 1985; Xie, 1990).
The expanded network with its associations between
actors (regulators, government of?cials, politicians, aca-
demics and accounting practitioners) and actants (e.g.,
the 1985 regulation, IAS) enlisted the target audience of
FIFs, foreign investors, international accounting bodies,
and international institutions (e.g., the World Bank). The
articulation of joint interests was premised on presenting
the 1985 regulation as one that adapted elements of
Western accounting consistent with Chinese characteris-
tics and provided greater protection for foreign investors.
As shown above, numerous inscriptions (accounting regu-
lations, Exposure Drafts, journal/newspaper articles, con-
ference presentations) were produced and circulated
widely by the MoF in order to formalise these interests,
provide regular communications between network mem-
bership and target audience, and stabilise the network.
The promulgation of the 1985 regulation was expected
to address the problematization of the UAS by regulators,
academics, and FIFs‘ managers. The network formed was
?uid, with new members added when appropriate, for
example the newly established accounting societies, rele-
vant government ministries and cities that disseminated
the 1985 regulation. By organizing meetings, seminars,
and conferences, and by utilizing various inscription
devices such as press releases, newspaper articles, book-
lets, and academic publications, the MoF mobilized alli-
ances within the network around what were translated
as the shared interests of the network. Academics and
practicing accountants published articles and books and
organized conferences that contributed to the debate,
problematized the UAS, and disseminated the new regula-
tion. Chinese characteristics, assuming differing meanings,
emerged as a discursive OPP that was invoked by advo-
cates and critics of adapting parts of IAS. As an actant con-
structed in the ?rst trials of strength, the 1985 regulation
was unlikely to be radical; it was a hybrid compromise of
the UAS and IAS because regulators had to tread a tricky
path: China still had strong elements of socialism, and
strict de?nitions of Chinese characteristics were invoked
by reform opponents.
The 1992 regulation
Problematization and interessment
The initial problematization of the 1985 regulation
began as soon as it was promulgated. Regulator 3 (inter-
view) said that foreign investors, including the World
Bank, complained that this regulation was different from
IAS. Zhao (1987), then Premier of China, in his address to
the 13th National Congress of the CPC stated that foreign
businessmen should be enabled ‘‘to operate businesses
according to international conventions”, thereby support-
ing the adoption of more IAS. Ge, Lin, and Wei (1988) con-
sidered the non-adoption of conservatism in the 1985
regulation a serious shortcoming, arguing that conser-
vatism deals with uncertainty in commodity economies,
helps harmonization with IAS, and improves the invest-
ment environment. Regulator 4 stated that the 1985 regu-
lation did not go far enough in adopting IAS. Yang (1994:
32) suggested that improved legislations for foreign busi-
nesses in 1991, especially those relating to taxing FIFs, ren-
dered the 1985 regulation unsatisfactory.
The problematization was undertaken with the need for
more accounting reform in mind; this was debated in
research groups and conferences from 1987 onwards,
which culminated in issuing An Outline of Accounting
Reform (draft) in April 1989 by the research group on
Accounting Reform in the MoF. The Outline aimed to estab-
lish a management-oriented accounting system suited to
central planning and market regulation, to strengthen
enterprise management, and to adopt more elements of
Western accounting that meet macroeconomic manage-
ment needs (Regulator 2).
Regulators investigated accounting practice in FIFs in
various cities. Initially, regulators considered separate
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 69
systems for each of: wholly-foreign owned ?rms, Chinese-
foreign equity JVs, and Chinese-foreign contractual JVs, but
it was found that they overlapped signi?cantly, and it was
thought that having three regulations would confuse for-
eign investors (Regulators 4 and 5). Thus, regulators
decided that one accounting regulation for all types of
FIFs should be developed. This led to a concern: how could
special transactions be treated in different types of FIFs?
Regulators adopted an approach that permitted making
special provisions for each type of FIFs, for example pro-
ducing rules on how to account for funds in Chinese-
foreign equity JVs that were not required in other types
of FIFs.
Regulator 5 said that due to the dual pricing system, the
MoF wanted to use market rates for accounting purposes,
but the People’s Bank of China (PBC, China’s Central
Bank) insisted on using the of?cial rates. The Regulatory
Bureau of the State Council required the MoF and the
PBC to reconcile their positions, forcing both to agree on
using the PBC’s year-end of?cial currency exchange rate
for balance sheet items, and the annual weighted average
currency exchange rate for income statement items.
Regulator suggested that the development of the 1992
regulation involved a ?ne balance of power and negotia-
tion between his department, the Department of Finance
and the Department of Taxes at the MoF. For example, in
negotiating provision for bad debts
14
:
I didn’t like to give a percentage in the regulation; it
[3%] was a product of compromise, because the state
taxation bureau didn’t like the idea of allowing the
enterprise to make provision for bad debts, also for
the inventory value to be below cost. . . because it
means less tax revenue... However, the percentage
was not imposed by tax staff, but by the Finance
Departments of the MoF. When I had the new idea of
allowing FIFs to provide for bad debts, the Finance
Departments said no at ?rst, because enterprises were
not allowed to do that. Finally, they agreed although
they insisted that I must determine a percentage
because we had a ?xed asset depreciation rate. If I
didn’t agree with them, this regulation would have
not emerged. I did not want any percentage. I just
wanted to produce a policy you can use, so the percent-
age could be decided according to the situation and IJVs
can make their own judgment.
[Regulator 5]
The above quote illustrates part of the complexity of the
Chinese accounting regulation process: multiple actors
with different roles and interests in the regulation process
were pushing in different directions to construct a new
actant. Tax authorities were concerned to avoid making
concessions by allowing greater provisions for bad debts
and reducing tax revenue. Yet, the power of determining
the percentage of provisions lay with the Department of
Finance whose concern was to ensure consistent
accounting practice across businesses. Regulators, the
Accounting Department (MoF) and the Ministry of
Foreign Trade were concerned to attend to the demands
of foreign partners in FIFs, the World Bank, and the
increased pressure to harmonize Chinese accounting more
closely with IAS. Regulator 5 had to negotiate hard and to
accept a compromise solution of a ?xed percentage against
his better judgement that provisions should vary depend-
ing on the situation. However, he felt that this compromise
still marked a radical departure from the 1985 regulation,
for at least the need to allow for provisions was accepted.
When asked how he managed to secure their agreement,
Regulator 5 answered:
I had a strong argument. What they were worried about
in this policy was the damage to the state tax revenue. I
said, if you don’t use the policy, you will damage assets
more. Because if companies have bad debts and we
don’t allow companies to make a provision, they may
have big pro?ts. Although a big pro?t will lead to a
big income tax, a big pro?t leads to a big distribution
of pro?t, so you may make some evil pro?t for the
shareholders of the company which will damage the
future prospects of the enterprise. If we want the enter-
prise to grow, we should allow it to make some reason-
able provision for this potential loss. Even though the
regulation allowed FIFs to provide for a 3% provision
for bad debts, the amount is not automatically deducted
from taxable income, because the reduction would have
to be approved by the tax authority.
Regulator 5 spoke a language that connected with the
interests of the target audience. He attributed his success
in convincing ?nance and tax of?cials to having a ‘‘strong
argument”. Having identi?ed their interests as protecting
tax revenue, he contrasted this against shareholders
receiving more evil ‘‘pro?ts” which he construed as an
impediment to enterprise viability. He could thus argue
persuasively that provisions for bad debts are necessary,
while minimizing the effect on tax revenue by stating that
provisions could not be deducted from taxable income
without the approval of tax authorities. Such consideration
by the regulators of the implications of a new accounting
regulation on state revenues underscores an important
Chinese characteristic – the in?uence of the central plan-
ning system on accounting which resulted in capping the
provision for bad debts at 3%.
Chinese characteristics
Politically, the attitude towards adopting Western
accounting became somewhat more relaxed than previ-
ously. The view that accounting is not ideological began
to gather a stronger momentum (Yang, 1993). This was
facilitated by the 13th CPC Congress held in 1987 embrac-
ing the Theory of Primitive Socialism (Zhao, 1987) which
shifted the emphasis from class struggle to economic
development and promoted a commodity economy. The
debate on further accounting reform continued and con-
cern with Chinese characteristics remained paramount.
Efforts were made to articulate the meaning of Chinese
characteristics. Yang (1985) argued that for accounting to
14
In the late 1980s and early 1990s, there was a debt crisis (i.e.,
companies using supply chains were unable to repay debts) which
encouraged provision for bad debts, because the government could protect
SOEs, but could not provide insurance for non-SOEs.
70 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
be consistent with Chinese characteristics accounting
should re?ect China’s experience supplemented by selec-
tive adoption of foreign accounting, help improve macro-
and micro-economic ef?ciency, help establish economic
responsibility centres and strengthen monitoring, and
serve the purposes of planning and markets. The
Accounting Society of China (ASC) (1985) made similar
comments and emphasized public ownership as the pri-
mary form of ownership. The ASC (1987) also produced a
research plan for the following four years aiming to
develop an accounting system with Chinese characteristics
that suits the needs of the four modernizations by adopting
elements of Western accounting deemed compatible with
Marxist principles and China’s planned economy.
Compared with the early 1980s, the debate on Chinese
characteristics focused upon speci?c issues at a deeper
level. He (1988) proposed an accounting system with
Chinese characteristics that emphasizes political economy,
dialectic and historical materialism, planned commodity
economy, systems theory, control theory, information the-
ory, shortage economics, and planning and control meth-
ods. He (1988), Yu (1989), and Jiang and Li (1991), all
MoF regulators, reiterated the importance of preserving
the socialist nature of accounting while embracing reform
and hence developing an accounting system with Chinese
characteristics. Xie (1990) stressed that Chinese character-
istics should emphasize the integration of enterprise and
national interests, mass participation, and permit selective
use of Western accounting suited to China. Commentators
argued that copying foreign accounting wholesale is incon-
sistent with Chinese characteristics because of differences
between the West and China; for example the prominence
of private ownership in the West compared to public own-
ership in China (Zhang, 1991).
In response to these calls, a symposium on accounting
standards was organized in 1990 with participants from
all SEZs. The delegates stressed that the new accounting
regulation for FIFs must set accounting standards based
on Chinese characteristics and socialist economics while
being ?exible as enterprises become gradually more inde-
pendent producers and traders of socialist commodities,
draw on over forty years of socialist accounting experi-
ence, and recognize the inexperience of practicing
accountants (Cai, 1990). The call for ?exibility implies
that the symposium participants considered that
Chinese characteristics should change as the regulatory
environment changes.
These interpretations of Chinese characteristics re?ect
understandings ranging from strict to liberal. Actors
deduced Chinese characteristics from what they deemed
an ‘‘acceptable” accounting regulation, and thus the object
of regulation recursively impacted the meaning of Chinese
characteristics. Chinese characteristics were rendered into
a malleable concept that could be de?ned variably. Such
malleability endowed Chinese characteristics, as a discur-
sive OPP, with conceptual mobility and durability, for such
malleability opened up a space for actors with differing
agendas to be part of the regulation debate. Meanwhile,
the Shanghai and Shenzhen Stock Exchanges were inaugu-
rated in 1990 and 1991 respectively as means of increasing
marketization, signalling a stronger desire that Chinese
characteristics should be ?exible in order to accommodate
more Western ideas to facilitate China’s drive to belong to
the modern ‘‘world order”.
In 1992, the MoF issued the Accounting System for
Foreign Invested Firms to replace the 1985 regulation. The
regulation included as new additions valuing long–term
investment at cost if the investment was 25% or less, and
using the equity method if the investment was above
25% of the total capital of the investee. It required FIFs to
prepare consolidated ?nancial statements if their invest-
ment in a third party accounted for over 50% of the inves-
tee’s total capital; adopt LIFO for stock valuation; and unit
of production or service and reducing balance for ?xed
assets depreciation with the residual value capped at
10%. It also allowed provision for stock impairment subject
to government approval.
To comply with the interpretations of Chinese charac-
teristics, the regulation did not allow companies to deter-
mine the rate for provision for bad debts but ?xed it at
3%, nor did it include conservatism as an accounting prin-
ciple. The regulation re?ected other concerns with Chinese
characteristics: the complexity of the regulatory process
(Regulator 5), the gradual adoption of economic and
accounting reform, the developing nature of the market
economy (Regulator 3), and the uncertainty in the emerg-
ing commodity/market economy which created a need for
bad debt provision (Ge et al., 1988). Also, it helped the UAS
which re?ected elements of Chinese characteristics
(Regulator 5): China still had a planned economy, and
accountants and tax of?cials were used to a chart of
accounts and the UAS made it convenient for government
departments to aggregate ?nancial statements, so that
‘‘these elements are carried on and become Chinese char-
acteristics.” (Regulator 7)
Enrolment and mobilization
The 1992 regulation was disseminated quickly and, ini-
tially, was seemingly well received:
In 1992, many nationwide training sessions were held.
The reaction was very positive. It [the new regulation]
was published in Economic Daily and broadcasted on
national TV news; the latter never happened before.
[It received] a lot of praise. IJVs felt that it was more
convenient for them.
[Regulator 4]
Regulators at the MoF mobilized a network (including
other ministries, LFBs, accounting societies, IJVs, and aca-
demics) to disseminate the 1992 regulation via training
sessions, workshops, seminars, TV broadcasts, and news-
paper articles. The MoF circulated the 1992 regulation to
all ministries and LFBs, along with a document explaining
how to treat speci?c types of transactions to central gov-
ernment and provincial governments.
Various accounting and ?nance magazines edited by
national and local associations and universities promoted
the 1992 regulation. A search of titles containing
‘Accounting Systems for FIFs’ in the Chinese Knowledge
Network Periodicals Database shows many articles explain-
ing the regulation written by academics, practitioners and
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 71
government of?cials published in 1992/1993 in magazines
such as CPA Communications (CICPA), Finance and
Accounting Communications (Hubei Accounting Society),
Finance and Accounting Monthly (Wuhan Accounting
Society), Finance and Economic Studies (Shanghai
University of Finance and Economics), Finance and
Commerce Research (Anhui Institute of Finance and
Commerce), Journal of Guangxi Institute of Finance and
Economics, Guangxi Finance and Accounting (both Guangxi
Accounting Society), Shanghai Accounting (Shanghai
Accounting Society), and International Taxation (Chinese
Association of International Taxation). However, the regu-
lation still attracted criticism:
Academics and practitioners were free to write articles
to analyze and discuss the new regulation. They would
also raise issues, sometimes, quite critical, when we
gave seminars. Once I was giving a lecture at a work-
shop in Shanghai and met some participants who were
critical of aspects of the FIF accounting regulation. I said
to them, ‘‘O.K., you think there are problems with it and
some requirements are inconsistent with your theory,
but we have to issue a regulation that is workable in
practice, even though it is not entirely consistent with
accounting theory.”
[Regulator 5]
In summary, the 1992 regulation was construed as a
pragmatic means of attending to both technical and polit-
ical concerns whilst preserving malleable translations of
Chinese characteristics, but it also had its critics as soon
as it was promulgated.
The 2000 enterprise accounting system (EAS)
Problematization and interessment
Initially, commentators ascribed several positive attri-
butes to the 1992 regulation; it was assessed to have:
provided good solutions to accounting and reporting
issues in FIFs at the time, improved investment condi-
tions, strengthened investors’ con?dence, and pro-
moted growth in foreign investments. . . it helped
spread market ideas, train many accountants who
became familiar with international accounting conven-
tions, promote accounting research, and accumulate
many important experiences that became useful for
transforming China’s accounting model into a market-
based accounting model.
[Regulator 9, our emphasis]
Thus, the 1992 regulation was construed as being
responsive to the needs of FIFs whilst observing interna-
tional conventions, thereby underscoring attention to local
needs and global accounting regulation. However, this
endorsement was simultaneously a thinly veiled prob-
lematization, for it temporally framed the 1992 regulation
by the expression ‘‘at the time” to denote its short shelf-
life. Actors criticised the elements of central planning
retained in the 1992 regulation and its problematic treat-
ment of bad debts:
It [the 1992 regulation] was stipulated at a time when
the economic system was experimenting with the inte-
gration of planning and market economies. Therefore, it
carried numerous traces of the central planning system.
For example, it could not re?ect the changes in asset
values because it required ?rms to use historical cost
to value short-term and long-term investments. This
became increasingly inappropriate because under a
market economy the market can change very quickly
and as a result the value of the ?rms’ assets will change.
Also, it required ?rms to expense bad debts when they
occurred or permitted provision for bad debts at a uni-
form low percentage of outstanding debts [3%]. This
produced much larger accounts receivable than the
amount that can be realistically received which over-
stated pro?ts.
[Regulator 11]
The 1992 regulation was construed as a hybrid of cen-
tral planning and market economy because at that time
China was experimenting with a dual system based on
both. Critics lamented the regulation’s reliance on histori-
cal cost rather than market value for valuing investments.
With increased marketization, more limitations were iden-
ti?ed: ‘‘the reaction [to the 1992 regulation] in my SEZ was
that the degree of harmonization was not enough”
(Government Of?cial 1). The regulation’s subordination to
tax and ?nance logic at the expense of relevance to the
changing context of FIFs and market reforms was stressed:
A change in accounting regulation. . . was in essence
determined by ?nance regulations. Finance regulations
originally included tax regulations and accounting was
merely a tool for implementing ?nance regulations.
Finance regulations neglect the ?rm because they
mainly concern ?scal revenues and tax and are lag-
gards, not appropriate for the ?rm. If we used these sys-
tems, we would lose competitive advantage, and
marketization will be undermined.
[Practitioner 18]
FIFs raised queries about taxation (Regulator 12).
Although companies could determine the useful lives of
?xed assets for depreciation purposes, they had to make
adjustments to meet tax requirements. This created two
different accounting practices: most FIFs, mainly small-
sized, followed tax requirements to avoid making the
adjustments required, but large FIFs estimated useful asset
lives differently from tax regulations (e.g., Practitioner 18’s
?rm). Further, foreign investors preferred to use their
domestic accounting standards for consolidation purposes
in order to be consistent with parent company accounting.
For example, while the 1992 regulation permitted the use
of LIFO for inventory valuation, Practitioner 18’s foreign
partner ?rm required its subsidiaries to adopt the moving
average cost method.
As FIFs became more diversi?ed and complex, the 1992
regulation was deemed inadequate:
The regulation was industry-based. Sometimes there
were inconsistencies between industries and with tax
rules. Companies felt the regulation was troublesome
because the inconsistencies meant that companies had
72 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
to make many adjustments. As a result, accounting
information lacked comparability even in the same
industry. This meant that there was scope for manipu-
lation.
[Practitioner 33]
Although the 1992 regulation permitted several speci?c
applications of conservatism, it did not adapt conservatism
as a principle. This was remedied in General Accounting
Standard for Business Enterprises (GASBE) issued a few
months later in 1992. GASBE went beyond the 1992 FIFs
regulation by providing de?nitions of ?nancial statement
elements and adopting as principles conservatism, truth-
fulness, understandability, and comprehensiveness.
However, extensive earnings management and false
reporting by companies still occurred and were assessed
by regulators and investors to have hampered the develop-
ment of the stock markets (Chen, Hu, & Xiao, 2010; Li,
2001, chap. 9). This attracted the attention of senior politi-
cians such as Premier Zhu who, in launching the National
Institute of Accountancy in Shanghai in 2000, demanded:
‘‘Do not fake accounts”. To minimize manipulations, in
1999 companies were required by law to use conservatism
(Liu, 2000). Similarly, the State Council (2000) issued an
Enterprise Financial Reporting Regulation (EFRR) which
?nancial statements elements in line with IAS and stipu-
lated responsibilities and liabilities of parties involved in
accounting, auditing and reporting, thereby shifting the
emphasis from the income statement model to the balance
sheet model.
Regulator 10 stated that since 1992 legal rules relating
to accounting developed rather quickly and the EFRR rede-
?ned elements of the ?nancial statement that were ‘‘tigh-
ter and more re?ned than those provided in the [1992]
Accounting Systems for FIFs”. Further, the ?nancial state-
ments produced under the 1992 regulation and the EFRR
were not comparable: ‘‘This caused problems for Chinese
partners in IJVs when evaluating investment performance”
(Regulator 9).
More Western accounting elements were introduced
into universities (Yang, 1998), and Western texts were
translated into Chinese, e.g., International Accounting
Standards edited by the AICPA (Chen & Jin, 1999). Based
on GASBE,
15
by the year 2000, ten accounting standards
had been issued concerning cash ?ow statements; debt
restructuring; non-monetary transactions; contingencies;
changes in accounting policies and accounting estimates
and correction of accounting errors; disclosure of related
party transactions; post-balance sheet date events; rev-
enues; construction contracts; and investment. However,
the regulators felt that it would be dif?cult to discard the
UAS because ‘‘accountants would not know what to do
which would cause disorder” (Regulator 6), and that govern-
ment needed time to promulgate more standards.
Chinese characteristics
The debate focused on the adoption of more IAS while
maintaining Chinese characteristics. Zhang (1992),
Deputy Minister of Finance, suggested that China’s circum-
stances and the adaptive capacities of Chinese accountants
should be borne in mind when considering adopting
Western accounting. With the 14th CPC Congress embrac-
ing the Theory of Socialist Market Economy (Jiang, 1992)
and the CPC Central Committee (1993) producing Decision
on Issues Relating to the Establishment of a Socialist Market
Economy, the MoF stated that accounting reform must draw
on Chinese accounting experience while using Western
accounting consistent with Chinese characteristics.
Yang Jiwan (cited in Xia & Ma, 1993) emphasized that
accounting should serve macro-economic management
and accommodate China’s special circumstances during
the transition period (e.g. the dual pricing mechanism),
and that Western accounting should be customized to suit
China. He suggested that one should identify Chinese char-
acteristics from practice, rather than conceptually, and that
differences in accounting practice between countries and
?rms will exist, thus treating these differences as Chinese
characteristics is problematic.
The debate on the relation between internationalization
(China’s transformation) and Chinese characteristics deep-
ened. First, there were attempts to identify favourable and
unfavourable conditions for internationalization. Wu
(1998) identi?ed circumstances that favour international-
ization: change from class struggle to economic develop-
ment, recognition that Western economics can help
tackle problems of economic growth, and change in the
relationship between capitalist and socialist countries
from con?ict to cooperation. Feng (2002) emphasized bar-
riers to internationalization: less developed markets, ?rm
performance evaluation based on past earnings not future
cash ?ows, government as the largest shareholder, weak
corporate governance, and modest experience of Chinese
accountants. Further, Feng argued that internationalization
and Chinese characteristics are not contradictory. The rela-
tionship between internationalization and localization,
borrowing from abroad and promoting innovation, and
being realistic and forward-looking were also discussed
(Wu, 1998; Wu, 2000). A Special Section on Accounting
Theory and Methods with Chinese Characteristics was
established in the ASC led by Feng Shuping, Director of
the Department of Accounting and Assistant Minister of
Finance, and symposia on the development of accounting
with Chinese characteristics were organized by MoF in
1999 and 2000 (Li, 2001).
For some, the question of Chinese characteristics was
framed into the issue of whether or not China should main-
tain a UAS or develop accounting standards:
We should have put more emphasis on them [account-
ing standards] than on the UAS. I suggest we abandon
the latter. There is no need for the UAS because there
are con?icts between the UAS and accounting stan-
dards. Standards are clear enough and there should be
scope for ?rms to design their own accounting systems.
[Practitioner 34]
15
GASBE was stipulated as a response to the need for a uni?ed accounting
system for all enterprises: there were 56 industry and ownership-based
accounting systems before it was issued which GASBE consolidated into 11
industry-based and two ownership-based accounting systems. SOEs
needed international harmonisation because most Chinese partners of IJVs
were SOEs and their accounts were not understood by foreign investors.
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 73
In contrast, senior staff at the China Securities
Regulatory Commission (CSRC) linked the meaning of
Chinese characteristics to the market context at a particu-
lar point in time: ‘‘whether the investors are mature
enough,. . . whether the ?nancial intermediaries are mature
enough,. . . [and] whether legal requirements are meaning-
ful or not or to what extent they are meaningful”
(Regulator 8).
Others sought to probe further the theoretical basis of
accounting with Chinese characteristics. Wu (1998) argued
that as accounting is socially constituted and also consti-
tutes the social, Chinese accounting should re?ect these
characteristics. While some (e.g., He, 1988) argued that
Chinese characteristics should feature in accounting only
at the theoretical level, others (e.g., Liu, 2000) contended
that international accounting harmonization can only be
achieved at the technical level with Chinese characteristics
persisting at the social level. Liu (2000) stressed that
Chinese characteristics are re?ected in the MoF setting
accounting standards, accounting training, entry quali?ca-
tions, and accounting experience. Further efforts were
made to rede?ne Chinese characteristics. For example,
Luo (1999) argued that Chinese characteristics should be
things unique to China, should permit the adoption of
advanced accounting methods, and must be consistent
with the development of China’s productive forces.
Others emphasized the dynamic nature of Chinese
characteristics:
I understand that a system with Chinese characteristics
is dynamic. Today’s Chinese characteristics are different
from yesterday’s. Marketization level is certainly a
major determinant of Chinese characteristics. As the
Chinese market develops, Chinese characteristics
become fewer, but those relating to non-market
areas remain the same, which has something to do
with tradition and culture, but the in?uence of such
factors on accounting and auditing standards is not
critical.
[Regulator 12]
The above quote suggests that those elements of
Chinese characteristics related to markets must change as
markets develop and should have a signi?cant impact on
accounting, whereas traditional and cultural elements
remain unchanged but that their in?uence on accounting
is marginal.
A reminder of the constructed, political nature of
Chinese characteristics is provided by Aufrecht and Bun
(ibid: 177) who note that ‘‘not all traditional Chinese char-
acteristics are sacred. Some are seen as evil remnants of
feudalism. Thus, the Chinese leadership ?nds itself in the
position of de?ning which Chinese characteristics are to
be preserved and which are to be suppressed.” Thus, the
changes that accompanied the various stages of China’s
transformation were understood by reform advocates to
necessitate shifts in the interpretation of Chinese
characteristics:
In the 1980s, accounting with Chinese characteristics
was consistent with the Soviet model because the two
countries were in the socialist camp. Then there was
the transition to planned commodity economy, then
the combining of planning and market elements.
[Regulator 12]
Yang (1998), an academic, argued that Chinese charac-
teristics should not be a criterion for judging accounting
reform but the criterion should be whether accounting
helps develop productive forces and serves domestic and
international needs. Others argued that there is no need
for Chinese characteristics because accounting is the lan-
guage of business and too much emphasis on Chinese char-
acteristics will hamper harmonizing Chinese accounting
with IAS at a time when IAS have greatly reduced differ-
ences in accounting among countries (Li, 2001). Regulator
5 stated that differences between Chinese accounting and
accounting in other countries re?ect Chinese circum-
stances, but these differences are not fundamental, and
state ownership should not be part of Chinese
characteristics.
There were calls for non-politicizing the debate on
Chinese characteristics (e.g., Yang Jiwan, cited in Xia &
Ma, 1993), but these were countered by the view that
choosing between maintaining Chinese characteristics
and internationalization is a matter of con?icting national
interests which is necessarily political (Feng, 2001b).
Indeed, it was during this phase that discourses consti-
tuted Chinese characteristics as political more frequently:
In the ?rst place, [Chinese characteristics] are a political
concept.
[Regulator 3]
Applying Chinese characteristics to accounting is far-
fetched. This way of thinking has a bit of a political col-
our. When there is a slogan, it will be followed.
‘Accounting standards with Chinese characteristics’ is
a slogan that must be used by a CPC cadre who manages
an enterprise or a sector, a necessary political gesture
by adding the addendum ‘Chinese characteristics’.
Chinese characteristics is a political concept; everyone
understands this connotation. We raise a ?ag then ?nd
the justi?cations to support the ?ag.
[Regulator 5]
As a malleable container, Chinese characteristics were
susceptible to assuming different meanings depending
upon actors’ cognitions and interests. Interestingly, the
reconstruction of Chinese characteristics as essentially
political seems to signal their demise as an OPP for
accounting regulation:
There is a political colour in ‘‘Chinese characteristics”;
we removed them from the ASC’s articles of association
last year. I simply kept the word ‘‘Chinese” (Regulator 12)
Others also suggested that by 2000, Chinese character-
istics had little in?uence on the adoption of International
Financial Reporting Standards (IFRS):
In the 1990s, we said we want to maintain Chinese
characteristics and achieve international harmoniza-
tion. Today, we talk about convergence in China, not
adoption. Times have changed. Now we feel it is no
longer necessary to stress Chinese characteristics.
[Regulator 3]
74 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Saying ‘accounting with Chinese characteristics’ is a
political gesture and is not realistic. The reality is that
our standards have converged with IFRS on a large
scale, and we have adopted everything we can use.
[Regulator 5]
The message here is that increased convergence with
IFRS means that Chinese characteristics are becoming
increasingly redundant. So, the question now is how did
Chinese characteristics change from being a discursive
OPP to becoming redundant in China’s accounting regula-
tion? And what, if anything, replaced them? With the
greater marketization of China and the expansion of pri-
vate ownership, discourses constructed Chinese character-
istics as too broad to help guide accounting regulation.
Regulator 12 lamented: ‘‘The concept of Chinese character-
istics is too general, not speci?c.” Rather than rede?ning
Chinese characteristics to connote new, more suitable,
attributes as was the case previously, an alternative con-
cept was advanced: gouqing (Chinese circumstances):
We did not mention Chinese characteristics as often as
before, but we used a different term: Chinese gouqing
thus signalling that as China’s circumstances change
so does Chinese gouqing. We developed EAS which
re?ected Chinese guoqing.
[Regulator 12]
Chinese characteristics were deemed too restrictive and
a more expedient replacement was forged; ‘‘circum-
stances”. The lack of adequate training for Chinese accoun-
tants and the existence of many related party transactions
were considered part of Chinese gouqing, which also
included some aspiration to socialism and recognition of
the less developed Chinese markets. Gouqing was advanced
by these actors as underscoring dynamism in comparison
with what they construed as the out-dated Chinese
characteristics:
If we do not use something it is because of Chinese circum-
stances, and not because we do not want to use them. In
this sense, why do we stress Chinese characteristics?
[Regulator 5]
At the time of concluding our interviews, Chinese cir-
cumstances were just beginning to undergo a process of
elaboration; hence we can only comment very brie?y on
this:
What are Chinese circumstances? In the beginning, they
were ‘? ?? ? ’(meaning ?rst poor and second back-
ward’). Later, they meant having a large population and
a large geo area with rich resources, and farmers mak-
ing up the main population. In the beginning central
planning was Chinese circumstances. Later we devel-
oped a market economy which is also Chinese circum-
stances.
[Regulator 5]
Thus, Chinese circumstances underwent signi?cant
change: from being poor and backward and embracing
central planning in the beginning, through having rich nat-
ural resources and a large population, to developing a mar-
ket economy.
Whether the discourse of accounting regulation
invoked Chinese characteristics or Chinese special circum-
stances, one issue remained the same: most Chinese regu-
lators and academics were against full convergence to IAS/
IFRS for practical and cultural reasons:
No matter who it is, it is not possible to completely
Westernize.
[Regulator 12]
. . . (full) adoption of IFRS may send the wrong political
signal to people: How can we just copy from another
country and completely Westernize? In addition to
direct copying, what about the operationalization of
IFRS? Some of them may not suit Chinese circum-
stances.
[Regulator 5]
In the quest for China’s transformation into a modern
state, Chinese characteristics were rede?ned in ways that
facilitated China’s push towards this ideal, and during the
later stages Chinese characteristics were deemed to have
gone past their shelf-life and were replaced by the even
more malleable Chinese circumstances.
The debate on Chinese characteristics/circumstances
strongly impacted the 2000 accounting regulation. For
example, even though the regulation largely converged
with IAS the UAS was retained because as it was consid-
ered part of China’s accounting tradition (Li, 2001). In this
regulation, however, fair value was not adopted because
the Chinese market (considered an element of Chinese
characteristics) was not well developed. Further, the
Chinese regulation on related party transactions differed
from IAS in at least two ways (Regulators 3 & 6): ?rst,
unlike IAS, the Chinese regulation does not treat entities
under common control as related parties if they did not
conduct material transactions, and (2) China’s de?nition
of family members as related parties provides a broader
scope to re?ect China’s collectivistic culture.
Enrollment and mobilization
The development of the EAS went through four stages:
project initiation; ?eld work; drafting and feedback; and
revising and ?nalizing (Feng, 2001a). In 1999, the
Department of Accounting (MoF) surveyed the implemen-
tation of industry-based UASs and concluded that a UAS be
established to meet the needs of companies working in
multiple industries.
The MoF identi?ed target audiences for enrollment:
government departments, political leaders, CPC members,
partners in FIFs, practitioners, members of national and
regional accounting bodies, academics, and international
bodies such as the International Accounting Standards
Board, the World Bank, and the WTO. Interactions between
the MoF and the CSRC provide insight into the translation
process. According to Chinese law, the MoF is responsible
for producing accounting regulations, and the CSRC
enforces their implementation. In deliberating over the
form of EAS, regulators and of?cials considered two possi-
bilities: to produce detailed accounting standards or to
develop a UAS. The MoF opted for the latter, an approach
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 75
not favoured by the CSRC which considered issuing a UAS
‘‘a setback” for accounting reform, because for ‘‘?ve years
from 1992 to 1997 the MoF did not publish any detailed
standards” (Regulator 8). Both sides realized that they
needed ‘‘to coordinate” if the 2000 EAS were to emerge.
By using their right to in?uence the way companies report
their ?nancial statements, e.g., using accelerated deprecia-
tion rather than straight-line depreciation, the CSRC was
able to ‘‘create de facto accounting standards” (Regulator
8). The MoF published a standard on bad debt restructur-
ing which the CSRC argued was used by companies to
manipulate pro?ts, but ‘‘several years later after negotia-
tions between the MoF and the CSRC, we see the MoF
change the original requirement” so that companies had
to use book value rather than fair value (Regulator 8).
On 31 July 2000, the Department of Accounting pub-
lished ‘A Call for Feedback on Enterprise Accounting
System Reform’ in the China Finance and Economics news-
paper (MoF, 2000b). It was also sent to LFBs and central
ministries for comment on such issues as: (1) which trans-
actions require supplement guidance beyond an overarch-
ing UAS for larger and middle sized-?rms compared to
small sized-?rms? (2) Should the revenues from main
operations be presented separately from other revenues?
(3) Which assets require provision for impairment, and
should the provision be presented item by item or in total?
And (4) is there need to stipulate speci?c requirements on
notes to the accounts of different industries? A common
theme in the responses was the need to establish an over-
arching UAS (Feng, 2001a).
The Department of Accounting organized two seminars
in Beijing on the EAS Exposure Draft, with participants
from the CSRC, the Shanghai and Shenzhen Stock
Exchanges, CPA ?rms, academics, LFBs and relevant
departments in the MoF, and received feedback from for-
eign experts. Most participants called for establishing a
comprehensive UAS consistent with IAS, with a minority
preferring producing accounting standards. The MoF
adopted a ‘‘substance over form” principle which incorpo-
rated more IAS while using a UAS.
In 2000 the MoF promulgated the EAS amid considera-
tion of alternative options:
In designing the EAS, there was a debate about whether
to require FIFs to adopt EAS or the Accounting System
for Small Enterprises (ASSE). . . Although it was realised
that many FIFs would be classi?ed into small enter-
prises, it was agreed that they would be required to
adopt EAS because accounting and tax were not com-
pletely separate at the time. FIFs were already given
many more tax bene?ts, and if they were allowed to
adopt the ASSE, then they would be given further tax
privileges.
[Academic 4]
The MoF published EAS lectures (Department of
Accounting, 2001) and organized training sessions for
accountants and managers (e.g., Liu, 2001). Regulators,
LFB of?cials, and academics published articles on the
advantages and implementation of the EAS in newspapers,
websites, magazines and academic journals, and the EAS
was incorporated in university curricula. The MoF used
novel approaches, especially newspapers, to garner sup-
port for the EAS:
We [the Department of Accounting] used newspapers
to receive feedback from the broadest stakeholders:
we presented the issues using a public medium. This
approach has not been used before . . .In the adoption
of IFRS, comments were solicited openly and nationally.
The approach mobilized the whole society to partici-
pate in accounting regulation, rather than setting regu-
lations behind closed doors.
[Regulator 11]
This approach was considered more inclusive and far
reaching:
A public survey is different from collecting feedback
from LFBs and other ministries, from running seminars
and visiting companies. A public survey is more open
and more inclusive whereas these other more tradi-
tional means are much more selective; they are mostly
restricted to government. Not only could the new
approach raise awareness, it also could secure more
acceptance for the regulation.
[Regulator 12]
Government of?cials claimed that the EAS brings
Chinese accounting closer to IAS. Arguments propounding
the merits of the EAS compared to the 1992 regulation
were circulated by the regulators in order to enrol and
mobilize alliances in support of the EAS:
The EAS is superior to the 1992 Accounting System for
FIFs in many respects. It adopted the principle of sub-
stance over form, signi?cantly reduced the impact of
government on accounting, gave ?rms more autonomy
in setting accounting policies, and showed more consid-
eration of market risk. This can be seen in many new
requirements, such as permitting ?rms to provide for
impairment in eight types of assets, and giving ?rms
more scope in determining depreciation policy and
the rate of provision for bad debts. The EAS also
required segmental reporting which was absent in the
1992 Accounting System for FIFs. These improvements
were considered to appropriately re?ect the conditions
of the emerging market economy and the trend toward
international accounting convergence.
[Regulator 9]
The EAS merged accounting for SOEs and FIFs. One key
issue was the treatment of assets in SOEs compared to FIFs.
Local Government Of?cial 2 stated that ‘‘In a foreign
invested ?rm, if an asset is no longer useful, it would sim-
ply be disposed of.” In contrast, in SOEs ‘‘the previous man-
ager of the company would have made the decision to buy
the asset, but the successor could not dispose of it even if s/
he knew that the asset would not be useful, because the
asset is state-owned, and there are many rules relating to
when and under what conditions assets can or cannot be
written off.” In an IJV where the Chinese partner is an
SOE, the balance sheet includes assets with no future eco-
nomic bene?ts, prompting the foreign partner to ‘‘request
revaluation of the assets. Therefore, many IJVs that were
76 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
previously SOEs also believe there is a need to unify the
?nancial statements. Otherwise foreign partners will not
understand them” (Practitioner 27).
Government of?cials cautioned against the possibility
of FIFs exploiting the ?exibility of the EAS to manipulate
pro?ts and pay less taxes because of China’s weak legal
system:
Foreign invested ?rms welcome the eight provisions
[for asset impairment]. . . because on the one hand they
are consistent with international practice. On the other
hand, they could also use the eight provisions to manip-
ulate numbers. Indeed, more than half of our foreign
invested ?rms. . . could use regulations to avoid or
reduce tax. This is because in our country, many other
regulations are slow coming. This is an indirect tool
for tax evasion.
[Local Government Of?cial 4]
Regulator 10 echoed these concerns, claiming that FIFs
are willing to adopt EAS because ‘‘EAS is more conservative
and FIFs would like to show a loss or a smaller pro?t
because that would help avoid or reduce tax”. In contrast,
SOEs are more reluctant to adopt EAS because some SOEs
have a deferred expenses account which if expensed
according to EAS ‘‘would cause a huge loss and a signi?cant
reduction in state revenues.” Further, some practitioners
were concerned about the potential misuse of EAS because
making sound professional judgement is dif?cult:
EAS requires that accountants are well quali?ed and are
able to make judgment. . . Many accountants cannot. . .
make professional judgment.
[Practitioner 18]
Other FIFs emphasized the high workload caused by the
EAS:
The workload for adjusting ?nancial accounts for tax
regulations is high. For example, there are over 4000
?xed assets in [my] company and the depreciation cal-
culation of almost half of them needs to be adjusted for
tax purposes.
[Practitioner 34]
Practitioners complained that the preparation of con-
solidated ?nancial statements in older FIFs required
numerous adjustments from the 1992 system to the EAS
in areas such as: ‘‘income recognition, depreciation, and
asset impairment” (Practitioner 33). However,
Practitioner 32 stated that his company used tax rules for
?nancial accounting purposes and hence the impact of
the EAS was small: given his company’s quick turnover
stock impairment was minimal.
As in previous regulations, the process of promulgating
the EAS exhibited multiple translations. In the project of
China’s transformation to become part of the world order,
the debate on Chinese characteristics/circumstances
re?ected much of this heterogeneity and multiplicity. The
reception of the EAS also showed considerable diversity
in opinion, ranging from those who extolled its virtues to
those who felt it was too conservative, susceptible to
manipulation, and imposing a big burden on the profes-
sional judgement of accountants so, like the two previous
regulations, its problematization began with its
promulgation.
Discussion and conclusion
Drawing on ANT, this paper focused on how IAS were
translated into accounting regulations for FIFs in China,
and how ‘‘Chinese characteristics” as a discursive OPP rec-
onciled the tension between achieving greater conver-
gence to IAS and preserving Chinese cultural identity.
Law (1992: 386) notes that the object of doing ANT
research is to ‘‘explore and describe local processes of pat-
terning, social orchestration, ordering and resistance”, and
this paper has analyzed these processes. We conceptual-
ized accounting regulations as actants constructed in trials
of strength with the process of translation producing alli-
ances around shared interests and countering resistance
to reform in the context of accounting regulations for
FIFs in China. Each accounting regulation was the outcome
a complex interaction of power relations and multiple
translations that were undertaken to build and maintain
networks, as actors negotiated their heterogeneous inter-
ests to achieve some common purpose (Law, 1992, 1999;
Mol, 1999). The new regulations had diverse spokesper-
sons (Latour, 1987): politicians, regulators, practitioners
and academics who translated Chinese characteristics dif-
ferently, and ultimately replaced them with Chinese cir-
cumstances, to speed up the adaptation of IAS. The
networks were expanded and regenerated over time
(Latour, 2004), and made to appear stable through transla-
tion and transformation (Latour, 1999b; Latour, 2005). The
trials of strength were games in which elements of
accounting regulations were involved, with some ignored
(e.g., all elements of conservatism in the 1985 regulation)
and others emerging (e.g., 3% provision for bad debts in
the 1992 regulation and the full adoption of conservatism
in the 2000 EAS).
The MoF was the formal institution responsible for
Chinese accounting regulations, and a medium through
which ideas for accounting reform were developed and
promoted. Other actors played key roles in the process of
translation, including the ASC and regional accounting
societies, LFBs, academics, FIFs accountants, foreign inves-
tors, and later the CSRC and the Chinese Accounting
Standards Committee. Actors constructed accounts of the
problems (Callon, 1986) with Chinese accounting, charac-
terized its information as unintelligible and uninformative,
provided arguments for producing new accounting regula-
tions for FIFs closer to IAS/IFRS but consistent with an
expedient interpretation of Chinese characteristics, and
stabilized networks by organizing seminars and confer-
ences, publishing articles and textbooks, mobilizing media
coverage, and providing training courses to target
audiences.
The context of our study placed limits on the extent of
heterogeneity and con?ict in networks: China is ruled by
a single party and can readily mobilize immense resources.
For example, the MoF mobilized national TV and newspa-
pers to disseminate accounting regulations, organized con-
ferences and workshops, arranged training programs, and
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 77
in?uenced university curricula. Further, the CPC controls
the National People’s Congress which promulgates new
accounting and auditing laws, the State Council which
issues regulations, the MoF, the CSRC, and other ministries
engaged in accounting regulation. The role of government
actors in the translation process has had a major impact
on accounting regulation. Emphasizing the power of the
political in organizations in accounting research is not
new. However, in this study our focus has been on state
politics and how this impacted the translation of Chinese
characteristics. Our emphasis on state politics connects
with the sparse literature that explores the relationship
between accounting and the state (e.g. Puxty, Willmott,
Cooper, & Lowe, 1987; Miller, 1990). We have shown
how a government with a single political party can shape
the course of accounting regulation, and how it manipu-
lates what is construed as limits (i.e., Chinese characteris-
tics) on the exercise of such power. In an earlier quote,
Regulator 6 stated ‘‘In China, if the central government
decided to do something, then people will follow”. While
this quote points to of?cial power, we have noted how dif-
ferent agents were pushing in different directions in the
debate on accounting regulation for FIFs, thus demonstrat-
ing that the process of translation does not fully accede to
such power.
Each accounting regulation was a partial trial and a step
towards getting closer to IAS. Chinese characteristics as a
malleable discursive OPP underpinned this gradual adapta-
tion of IAS and the orchestration of common interests, by
demonstrating capacity for progressive liberal interpreta-
tion over time. While anti-reformers invoked strict inter-
pretations of Chinese characteristics to forestall reform,
reformers gradually interpreted Chinese characteristics
more liberally to facilitate reform. For some, Chinese char-
acteristics meant everything deemed unique to China; for
others, they re?ected the needs of greater marketization;
for still others, they signi?ed the extent of maturity of
investors and ?nancial intermediaries; and ?nally they
were construed as a political slogan. Despite their contin-
gency as a signi?er capable of assuming alternative trans-
lations (Z
?
iz?ek, 1989), no credible debate on accounting
regulation for FIFs could avoid engaging with Chinese char-
acteristics, until their replacement with Chinese circum-
stances. As a discursive OPP, Chinese characteristics were
placed between global networks (international accounting
?rms, the International Accounting Standards Board, the
World Bank, the WTO, foreign venture capitalists) and local
networks (Chinese institutions engaged in accounting reg-
ulation), making it possible for local networks to attain
their identity and retain some independence (Bijker &
Law, 1994).
Political acumen and timing are interrelated qualities
that actors engaged in the process of translation exercise
in order to build stable networks and achieve their aims.
Political intervention invested in knowledge exhibiting
these qualities was deployed to adopt Western ideas
deemed by critics inconsistent with Chinese characteris-
tics. Acumen, or the gift of sound judgement, entailed the
Vice Minister of Finance being able to grasp several issues:
the political landscape; regulators’ desire to expedite
accounting reform for FIFs; resistance to change;
regulators need for political sanction to engineer account-
ing reforms, and how terms sought alien to the Chinese
characteristics, such as ‘‘capital”, can be made acceptable
vocabulary. But drawing on such knowledge can back?re
if timing is inappropriate. The Vice-Minister of Finance
had to judge his timing carefully so that his intervention
can achieve its desired outcome. Similarly, reformers had
to wait for the ‘‘right time” when it became possible to
replace Chinese characteristics with Chinese circum-
stances, before full conservatism was adopted in 2000.
The import of such political acumen and sense of timing
for ANT is thus in terms of their performative power: the
moments of translation are rendered more effective via
political intervention that displays both acumen and
timing.
In China’s quest to become part of the modern ‘‘world
order”, international bodies expected that they provide
the lead with China passively adopting the ideals of
advanced capitalism (see Mitchell, 2002: 223, for a similar
point about Egypt). In contrast, China embarked on a pro-
cess of translation, adaptation and customization of IAS/
IFRS. Chinese characteristics helped to mediate this trans-
formation by being the channel via which elements of
the West were adapted to China. There was consensus
against whole-mass importation of Western accounting
as reform was guarded, gradual and selective; a pragmatic
approach to mark China’s transformation. Far from the
‘‘desire to belong to the ‘West’ reported by a Russian audit
?rm in its drive to adopt International Auditing Standards”
(Mennicken, 2008: 388), the attitude of Chinese actors was
much more muted: IAS/IFRS was more like a necessary
price to pay for China’s transformation.
The intervention of Chinese characteristics as a discur-
sive OPP in the development of accounting regulations for
FIFs helped articulate the process of translation in the
broader sense advocated by Djelic (2008). She (ibid: 13)
argues that the term ‘‘translation” should be used in three
related ways: the construction of an identi?able, attractive
idea, building upon local experience and/or transnational
fora; mediation; and local adaptation and transformation.
Chinese characteristics were invoked to specify which
parts of IAS were acceptable and which were not at a par-
ticular juncture in time: they contributed to the construc-
tion of each regulation as an expression of local
experience, supplemented with adapted selections of IAS,
to make it attractive to the diverse actors involved in the
regulation debate; they impacted translation as a carrier
or media through which Western accounting travelled to
China; and they set the boundaries within which local
adaptation and transformation of Western accounting took
place.
The conceptualization of Chinese characteristics as a
contingent and malleable discursive OPP, susceptible to
political manipulation has import for ANT. These are not
negative qualities; rather they are the very qualities that
endow discursive OPPs with utility and signi?cance. As a
malleable signi?er, Chinese characteristics demonstrated
a capacity for adaptation, and an ability to remain central
to acts of translation and network building. Further, discur-
sive OPPs can open up spaces in which irreconcilable ends
can be made reconcilable: Chinese characteristics was the
78 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
means through which regulators introduced increasing
elements of Western accounting while seemingly preserv-
ing Chinese uniqueness. Malleable discursive OPPs gain
longevity by being a key weapon in the arsenal of both
those promoting and those opposing change, and by oper-
ating as the glue that holds networks and alliances
together, giving them the appearance of permanence and
stability. Chinese characteristics helped de?ne the con-
tours of the discursive ?eld of accounting regulation.
This depiction of the role of Chinese characteristics in
China’s experience has parallels in the critical literature
on diffusion (Djelic (2008), which focuses upon the
increasing similarity of forms and ideas across borders,
the interactions between objects, and the features of the
constellations where diffusion occurs. It underscores the
active process of translation that underpins the travel of
ideas (Czarniawska & Sevón, 1996), where translators edit
innovations (Sahlin-Andersson, 1996), add to, and change
elements of, the original object through hybridization
(Djelic, 1998), adaptation and interpretation (Westney,
1987), emphasizing that what travels is not always the
same (Czarniawska & Sevón, 2005). Thus, diffusion is both
mediation and construction, and it underscores the impor-
tance of actors and networks in the process of translation
(Djelic, 2004).
Also, under ANT a translation process transforms the
original idea/object, leaving out some components and
adding others (Callon, Lascoumes, & Barthe, 2009).
Chinese characteristics as a discursive OPP operated as a
conceptual gate-keeper through which Western account-
ing ideas travelled gradually to China in three accounting
regulations. In these travels, Western accounting ideas
interacted with Chinese characteristics: these ideas were
reinterpreted, adapted and changed as they arrived in
China. Our theorization of Chinese characteristics as a dis-
cursive OPP adds to this by emphasizing that the interac-
tion between ideas/objects and discursive OPPs is a
recursive process in which not only OPPs impact objects
but also objects reshape OPPs. Elements of Western
accounting assessed as incompatible with Chinese charac-
teristics remained part of the discursive ?eld of accounting
regulation. They contributed to shifts in the interpretation
of Chinese characteristics over time that rendered them
more accommodating to some of these elements in later
years. ANT should thus conceptualize the travel of objects
through OPPs as a recursive process in which both OPPs
and objects are mutually constituted. This theorization
helps explain how change can be engineered. To avoid
making a complete break with the past, elements of
Chinese accounting were retained and combined with
translations and editing of new elements of Western
accounting. The West as the ‘Other’ was rendered a subject
of translation and editing before it could arrive in China.
But the ‘Other’ also reshaped the meaning of Chinese char-
acteristics. Through ongoing change, a discursive OPP
writes itself in time. The emerging accounting regulations
are thus the outcome of interactions between objects and
discursive OPPs through which both objects and OPPs are
continually transformed. This also contributes to the liter-
ature on diffusion in showing how the translation process
is mediated by the development of malleable discursive
OPPs.
While state transformation towards the modern ‘‘world
order” is typically assessed in terms of the extent of same-
ness between a country undergoing transformation and
advanced capitalist countries, our paper has demonstrated
that the intervention of discursive OPPs places limits on
how much sameness can be achieved. As Mitchell (2002:
245) acknowledges, the logic of sameness ‘‘does not mean
that there are no other factors at work. The narrative gives
a place to all kinds of noncapitalist features.” Chinese char-
acteristics are an example of such ‘‘noncapitalist features”,
even though their later interpretations included some cap-
italist features, and we have shown how they impacted
China’s transition. In commenting on noncapitalist features
Mitchell (ibid) argues that ‘‘The narrative [of capitalism]
marks them as nonmarket factors meaning that it de?nes
their identity and signi?cance in terms of what they are
not. Their role is that of negative elements. They stand out-
side the principle of the market, as external, nondynamic,
generally residual, mostly local factors.” Our theorization
of Chinese characteristics as a discursive OPP extends
Mitchell’s argument, for we have shown that while discur-
sive OPPs emerged as noncapitalist, local factors, they
became malleable, dynamic, and later de?nable with refer-
ence to the market, and they carved out spaces where the
local maintained its identity and independence while
engaging the global.
Appendix A
List of abbreviations
AICPA – American Institute of Certi?ed Public
Accountants
ANT – actor network theory
ASC – Accounting Society of China
CICPA – China Institute of Certi?ed Public Accountants
CPA - Certi?ed Public Accountants
CPC – Communist Party of China
CSRC – China Securities Regulatory Commission
EAS – Enterprise Accounting System
EFRR - Enterprise Financial Reporting Regulation
FDI – foreign direct investment
FIFs – foreign invested ?rms
GASBE - General Accounting Standard for Business
Enterprises
IAS – International Accounting Standards
IFRS - International Financial Reporting Standards
IJV – international joint-ventures
LFB – local ?nance bureau
LIFO – last in ?rst out
MoF – Ministry of Finance, China
OPP – obligatory passage point
PBC – People’s Bank of China
SEZ – Special economic zone
SOE – State-owned enterprise
UAS – uniform accounting system
WTO – World Trade Organization
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 79
Appendix B
Schedule of Interviewees
Interviewee Company Experience Date of
Interview
Language Taped or
Notes
1. Regulator 1 Ministry A Retired. Involved in accounting regulation from
the 1960s to the early 1990s
2004 Chinese Notes
2. Regulator 2 Ministry A Retired. Involved in accounting regulation from
the 1960s to the early 1990s
2004, 2012 Chinese Notes
3. Regulator 3 Accounting
Professional Body
A
Involved in accounting regulation from the 1980s
to present and auditing regulation from the 1990s
to present
2004, 2006,
2010, 2013
English Taped
4. Regulator 4 Government
Agency A
Involved in accounting regulation from the 1980s
to the late 1990s
2004,2010 Chinese Notes
5. Regulator 5 Accounting
Professional Body
B
Involved in accounting regulation from the 1980s
to the early 1990s
2004,2006,
2012, 2013,
2014
English Taped
6. Regulator 6 Ministry A Involved in accounting regulation from the 1980s
to present
2004,2006,
2013
Chinese Taped
7. Regulator 7 Government
Agency B
Involved in accounting regulation in the 1980s and
early 1990s and auditing regulation in the 1990s
2006 Chinese Taped
8. Regulator 8 Ministry B Involved in accounting regulation from the late
1990s
2006, 2010 English Taped
9. Regulator 9 Ministry A Involved in accounting regulation from the early
1990s
2009 Chinese Taped
10. Regulator 10 Ministry A Involved in accounting regulation from the middle
1990s
2009 Chinese Taped
11. Regulator 11 Ministry A Involved in accounting regulation from the 1980s
to present
2010 Chinese Taped
12. Regulator 12 Ministry A Involved in accounting regulation since the late
1990s
2010, 2012,
2013, 2014
Chinese Notes/
Taped
13. Local
Government
Of?cial 1
Municipal
Government A
Accounting teacher for eight years. Practicing CPA
for three years. Involved in implementing
accounting regulations and setting local
accounting regulations since 1992
2004,2006 Chinese Taped
14. Local
Government
Of?cial 2
Municipal
Government B
Involved in implementing accounting regulations
and setting local accounting regulations since the
early 1980s
2004,2006 Chinese Taped
15. Local government
Of?cial 3
Local Municipal
Government B
Worked in the Finance Bureau from 1971 to 1994,
responsible for FIF from the early 1980s to 1994;
worked in the State Assets Management Bureau
from 1994
2006 Chinese Taped
16. Local government
Of?cial 4
Municipal
Government C
Worked in the Finance Bureau for more than 20
years as a senior accounting staff
2006 Chinese Taped
17. Academic 1 Research Institute
at Ministry A
Research Fellow 2004 Chinese Written
response
18. Academic 2 University A Full Professor, specialising in accounting for
foreign joint ventures
2005,2006 Chinese
and
English
Taped
19. Academic 3 University A Full Professor, leading ?nancial accounting expert,
involved in accounting standards setting from the
late 1980s
2005,2006 Chinese Taped
20. Academic 4 University B Full Professor, member of the Chinese Accounting
Standards Committee
2009 Chinese Taped
21. Practitioner 1 IJV(US) A (Beijing) Worked for Chinese-Foreign Joint-Ventures since
1998. Prior to that, CPA for a Big Five for ?ve years.
Currently Finance Director
2004 English Taped
22. Practitioners 2, 3,
and 4
IJV (US) B (Beijing) Currently Finance Director, Internal Auditor and
Finance Manager respectively
2004 English
and
Chinese
Taped
23. Practitioner 5 IJV (HK) C
(Beijing)
A former State Auditor. Currently Deputy Financial
Controller
2004 Chinese Taped
24. Practitioner 6 IJV (Germany) D Currently Financial Controller 2004 Chinese Notes
80 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Appendix B (continued)
Interviewee Company Experience Date of
Interview
Language Taped or
Notes
(Beijing)
25. Practitioners 7
and 8
Wholly Foreign-
owned Firm A
(HK) (Xiamen)
Currently Accounting Manager and Accountant
respectively
2004 Chinese Taped
26. Practitioners 9
and 10
IJV (US) E
(Xiamen)
P9 is currently responsible for ?nance as Special
Assistant to CEO. P10 is Head of the Finance
Department
2004 Chinese Taped
27. Practitioners 11,
12, 13, and 14
IJV (Taiwan &
Canada) F
(Xiamen)
P11 is Accounting and Personnel Of?cer for
subsidiary 1. P12 is an Accounting Manager for
Subsidiary 2. P13 is an Accounting Of?cer of the
group. P14 is accounting manager for Subsidiary 3.
The group is a private company. Each subsidiary is
a Chinese-foreign joint-venture
2004 Chinese Notes
28. Practitioner 15 IJV (HK) G
(Xiamen)
Currently Deputy CEO responsible for ?nance 2004 Chinese Taped
29. Practitioner 16 IJV (Netherlands)
H (Shenzhen)
Former state auditor. Formerly ?nance director
and currently Deputy CEO responsible for ?nance
2004,2006 Chinese Taped
30. Practitioner 17 IJV (HK) I
(Shenzhen)
Currently Head of Finance Director 2004 Chinese Taped
31. Practitioners
18-19
IJV (S. Korea) J
(Shenzhen)
Previously an Accounting Regulator at Ministry A,
P18 is currently Deputy CEO responsible for
external relations and ?nance. P19 is Head of
Finance Department
2004 Chinese Taped
32. Practitioners
20-21
IJV(HK) K
(Shenzhen)
P20 is currently Head of Accounting Department.
P21 is Accountant
2004 Chinese Taped
33. Practitioner 22 IJV (HK) Foreign
Partner A
Financial Controller 2005 English Taped
34. Practitioner 23 Wholly Foreign
Owned Firm (HK)
A (Shenzhen)
Owner and CEO 2005 English Taped
35. Practitioner 24 Wholly-Foreign-
Owned Firm (HK)
B (Beijing)
Owner and executive 2005 English Taped
36. Practitioner 25 IJV (HK) Foreign
Partner B
Financial Controller. Based in Hong Kong 2005 English Taped
37. Practitioner 26 Auditor of IJV (HK)
A
Partner of an auditing ?rm 2005 English Taped
38. Practitioner 27 Wholly-Foreign-
Owned Firm (HK)
C (Dongguan)
Owner and executive 2005 English Taped
39. Practitioner 28 IJV (UK) L
(Shanghai)
Finance Director 2005 Chinese Taped
40. Practitioner 29 IJV (UK) M
(Shanghai)
Finance Director and Deputy General Manager 2005 Chinese Taped
41. Practitioner 30 IJV (UK) N 31
(Shenzhen)
CEO 2005 Chinese Taped
42. Practitioner 31 Wholly-foreign-
owned Firm (USA)
(Tianjin)
Financial Controller 2009 Chinese
and
English
Taped
43. Practitioner 32 Wholly-foreign-
owned Firm
(Japan) (Tianjin)
Deputy Head of Finance Department 2009 Chinese
and
English
Taped
44. Practitioner 33 Wholly-foreign-
owned Firm
(Germany)
(Tianjin)
Deputy General Manager (Finance/Auditing/
Investment)
2009 Chinese
and
English
Taped
45. Practitioner 34 Wholly-foreign-
owned Firm
(South Korea)
(Tianjin)
Head of Finance Department 2009 Chinese
and
English
Taped
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 81
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doc_380585986.pdf
Drawing on actor network theory (ANT), this paper analyses the role of Chinese characteristics
in the emergence of three accounting regulations for foreign invested firms (FIFs) as
part of China’s recent transformation to become part of the ‘‘world order”. The paper examines
how international accounting standards (IAS) and existing Chinese accounting were
translated into new regulations for FIFs, and how these translations were shaped by malleable
interpretations of Chinese characteristics. Chinese characteristics were a discursive
obligatory passage point (OPP) rendered malleable through cognition and the sanctions of
political authority to suit the interests of actors seeking to produce new accounting regulations.
The development of accounting regulations for foreign invested
?rms in China: The role of Chinese characteristics
q
Mahmoud Ezzamel
a,b,?
, Jason Zezhong Xiao
a
a
Cardiff Business School, Cardiff University, Wales, UK
b
IE Business School, Madrid, Spain
a r t i c l e i n f o
Article history:
Available online xxxx
a b s t r a c t
Drawing on actor network theory (ANT), this paper analyses the role of Chinese character-
istics in the emergence of three accounting regulations for foreign invested ?rms (FIFs) as
part of China’s recent transformation to become part of the ‘‘world order”. The paper exam-
ines how international accounting standards (IAS) and existing Chinese accounting were
translated into new regulations for FIFs, and how these translations were shaped by mal-
leable interpretations of Chinese characteristics. Chinese characteristics were a discursive
obligatory passage point (OPP) rendered malleable through cognition and the sanctions of
political authority to suit the interests of actors seeking to produce new accounting regula-
tions. Chinese characteristics were a signi?er that carved out a space for local networks to
attain their identity and retain some measure of independence from global networks, shaped
the construction of each accounting regulation for FIFs into an attractive package, and in?u-
enced the adaptation and transformation of those elements of Western accounting that
arrived into China. In turn, IAS became part of the discursive ?eld on accounting regulation
that helped mediate the shifts in the interpretation of Chinese characteristics over time.
Ó 2015 Elsevier Ltd. All rights reserved.
Introduction
This paper draws on actor network theory (ANT) to
examine the role of Chinese characteristics in the develop-
ment of three accounting regulations for foreign invested
?rms (FIFs)
1
in China as part of China’s recent
transformation to become part of the modern world order.
The paper explores how International Accounting
Standards (IAS) and existing Chinese accounting were trans-
lated into accounting regulations for FIFs and the mediating
role played by Chinese characteristics therein. The produc-
tion of each regulation is conceptualized as a trial of strength
in which reformers built networks around interests con-
structed as commonly shared between network members.
Chinese characteristics were a malleable, discursive obliga-
tory passage point (OPP) de?ned and rede?ned by actors’
cognition, interest, and the sanction of political authority
whereby political acumen and timing contributed to facili-
tating the acceptance of new regulations.
Increasingly, countries have been undergoing signi?-
cant transformations in order to become a part of the mod-
ern ‘‘world order” as a consequence of the ‘‘interrelated
processes” of globalization that are ‘‘operating across all
the primary domains of social power” (Held & McGrew,http://dx.doi.org/10.1016/j.aos.2015.05.005
0361-3682/Ó 2015 Elsevier Ltd. All rights reserved.
q
This paper is part of a larger research project funded by the Institute
Chartered Accountants of Scotland (ICAS). We are grateful to ICAS for
funding, and to all the interviewees for their cooperation. Earlier drafts of
this paper were presented at UESTC, Chengdu and Xiangtan University,
China, and the European Accounting Congress, Rome, 2011. We are
grateful to Keith Robson, Paolo Quattrone and to the participants at these
venues for their comments. We are also grateful to the many constructive
comments provided by the two reviewers and the editor.
?
Corresponding author at: Cardiff Business School, Cardiff University,
Wales, UK.
E-mail addresses: [email protected], [email protected]
(M. Ezzamel), [email protected] (J.Z. Xiao).
1
See Appendix A for a list of abbreviations used in this paper.
Accounting, Organizations and Society 44 (2015) 60–84
Contents lists available at ScienceDirect
Accounting, Organizations and Society
j our nal homepage: www. el sevi er. com/ l ocat e/ aos
2000: 6; see also Held, McGrew, Goldblatt, & Perraton,
1999). Yet, counter pressures seek to preserve cultural
identity and ways of doing things (Tomlinson, 2000).
Recent developments in China are an example of such rad-
ical transformation which entailed gradual customization
of Western ideas coupled with a desire to preserve
Chinese cultural identity. Our argument is that Chinese
characteristics played a key role in the effort to reconcile
these seemingly irreconcilable pressures for pursuing
international conformity while preserving cultural iden-
tity, and they impacted the way in which elements of
Western accounting were customized and arrived into
China. In turn, IAS became part of the discursive ?eld on
accounting regulation that helped mediate the shifts in
the interpretation of Chinese characteristics over time.
‘‘Chinese characteristics”, or ‘‘Chineseness” (for the lat-
ter see Coase & Wang, 2013) are dominant expressions in
discussions of China’s recent transformation. Of?cial
Chinese discourse talks of ‘‘socialism with Chinese charac-
teristics”, whereas elsewhere the discourse is on ‘‘capital-
ism with Chinese characteristics” (e.g., Breslin, 2004;
Coase & Wang, 2013; Huang, 2008; Karmel, 1994; Peck &
Zhang, 2013; Yang, 2007).
2
The addendum ‘‘with Chinese
characteristics”, has been attached to issues such as agrarian
reforms (Zhang & Donaldson, 2008), political ideologies
(Nathan & Shi, 1996), the global model (Mohrman, 2008),
civil services (Aufrecht & Bun, 1995), ownership (Dorn,
2003), and human resources (Warner, 2008). It is therefore
not surprising that Chinese characteristics played a key role
in the development of the accounting regulations we anal-
yse. Remarkably, however, Chinese characteristics are
hardly articulated and/or problematized in the literature.
In this paper, we re?ect on what Chinese characteristics
mean, how their meaning shifted across individuals/groups
and over time, and how they mediated the production of
each accounting regulation and the adaptation and transfor-
mation of Western accounting ideas in China.
This study differs from research on accounting change
in transitional economies such as the Czech Republic
(Seal, Sucher, & Zelenka, 1995); Poland (Krzywda, Bailey,
& Schroeder, 1995); and Vietnam (Phuong & Richards,
2011). While these studies provide timely updates of cur-
rent developments in accounting regulations, they present
accounting change as purely technical and unproblematic,
with little attention accorded to the impact of cultural and
political issues. While Chow, Chau, and Gray (1995) focus
on the role of the Chinese government in the development
of accounting standards and Xiao, Zhang, and Xie (2000),
Xiao, Weetman, and Sun (2004) examine factors that moti-
vated the development of Chinese accounting and auditing
standards in the 1980s and 1990s, studies neglect the
dynamics of change and the translation of accounting
ideas. In one of the few exceptions that problematizes
the travel of Western ideas to a former socialist context,
Mennicken (2008) examines the process of using interna-
tional auditing standards in a post-Soviet Russian audit
?rm and emphasizes the fragility of international harmo-
nization projects.
We examine the networks formed and the media used
to bring about new accounting regulations (actants) with
a speci?c focus on the role of Chinese characteristics. We
conceptualize the travel of accounting ideas as both the
process and outcome of actor-network formation, which
involves a chain of activities performed by actors/actants
through which ideas or visions are translated into practice
(Callon, 1980, 1986; Latour, 1987, 2005). We theorize
Chinese characteristics as a discursive OPP, pointing to
their malleability to political acumen and actors’ interests,
and explore the implications of this theorizing for ANT.
By studying the machinations of the regulatory envi-
ronment in the context of China’s transformation, we add
to the sparse literature that problematizes the travel of
ideas to different socio-political contexts. We show how
China’s unique socio-political and cultural contexts,
summed up by the term Chinese characteristics, impacted
the process and outcomes of accounting regulation. Some
socialist elements have remained an important part of
the Chinese political agenda despite the continuing march
towards greater marketization, with the Chinese govern-
ment continuing to have a major interventionist role in
accounting regulation. We show how differing forces acted
to shape accounting regulations for FIFs, and how these
forces, especially Chinese characteristics, underwent fre-
quent translations and was susceptible to political manip-
ulation. Chinese characteristics operated as a discursive
OPP by acting as a gatekeeper that impacted the way the
West arrived in China by permitting some Western ideas,
suitably translated, but not others, to enter China. The mal-
leability and shifting meaning of Chinese characteristics
helped create a space for actors with differing agendas to
become part of the network that produced the accounting
regulations, and made it possible for local entities to pro-
tect their identities and independence while engaging the
so-called global. As IAS became part of the discursive ?eld
on accounting regulations, IAS interacted with, and helped
reshape, the interpretations of Chinese characteristics so
that parts of Western accounting that were barred in the
1985 regulation were included in later regulations. We also
note the value of acumen and timing in rendering the
moments of translation more effective. Finally, we argue
that the process of producing accounting regulations for
FIFs galvanized the interests of diverse actors, bonding
them together in their drive to adapt and translate ele-
ments of Western accounting.
This study also contributes to the literature on account-
ing change informed by ANT. Briers and Chua (2001) exam-
ine the implementation of activity-based costing as a set of
trials of strengths, Christensen and Skaerbaek (2010) study
how consultants ‘purify’ accounting technologies to reduce
resistance to change, and Dambrin and Robson (2011)
focus on the ambivalence, opacity and performativity of
?awed measures. While providing powerful insights, these
studies focus on either single case studies (Briers & Chua,
2001; Christensen & Skaerbaek, 2010) or individual indus-
tries (Dambrin and Robson, 2011) in advanced capitalist
countries. In contrast, we examine the state transformation
of a socialist economy towards greater marketization and
show how Western accounting ideas travel to that context.
This helps clarify the extent to which ANT illuminates how
2
One of the few exceptions is Harvey (2007: 122).
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 61
different machinations, political discourses, and Chinese
characteristics became enmeshed in the processes of pro-
mulgating new accounting regulations.
This study has close af?nity with Mennicken (2008) but
differs from it in three respects. First, this study focuses on
the level of the state compared to her focus on a single,
large audit ?rm; hence issues such as state politics and
policies are brought to the fore more directly in our case.
Second, the Chinese context differs signi?cantly from the
Soviet context of her study. Third, our focus is upon
accounting regulation in contrast to Mennicken’s interest
in audit regulations. Our study also differs from Ezzamel,
Xiao, and Pan (2007) who examined how discourse shifted
from conceptualizing accounting as ideologically-laden
under Mao to a neutral technology under Deng. However,
their study did not address the emergence of accounting
regulations for FIFs, even though FIFs play an important
role in China’s transformation and in the globalization of
business (Harvey, 2007),
3
nor did it examine the role of
Chinese characteristics in impacting accounting regulation.
The remainder of this paper is organized as follows. The
next two sections present our theoretical framing and
research method. This is followed by an examination of
the context in which FIFs were developed as background
to studying accounting regulations. Thereafter, a major
section analyses the trials through which the three
accounting regulations for FIFs emerged. The ?nal section
discusses the main arguments and concludes the paper.
Theoretical framing
In this section we describe some elements of ANT that
are central to the arguments of this paper followed by a
preliminary discussion of Chinese characteristics.
Under ANT, ideas and practices emerge in network
building involving humans (actors) and non-humans
(actants). Actors seek to enlist the support of others to their
cause, and if successful an actor-network emerges. Actants,
such as accounting regulations, are made to act through
agency whether the latter is true or false (Latour, 2005:
54–55), and are ‘‘occasions given to different entities to
enter into contact” (Latour, 1999a: 141, original emphasis)
in networks. Networks, translations and inscriptions are
central elements in the process of building alliances
(Callon, 1986). ANT is about ‘‘the summing up of interac-
tions through various kinds of devices, inscriptions, forms
and formulae, into a very local, very practical, very tiny
locus” (Latour, 1999b: 17, original emphasis), and in this
paper we focus on the interactions that occurred in the
development of accounting regulations for FIFs.
A network is a concentration of resources (Latour, 1987:
180); it is a ‘‘co-ordinated set of heterogeneous actors
which interact more or less successfully to develop, pro-
duce, distribute and diffuse methods for generating goods
and services” (Callon, 1991: 133). It is ‘‘a tool to help
describe something, not what is being described”, a means
to ‘‘designate ?ows of translations”, a ‘‘trace left behind by
some moving agent” (Latour, 2005: 131; 132), and a ‘‘series
of transformations –translations, transductions” (Latour,
1999b: 15, original emphasis). Network members act to
‘‘modify other actors through a set of trials” (Latour, 2004:
75, original emphasis). Actors are ‘‘network effects” (Law,
1992: 383), and trials allow for network membership to
expand and regenerate and are the sites in which heteroge-
neous and con?icting interests are negotiated. Networks
are inevitably fragile and unstable; in each trial relations
are renegotiated because networks create patterns of
heterogeneous materials (Law, 1992: 381). Yet, despite
their inherent instability networks can appear stable as
the patterns of links are held together (Law, 1999: 6–7)
in the interest of demonstrating unity.
Harman (2009: 16) notes ‘‘For Latour the world is a ?eld
of objects or actants locked in trials of strength-some
growing stronger through increased associations, others
becoming weaker and lonelier as they are cut off from
others”. Trials of strength are about actants and actors
being in action and are the means through which actants
are re-constructed. We conceptualize the process of devel-
oping each accounting regulation as a trial of strength,
whereby actors interested in mobilizing support for a
new regulation seek to test and persuade others with their
views. During trials of strength spokespersons emerge to
speak on behalf of their constituencies who may not be a
coherent entity, and different spokespersons may pursue
different agendas (Latour, 1987: 78). Further, dissenters
aim to severe the link between the spokespersons and their
constituencies.
Translation is a process of aligning different interests,
claims, ideas and intentions of different actors. It consists
of four moments: problematization, interessment, enrol-
ment, and mobilization (Callon, 1986). Problematization
involves a focal actor de?ning the interests of other actors
in a way consistent with his/her own interests, and estab-
lishes itself as an OPP, thus rendering itself indispensable
(Callon, 1986). For example, when China launched the
open door policy and formed FIFs, new interests consti-
tuted existing accounting regulations as ill-suited to FIFs
(problematization). Interessment entails convincing other
actors to accept the problematization of the focal actor
while in enrolment actors are persuaded to accept the
interests de?ned by the focal actor (Callon, 1986; Callon
& Law, 1982). Mobilization involves the enrolling agencies
monitoring those enrolled in order to perpetuate represen-
tations of interests. This depiction of the moments of trans-
lation is not intended to signal a linear trajectory; the
moments overlap and frequently there are multiplicities
of translations because ‘‘translation is contingent, local,
and variable” (Law, 1992: 387). We draw on these four
moments to organize the narrative of our case study.
Inscriptions (scripts, diagrams, charts, etc.) are the
means by which moments of translation are performed,
networks formalized, and trials of strength executed (see
also Qu & Cooper, 2011). They provide a record for mem-
bers of a network and their target audience, and they are
means of forging alliances and bonding heterogeneous
members together. Dambrin and Robson (2011) usefully
3
FIFs in China have three forms: Chinese-foreign joint ventures with two
or more partners each with a given share of capital; Chinese-foreign
contractual joint ventures with two or more partners jointly controlling
assets or operations from which they bene?t; and wholly-foreign-owned
?rms (Ezzamel & Xiao, 2008).
62 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
show how inscription devices, even when interrupted and
imperfect, enable practical actions and fragile networks to
perform. In this paper, inscriptions include documents on
Chinese accounting, IAS, the new accounting regulations
for FIF’s, development of Special Economic Zones (SEZs)
and open door policies, and publications by the govern-
ment agencies, and other network members either in sup-
port of or against accounting reform.
An OPP is a point of negotiation centred on a primary
actor through which other actors must pass and are able
to achieve their interests as de?ned by the primary/focal
actor (Callon, 1986). An OPP mediates all interactions
between actors in a network and de?nes the action pro-
gram, affects future alliances in networks, and controls
the resources required to achieve the outcomes desired
by actors. It is a ‘‘single locus that could shape and mobilize
the local network” and it has ‘‘control over all transactions
between the local and the global networks” (Bijker & Law,
1994: 31). Finally, an OPP creates negotiation space, mak-
ing it possible for local networks to attain their identities
and independence from global networks. We argue that
Chinese characteristics played these roles in the develop-
ment of accounting regulations for FIFs.
In Mandarin, ???? (Zhongguo tese) is widely trans-
lated as ‘Chinese characteristics’, and occasionally as ‘the
Chinese way of doing things’ (Warner, 2008: 771).
Although known before the Mao era, it was not until the
Deng era that Chinese characteristics began to be used in
the discourse on transforming China. The formal Chinese
discourse on ‘‘socialism with Chinese characteristics” is
intended to reconcile what seems irreconcilable: combin-
ing ‘‘‘foreign’ (even ‘capitalist’ and therefore ‘non-
socialist) practices with indigenous Chinese institutions
based on Chinese values, whether traditional or commu-
nist” (Warner, 2008: 772). This brings together the oppos-
ing ideological values of capitalism and socialism, and
combines ‘‘individualist/foreign” and ‘‘collectivist/Chinese
” values (ibid).
For some commentators, ‘‘capitalism with Chinese
characteristics” is a means of combining public and private
ownership and management with responsibility (Karmel,
1994: 1105). For others, ‘‘Capitalism with Chinese charac-
teristics is a function of political balance between two
Chinas – the entrepreneurial, market-driven rural China
vis-à-vis the state-led urban China” (Huang, 2008: xvi).
For still others, it is a system ‘‘where the state creates the
space for the private sector to dominate and regulate the
market to ensure that the new bourgeoisie can appropriate
surplus value thanks to the bourgeoisie’s close relationship
with the party state” (Breslin, 2004: 29). These statements,
however, do not articulate what Chinese characteristics
mean.
Building on Ogden’s (1989) work, Aufrecht and Bun
(1995) examine Chinese characteristics in the context of
civil service reforms. Ogden (1989) contends that all deci-
sions of the Chinese government are underpinned by three
competing values: economic development, socialist values,
and Chinese culture (the most dominant of the three val-
ues). Aufrecht and Bun argue that the factors that re?ect
Chinese cultural values are: Confucianism, guanxi/person-
alism (a network of personal favours and obligations
underpinned by ties such as those of family and region),
and civil service examination and scholarly rules; those
that re?ect socialist values are: the Communist Party of
China (CPC) cadre (those who work in different ranks in
the party, government, the military, and social, economic
and educational institutions), work unit, and equity; and
?nally those that re?ect economic development values
are: China’s size, poverty, and education levels (1995:
176). Our analysis is not intended to directly tap these fac-
tors, but rather seeks to trace shifts in meaning in the dis-
course on Chinese characteristics that impacted
accounting regulations for FIFs during our period of study.
Research method
Our data collection entailed inspecting published
inscriptions and conducting 65 interviews. From 2004 to
2010, we undertook 56 interviews with: regulators
involved in drafting and implementing accounting regula-
tions, government of?cials (to identify how the scope of
accounting regulation for FIFs expanded, how they were
consulted about relevant regulations, and how they
participated in the regulatory process), academics who
participated in the regulatory processes, and accountants
in FIFs or their audit ?rms. From 2012 to 2014, we
conducted nine more interviews in order to ?ll in some
gaps (see Appendix B).
We gained access to interviewees through personal
contacts with the help of of?cials and academics.
Interviews were conducted by the researchers in English
or Mandarin, face-to-face except for two: one where a
written response to our questions was obtained and one
conducted on the telephone. Each interview lasted
between one and two hours. Notes were taken during the
interviews, and the interviews were tape recorded and
transcribed, and those conducted in Mandarin were trans-
lated into English. The interviews explored issues relevant
to our research themes and theoretical framing, mainly: (i)
the development of FIFs since the founding of the People’s
Republic of China in 1949; (ii) Chinese accounting before
reforms began, the emergence of three accounting regula-
tions for FIFs (MoF, 1985, 1992, 2000a), the actors involved,
the inscriptions and networks that developed, and how the
regulations were promoted; and (iii) the impact of eco-
nomic reforms, open door policy, and Chinese characteris-
tics on accounting regulations for FIFs. In order to preserve
the anonymity of our interviewees, we refer to each of
them in the masculine ‘he’.
We also drew on primary documents and secondary
inscriptions on Chinese political and economic policies,
accounting regulations, and convergence to IAS. We traced
the discourse on Chinese characteristics in publicly avail-
able sources and interviews, and how this discourse varied
across actors and over time and how it impacted account-
ing regulations for FIFs. We connected research issues and
the theoretical themes to these inscriptions and the inter-
view data. We conceptualize the episodes of the three
accounting regulations for FIFs as trials of strength
whereby IAS, Chinese accounting, and each new regulation
were actants, with spokespersons seeking to persuade
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 63
others of the strength of their cause. Each trial of strength
was a process in which actants were constructed through
multiple translations in the struggle to prevail over other
actant(s). Each reconstruction entailed revisions that
re?ected compromises to achieve consensus among the
target audiences and to overcome resistance against the
new regulation by claiming adherence to Chinese charac-
teristics whose meaning shifted across actors and over
time.
In ANT networks are a concept, ‘‘not a thing out there”
(Latour, 2005: 131). Hence, the challenge for us was to des-
ignate certain actants, actors and associations as networks:
‘‘In order to trace an actor network, what we have to do is
to add to the many traces left by the social ?uid through
which the traces are rendered again present, provided
something happened in it. . . The whole question is to see
whether the event of the social can be extended all the
way to the event of the reading through the medium of
the text.” (Latour, ibid: 133, original emphases). We follow
Latour’s lead by identifying traces of networks and events
in the social domain of regulating accounting for FIFs in
China that were connected to events in the source
material.
The use of ANT as a theoretical framing for this paper
poses a challenge in relation to writing style. ANT advo-
cates are critical of the use of categories of the social (e.g.
society, the state, capitalism) as if they pre-exist any form
of analysis by the researcher (Callon & Latour, 1981).
Rather, the social is a reassembling of different material
and social things through collective action. This reassem-
bling, argues Latour (2005: 75), ‘‘will thread a trajectory
through completely foreign modes of existence that have
been brought together by such heterogeneity.” What is at
stake here is the insistence that macro social phenomena
are not already assembled ‘‘out there”; in essence they
are micro phenomena connected to many others ‘‘through
some medium transporting speci?c types of traces” (ibid:
176). The emphasis is upon the connections and associa-
tions through which the social is related which researchers
should uncover: ‘‘The macro is neither ‘above’ nor ‘below’
the interactions, but added to them as another of their con-
nections, feeding them and feeding of them.” (ibid: 177).
Our focus is upon developing Chinese characteristics as a
discursive OPP and the connections between local actors
in understanding the emergence of accounting regulations
for FIFs in China. However, we do not go as far as reassem-
bling all the terms we use, but we stress that we under-
stand terms such as ‘‘the state”, ‘‘socialism”, ‘‘capitalism”,
etc., as re-assemblages of connected sites of the social.
The rise and growth of FIFs
Up to the late 1970s China’s relations with Western
countries were limited because of ideological differences
(CPC Central Committee, 1981; Mao, 1951; Mao, 1952),
with only a few international joint-ventures (IJVs) between
Chinese and foreign partners formed in the early 1950s.
Following Mao’s death in 1976, China was assessed to be
short of capital, technology and know-how (Expert
Group, 1995). In 1978 a conference held by the CPC
concluded that the CPC must seek truth from facts in order
to revise Marxism and Maoism. Deng (1978: 150), then
Vice-Chair of the CPC Central Committee, called for eco-
nomic reforms including learning from abroad. Deng’s
views set the tone for the 3rd Plenum of the 11th
National Congress of the CPC which stipulated a shift from
class struggle to economic development and promoted
economic reform and open door policy in order to develop
socialist productive forces (CPC Central Committee, 1978;
Xi, 1998). Consequently, SEZs began to be established
(Expert Group, 1995).
Following several conferences and deliberations from
January 1979 onwards, the CPC resolved in December
1980 that special policies and ?exible measures for SEZs
be developed. A conference organized by the CPC in May
1981 concluded that establishing SEZs has support in
Lenin’s view that foreign resources and management
expertise could be used to serve socialism, and that SEZs
are a means of improving the economy and achieving the
four modernisations needed in industry, agriculture,
defence, and science and technology. The conference stip-
ulated new policies to encourage foreign investment (CPC
Central Committee and State Council, 1981). But after vis-
iting the SEZs, reform opponents argued that only the
national ?ag remained red. Liu (1995: 434), then Deputy
Director of the CPC Revolutionary Committee of the
Guangdong Province, recalled that after he and a colleague
proposed that Guangdong should experiment with SEZs:
‘‘A Vice Premier immediately ‘threw cold water’ on it.
The Vice Premier said that ‘if Guangdong did this, then
there would be a need to put a 7000 kilometres iron net
to separate Guangdong from its neighbouring
provinces.’. . . Obviously, he was concerned that once
the door was opened, capitalist ideas would ?ood the
province and thus there would be a need to insulate
the neighbouring Fujian, Jiangxi, Hunan and Guangxi
Provinces from Guangdong.”
However, SEZs continued to gain of?cial support (Yu,
1998: 147) and to attract signi?cant investments (Cheng,
2000: 106). Between 1979 and 1988, one law for each of
the three types of FIFs and tax and accounting regulations
were promulgated. To counter critics, the CPC Central
Committee (1984) issued Decision on Economic Structural
Reforms in which it drew on Marx and Engels’ (1848) argu-
ment that because capitalism has developed a world mar-
ket, the previous self-reliance situation has been replaced
by exchanges between different economies, rendering the
production and consumption of all countries global:
People were used to the ideas and practices under the
planned economy systems and were in?uenced by the
‘‘leftist” ideas for a long time. They were thus used to
think about, and try to understand, economic matters
from these perspectives. When they were encouraged
to do something different, how could they be con-
vinced? If the new idea or practice is advocated by
Marx and Engels, then it would be easier for many peo-
ple to accept it because the planned economy ideas or
practices were also based on Marxist theory.
[Regulator 5]
64 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Reform critics considered high performing IJVs a threat
to state owned enterprises (SOEs) and a means of spread-
ing ‘‘spiritual pollution” (i.e., capitalist life style, Li & Li,
1999). In contrast, international investors complained
about restricting FIFs domestic sales, foreign exchange
problems, poor infrastructure, corruption and bureaucracy
in local government, and inconsistencies in accounting reg-
ulations (Xiang, 1999a), which led to FIFs receiving tax
incentives.
4
From 1984 onwards, the government began to
reduce its intervention in pricing and investment in joint
stock companies. The CPC embraced the ‘Theory of
Planned Commodity Economy’ which stated that there is
no con?ict between planning and developing a commodity
economy as long as public ownership is preserved. In
1987, the 13th CPC National Congress recommended
strengthening productive forces given China’s primitive
stage of socialism (Zhao, 1987).
Following the 1986 student movement demanding
more democracy, the CPC launched a national campaign
of ‘‘Anti-Capitalist-Freedom-Thinking” in 1987 and
emphasized the Four Cardinal Principles of Chinese social-
ism: Marxism, Leninism, and Mao Zedong Thought;
Socialism; Proletarian Dictatorship; and CPC Leadership
(Tang, 1998). As the underlying problems (e.g., corruption)
were not addressed, the Tiananmen Square demonstra-
tions erupted in June 1989 and China became isolated
internationally because of the way it handled the crisis.
Reform critics called for a return to pre-reform days. In
response, Deng (1992) urged the government to speed up
economic reform and develop a market economy because,
he argued, markets could support socialist productive
forces. Thus, the CPC resolved that a socialist market econ-
omy is the goal of China’s economic reform (Jiang, 1992):
In China, if the central government decided to do some-
thing, then people will follow. Before 1992, there was
debate all the time, but debate is one thing, action is
another. Therefore, Deng said, ‘‘do not debate”.
[Regulator 6]
Our informants suggested that Deng’s support for SEZs
seriously weakened reform opponents (Practitioner 18).
After Deng’s intervention, accounting reforms began to
unfold, and the Department of Accounting at the Ministry
of Finance (MoF) that was dissolved under Mao was
restored. In 1980, the MoF became responsible for issuing
accounting regulations in consultation with the relevant
ministries. In 1990, China opened the Shanghai Pudong
Development Zone and expanded the scope for FDI to
include more industry sectors. From 1989 to 1992 FDI rose
from US $3.4 billion to US $11 billion (Expert Group, 1995).
By 1993 the prices of most commodities became deter-
mined by the market. The CPC Central Committee (1993:
289) produced the Decision on Issues Relating to the
Establishment of a Socialist Market Economy which consid-
ered the open door policy key to reform because it con-
nects domestic and international markets and optimizes
resource allocation. In 1997, the 15th CPC Congress per-
mitted different forms of ownership judged to suit the
development of socialist productive forces (Li, 1997).
These initiatives expedited the development of the capital
markets in Shanghai and Shenzhen.
The three accounting regulations
5
‘‘A single inscription would not inspire trust” (Latour,
1999a: 28)
The 1985 regulation
Informants suggested that the establishment of FIFs
created demand for information from government depart-
ments, Chinese and foreign partners, and FIFs managers
which required a new accounting regulation. Several
options of regulation were available to the MoF: account-
ing systems of the investor’s country, Chinese accounting,
a hybrid of both, a new regulation, IAS, and developing dif-
ferent regulations for different industries (Regulator 5).
Problematization and interessment
The problematization of the Chinese Uniform
Accounting System (UAS) began with the MoF inviting tar-
get audiences to seminars aimed at promoting accounting
reform:
Before the accounting regulation for IJVs was stipulated,
many seminars were held in Beijing and Guangzhou on
foreign investments sponsored by the government.
Participants included representatives from the MoF,
the Ministry of Foreign Economic Relations and Trade,
the State Tax Bureau, the State Foreign Currency
Management Bureau, SEZs of?cials, lawyers, and
accounting ?rms.
[Regulator 5]
Reform advocates (e.g., regulators, foreign investors)
constituted the UAS as unacceptable because it was not
based on IAS (Regulator 1). The UAS based ?nancial state-
ments on Funds System
6
; ‘‘funds” were used instead of
‘‘capital” because the latter was construed as capitalist ter-
minology. Further, reformers argued that the UAS was dom-
inated by tax and ?nance regulations with little scope for
companies to develop their own accounting policies. This
problematization was debated in the seminars:
At these seminars, accounting and tax issues were hot
topics. Many questions were asked by foreign investors
and accounting ?rms about how IJVs should book
assets, value assets, and be taxed on the income of the
4
Initially, IJVs were exempt from corporate income tax in the ?rst year
when pro?t was made and given 50% tax reduction in the next two years. In
1983, these provisions were revised to provide foreign investors with better
privileges: from the year when they made pro?t, IJVs enjoy free corporate
income tax in the ?rst two years and 50% reduction from the third to the
?fth year. Export-oriented FIFs using advanced technologies enjoyed
favourable utility rates, land use fees, working capital loans, lower income
tax, preferential import and export rights, foreign currency rates, and high
managerial autonomy (State Council, 1986).
5
Details of the three regulations are available in Ezzamel and Xiao
(2008).
6
The Funds System had three sections: ?xed funds and ?xed assets,
current funds and current assets, and special purpose funds and special
purpose assets.
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 65
company. When we tried to answer the questions, we
realized that we had accounting regulations for domes-
tic ?rms, but we could not use them in IJVs, we needed
to rede?ne assets, liabilities, things like that. And in
China, we did not have balance sheets; instead, we
had a funds statement at that time. . . [which] was a
product of the planned economy, we learned it from
the Soviet Union. When we tried to answer the afore-
mentioned questions, we found we could not use such
concepts because foreign investors did not understand
them. We started to learn fromIAS and tried to use their
concepts as much as possible.
[Regulator 5]
It was also suggested that foreign investors had little
con?dence in Chinese accounting (Regulator 2, interview).
Further, two problems were encountered in negotiations
with foreign investors:
The ?rst related to accounting standards. Chinese
accounting regulations were centred on a planned
economy with unitary state ownership. . . The existing
systemcould not measure foreign investments and allo-
cate pro?t according to investments, nor was it able to
record fully assets, liabilities and equity. The second
problem was auditing. Under the planned economy,
SOEs’ ?nancial statements were reviewed by the MoF
or a local ?nance bureau according to the size of the
?rm. But for an IJV, the foreign partner demanded a
third party audit. This raised the issue of independent
auditing at the same time when the accounting stan-
dards problem was raised.
[Regulator 6]
These seminars were also means via which the MoF
sought to align the interests of network members to its
own interests by discrediting the use of UAS for FIFs,
emphasizing the need for a new regulation that imports
some Western accounting elements:
. . .perhaps the most important function of the seminars
was to unite people’s thoughts. This involved two
aspects. For one thing, we needed to explain some reg-
ulatory requirements, techniques and concepts so that
people could understand them. For another, some new
and foreign techniques and concepts (e.g., the capital
concept) might be seen inappropriate for China. This
required us to convince people that they are useful
and workable in China.
[Regulator 5]
Initially, IJVs prepared two sets of accounts, one
based on Chinese accounting and one on IAS and foreign
investors’ national rules, but the MoF wanted IJVs to
prepare only one set of accounts (Regulator 5). FIFs also
encountered dif?culties with accounting for intangible
assets:
During the formation of Shanghai Zhongrui Co. Ltd, a
joint venture between a Chinese company and a
German company, the latter proposed to invest intangi-
ble assets into the joint venture. . . and required that the
investment be recognized as an intangible asset.
However, in Chinese accounting regulations and
practice intangible assets were not recognized and
recorded.
[Regulator 2]
Thus, network members articulated different concerns
regarding the suitability of the UAS for FIFs, and the MoF
sought to align these interests by emphasizing the need
for a new accounting regulation that addresses some of
these concerns.
Given the above problematization, various scenarios of
interessment were attempted. For example, under the aus-
pices of the MoF, the Accounting Society of China (ASC),
7
Cooper & Lybrand, the Chinese Society of Fiscal Studies,
the Shanghai Institute of Finance and Economics, and the
Shanghai Bureau of Finance, organized training in IJV
accounting in 1980 (Xiang, 1999b). In 1981, the ?rst issue
of the academic journal Accounting Research published two
articles introducing international accounting developments.
Its second issue contained an article introducing IAS, a
report on a national accounting and auditing conference
organized by the American Institute of Certi?ed Public
Accountants (AICPA), and an introduction to Western trans-
fer pricing, followed by articles on Western ?nancial man-
agement in three subsequent issues. The journal’s fourth
issue in 1981 published the ?rst Chinese translation of IAS
on post-balance sheet date events, followed by a series of
translations of IAS on income tax, and the presentation of
current assets and current liabilities. Articles written by
Lou, Shi, and Pei (1982, 1983), Lou, Shi, Pei, and Feng
(1984)
8
published in Accounting Research compared account-
ing in the USA and China. There were also articles on
Japanese accounting standards and accounting curricula in
USA universities. These inscriptions were mobilized by the
MoF to problematize the UAS, and to convince its target
audience of the usefulness of Western accounting and of
the need for producing an accounting regulation for FIFs.
Chinese characteristics
The problematization of the UAS and the existence of
Western accounting raised two main questions: Could
Western accounting be used to make the UAS appropriate
for FIFs? Should Western accounting be copied wholesale,
or should only parts of it be borrowed? Which parts of
Western accounting could be made compatible with
Chinese characteristics?
Interviewees linked accounting and Chinese character-
istics: ‘‘When Deng used ‘socialism with Chinese charac-
teristics’, accounting of?cials began to think whether
there is accounting with Chinese characteristics”
(Regulator 5). In 1980, Xie (1983, 1987), a Vice-Minister
of Finance and Vice-president of the ASC argued for the
need for a system of accounting with Chinese characteris-
tics that emphasizes economic ef?ciency, stating that
7
The ASC’s involvement in accounting reforms is because it is under the
auspices of the MoF and many government of?cials are among its
members. The president of the society is a current or retired Minister of
Finance while the Secretary-General is the Director-General or Deputy
Director-General of the Department of Accounting at the MoF.
8
Also Vice President of the ASC, and a member of the Chinese advisory
panel for setting accounting standards in the 1990s.
66 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Western accounting has to be carefully analysed and inte-
grated with Chinese Characteristics. Political leaders, regu-
lators, academics and practitioners debated how
accounting with Chinese characteristics can be developed,
yet no effort was made to de?ne Chinese characteristics
directly, although some emphasized the necessity of
accounting complying with state laws and ?nancial regula-
tions and protecting state interests (Yang, 1983).
Yang Jiwan, Director-General of the Department of
Accounting at the MoF and Vice-president of the ASC, sta-
ted that developing accounting with Chinese characteris-
tics was espoused at the 1983 annual conference of the
ASC in a proposal: ‘‘to establish a system of accounting the-
ory and methods with Chinese characteristics centred on
improving economic effectiveness” (Xia & Ma, 1993: 24).
Yang emphasized three issues. First, accounting must be
responsive to both Chinese characteristics and economic
effectiveness. Secondly, Chinese characteristics do not
exclude foreign ideas; China can use foreign methods while
maintaining independence. Thirdly, Chinese characteristics
have their support in Deng’s theory of developing socialism
with Chinese characteristics. Ding (1984), an accounting
regulator and of?cial in the MoF, stated that the develop-
ment of accounting with Chinese characteristics should
embrace learning from foreign experiences based on analy-
sis and critique rather than wholesale adoption.
Other actors deployed stricter arguments, emphasizing
the importance of observing Marxist political economy
and China’s socialism, meeting the needs of the four mod-
ernisations (see earlier), and drawing on China’s past
accounting experiences, and thus arguing that China
should not ‘‘blindly copy” foreign accounting (Ding, 1984;
Lou & Shi, 1981). Others stated that accounting with
Chinese characteristics should be ‘‘consistent with the
Soviet model because the two countries are in the socialist
camp” (Regulator 12). Chinese characteristics were there-
fore assumed to re?ect whatever Chinese attributes were
construed to be relevant from a particular perspective,
including Marxist political economy, Mao Zedong
Thought, economic ef?ciency, central planning, state inter-
ests, and Chinese experience rooted in the past while being
forward looking (e.g. Ding, 1984).
Translation was a big challenge both technically and
politically: which Western accounting elements could be
adapted and ‘‘attractively packaged” (Djelic, 2008) to travel
to China?
. . .Western accounting practice. . .can’t (be used) directly.
It has to be adapted and customized to the Chinese con-
text. The problem is how far you can use all this Western
thing, you know. This is a question with no answer. So
customization was a really important factor. And some-
times you need the decision maker to put some input. . .
It could be a political issue, not just purely technical,
especially at that time people used to think of issues,
problems from a political perspective, you know, at that
time, not long after the Cultural Revolution.
[Regulator 5]
In the above quote, the term ‘‘Chinese context” is
another way of invoking Chinese characteristics.
Customization, or to use ANT terminology translation, of
Western accounting to China was not only about attending
to technical issues but also had to be politically sensitive.
The translation of actants is not only a matter of making
things doable in practice but also of packaging them in a
way that makes them politically acceptable. One dilemma
regulators faced was how Western accounting vocabulary
can be rendered consistent with Chinese characteristics?
At the beginning of the development of the accounting
regulation for IJV, when many people heard the word’
‘capital’, they did not feel comfortable. Because they
have been under the in?uence of Maoist education for
so many years, they could not accept foreign ideas
and concepts. This naturally created debate and even
resistance which in turn distracted and delayed
reforms.
[Regulator 2]
Regulators were nervous about using a vocabulary such
as ‘‘capital” on their own initiative, but felt that producing
the new regulation required it. Support came to them from
higher authorities:
Mr. Xie Ming, Vice-Minister of Finance, was in charge of
accounting at that time. During the process of drafting,
when capital was used, he specially asked us to explain
it as registered capital, and paid capital etc. He did not
oppose the use of the concepts and allowed us to use
them boldly. If there was any problem, leaders would
bear the responsibility. As to what represents capital-
ism that was only the view of some people but not
the mainstream. Central government considered that
any market economy concept and method can be used.
[Regulator 6]
In the early 1980s, China was still coming to terms with
the aftermath of the Cultural Revolution: reformers
wanted to de-emphasize class struggle and promote eco-
nomic development, while critics remained wedded to
Maoist ideas. The issues of whether or not ‘‘capital” is con-
sistent with Chinese characteristics, and whether account-
ing is a tool for exploiting the working classes or a neutral
technology were strongly contested. But the discursive
?eld was shifting slowly in favour of reform. It is in this
context that the intervention by Xie Ming should be under-
stood. Regulators were aware of potential hostility from
critics, and the intervention of formal authority in the
translation process reassured the regulators that any
blame will reside with high authority rather than with
them. Xie Ming’s intervention exhibited some measure of
political acumen invested in knowing how far the vocabu-
lary of ‘‘capital” and ‘‘capitalism” can be pushed, and when
it is best to do so. By that time, the problematization and
interessment promoted the accounting reform agenda
through university education, published debate, seminars
and conferences.
The translation of Western accounting vocabulary and
methods (e.g., changing the accounting equation from
‘‘fund sources = fund application” to ‘‘assets = equity capi-
tal + liabilities”) suggests that ideological arguments began
to give way to the claimed needs of FIFs:
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 67
Ideology can give way to the requirements of economic
development. Irrespective of whether it is capitalist or
socialist, if it (an accounting concept or method) can
help create social wealth and social resources, it can
compete with others.
[Regulator 12]
Thus, although under Mao Western accounting and its
vocabulary (e.g., capital) were inconsistent with Chinese
characteristics, the rise of FIFs and shifts in the discursive
?eld facilitated their partial acceptance. However,
Chinese characteristics prevented the adoption of other
elements of Western accounting: ‘‘we did not allow JVs
to provide for bad debts in the 1985 accounting regula-
tion. . . because the possibility of having bad debts was very
small because in the Chinese economic environment for-
eign investors sold their products to foreign countries by
prepayment or to SOEs; this was Chinese characteristics”
(Regulator 5).
Enrolment and mobilization
In February 1980, the MoF undertook a ?eld survey of
IJV accounting, tax and ?nance practices in Guangdong
and produced The Accounting System for Chinese-Foreign
Industrial Joint Ventures (Exposure Draft) in June 1980.
Regulator 5 recalled that the project team charged with
producing the regulation started with a ‘‘white paper” (a
blank paper) on which they drafted an outline of the
1985 regulation. Members of the project team visited
FIFs and various government departments. The
Department of Accounting at the MoF organized a work-
shop where staff explained the need for the new regulation
and introduced its Exposure Draft.
It was a really open process that consulted technical
experts who knew Western accounting practices very
well and had a lot of access to FIFs to ?nd out about
problems, then produced an outline regulation that
was discussed with small groups of experts. This led
to an Exposure Draft which was further disseminated
to people who were invited to comment on it from aca-
demia, FIFs, and provincial ?nance of?ces.
[Regulator 5]
The MoF distributed the Exposure Draft to central and
local government departments for comment. Government
of?cials, academics and practitioners published articles
promoting the Exposure Draft. For example, Gao (1984),
Guangdong Finance Bureau, published an article in the
Guangdong Finance and Accounting journal that discussed
the contradictions between the Exposure Draft and exist-
ing accounting practice and the relationship between the
Exposure Draft, tax laws and ?nancial regulations. This,
and similar publications, provided input into the regula-
tory process, claiming that the Exposure Draft has survival
capabilities in being malleable and ?exible and thus gain-
ing strength through negotiation and revision. Regulator
6 indicated that ‘‘From 1980 to 1985, the Draft was used
in negotiations with foreign investors.” Feedback was also
received from two groups of local bureaus of ?nance: the
western part and the coastal provinces. As the former
group had no knowledge of Western accounting, the MoF
arranged training for them. The coastal group, with knowl-
edge of Western accounting, provided comments on the
Exposure Draft. This divide between the two groups sug-
gests that enrolment and mobilization were more dif?cult
in some regions compared to others.
The Accounting Department (MoF) had several mem-
bers who previously studied, taught or practised
Western accounting: Mo Qiou,
9
Lu Zhongwen
10
; Hu
Baochang,
11
and Yang Jiwan (Regulator 4).
12
It was sug-
gested that the expertise of these members endowed
the Exposure Draft with legitimacy in the eyes of foreign
investors:
Mo Qiou and I visited an IJV in Shanghai which manu-
factured elevators. We studied and were able to under-
stand its accounting system in detail quickly. Without
these experts, it would have taken much longer to
understand the system. Moreover, even if the regulation
was eventually produced, if the regulators were not
authoritative, it would be subject to questioning and
suspicion, especially by foreign investors.
[Regulator 2]
In March and April 1985, the MoF issued The
Accounting System for Chinese-Foreign Industrial Joint
Ventures and The Chart of Accounts and Financial
Statements in Chinese-Foreign Industrial Joint Ventures.
This regulation adopted matching costs and revenues,
accrual accounting, Debit-Credit bookkeeping, accounting
for intangibles, and expensing ?nancial and administrative
costs: ‘‘[The 1985 regulation] laid the foundations for
future reforms in accounting regulation.” (Yang, 1994:
32). The UAS was embraced to enhance information com-
parability because most IJVs’ transactions occurred with
SOEs. The 1985 regulation was strengthened by its associ-
ation with other actants, in particular IAS, but was
also impacted by Chinese characteristics as suggested
earlier.
The debate over the nature of accounting in?uenced the
assessment of the 1985 regulation, with critics questioning
the relevance of Western ideas to socialist China
13
:
At the beginning, when the IJVs’ accounting system was
?rst introduced, people could not accept the concept of
capital. They thought capital represents capitalism and
9
Mr. Mo Qiou was the chief accountant of the American owned
Zhongmei Fuyou Co. before 1949. He joined the MoF in 1953, and became
responsible for developing enterprise accounting systems including the
Accounting System for Joint Ventures. He translated Accounting System for
Foreign Contracted Firms from Chinese into English.
10
Professor Lu Zhongwen was an academic, chief editor of three journals
in the 1950s-1960s, and participated in the development of accounting
systems.
11
Hu Baochang was an academic, then member of the Department of
Accounting in 1979. He translated with Mo Qiou Yugoslavian Bookkeeping
Bureau Regulations. He participated in the development of accounting
systems.
12
Professor Yang Jiwan was an academic before 1949. In 1949 he joined
the MoF then became Director General of its Department of Accounting and
advisor to the MoF.
13
The debate was not only academic because the MoF controlled media
such as the journal Accounting Research where articles on accounting
regulation for FIFs were published.
68 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
funds represent socialism. The concepts of registered
capital and actually received capital etc., were not
accepted. At that time, Increase/Decrease bookkeeping
represented socialism while Debit/Credit represented
capitalism.
[Regulator 6]
Thus, despite formal support, critics continued to con-
strue terms such as ‘‘capital” and ‘‘debit-credit” as capital-
ist terminology and being inconsistent with their
interpretation of Chinese characteristics. By imparting ide-
ological values to accounting vocabulary, the aim was to
discredit the 1985 regulation and to destabilize its
network.
To promote the 1985 regulation, the MoF expanded the
network by enrolling further members, including local
government of?cers, university professors and students,
accountants in IJVs and SOEs, and domestic and foreign
investors. The MoF translated the regulation into English,
French, German, Japanese and Spanish and published it
in Beijing Review, China Daily, Finance and Accounting jour-
nal (edited by the MoF), Accounting Research journal (edi-
ted by the ASC) and booklets. The MoF and local ?nance
bureaus (LFBs) organized workshops on the new regula-
tion, with participants drawn from ?nance, tax, enterprise
supervising departments, accounting ?rms, and IJVs in
cities opened to foreign investors (Finance, 1985), and
courses on accounting for IJVs were introduced in
universities:
In 1985 I was at Graduate School so my Professor taught
us how to do accounting for foreign currencies and how
to prepare consolidated statements.. . .. After 1985, they
taught not only accounting for capitalist enterprises,
but also accounting for IJVs.
[Regulator 3]
In 1986, Mo Qiou (see f.n. 8) and his colleagues pub-
lished textbooks based on the new regulation (e.g., He &
Lin, 1993; Wang & Shen, 1987). By that time, almost every
province, major city, and government ministry had estab-
lished an accounting society af?liated to LFBs as branches
of the ASC in order to forge strong links between academics
and practitioners (Regulator 5), and issued journals such as
Shanghai Accounting which published articles explaining
the 1985 regulation (Chen, 1985; Xie, 1990).
The expanded network with its associations between
actors (regulators, government of?cials, politicians, aca-
demics and accounting practitioners) and actants (e.g.,
the 1985 regulation, IAS) enlisted the target audience of
FIFs, foreign investors, international accounting bodies,
and international institutions (e.g., the World Bank). The
articulation of joint interests was premised on presenting
the 1985 regulation as one that adapted elements of
Western accounting consistent with Chinese characteris-
tics and provided greater protection for foreign investors.
As shown above, numerous inscriptions (accounting regu-
lations, Exposure Drafts, journal/newspaper articles, con-
ference presentations) were produced and circulated
widely by the MoF in order to formalise these interests,
provide regular communications between network mem-
bership and target audience, and stabilise the network.
The promulgation of the 1985 regulation was expected
to address the problematization of the UAS by regulators,
academics, and FIFs‘ managers. The network formed was
?uid, with new members added when appropriate, for
example the newly established accounting societies, rele-
vant government ministries and cities that disseminated
the 1985 regulation. By organizing meetings, seminars,
and conferences, and by utilizing various inscription
devices such as press releases, newspaper articles, book-
lets, and academic publications, the MoF mobilized alli-
ances within the network around what were translated
as the shared interests of the network. Academics and
practicing accountants published articles and books and
organized conferences that contributed to the debate,
problematized the UAS, and disseminated the new regula-
tion. Chinese characteristics, assuming differing meanings,
emerged as a discursive OPP that was invoked by advo-
cates and critics of adapting parts of IAS. As an actant con-
structed in the ?rst trials of strength, the 1985 regulation
was unlikely to be radical; it was a hybrid compromise of
the UAS and IAS because regulators had to tread a tricky
path: China still had strong elements of socialism, and
strict de?nitions of Chinese characteristics were invoked
by reform opponents.
The 1992 regulation
Problematization and interessment
The initial problematization of the 1985 regulation
began as soon as it was promulgated. Regulator 3 (inter-
view) said that foreign investors, including the World
Bank, complained that this regulation was different from
IAS. Zhao (1987), then Premier of China, in his address to
the 13th National Congress of the CPC stated that foreign
businessmen should be enabled ‘‘to operate businesses
according to international conventions”, thereby support-
ing the adoption of more IAS. Ge, Lin, and Wei (1988) con-
sidered the non-adoption of conservatism in the 1985
regulation a serious shortcoming, arguing that conser-
vatism deals with uncertainty in commodity economies,
helps harmonization with IAS, and improves the invest-
ment environment. Regulator 4 stated that the 1985 regu-
lation did not go far enough in adopting IAS. Yang (1994:
32) suggested that improved legislations for foreign busi-
nesses in 1991, especially those relating to taxing FIFs, ren-
dered the 1985 regulation unsatisfactory.
The problematization was undertaken with the need for
more accounting reform in mind; this was debated in
research groups and conferences from 1987 onwards,
which culminated in issuing An Outline of Accounting
Reform (draft) in April 1989 by the research group on
Accounting Reform in the MoF. The Outline aimed to estab-
lish a management-oriented accounting system suited to
central planning and market regulation, to strengthen
enterprise management, and to adopt more elements of
Western accounting that meet macroeconomic manage-
ment needs (Regulator 2).
Regulators investigated accounting practice in FIFs in
various cities. Initially, regulators considered separate
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 69
systems for each of: wholly-foreign owned ?rms, Chinese-
foreign equity JVs, and Chinese-foreign contractual JVs, but
it was found that they overlapped signi?cantly, and it was
thought that having three regulations would confuse for-
eign investors (Regulators 4 and 5). Thus, regulators
decided that one accounting regulation for all types of
FIFs should be developed. This led to a concern: how could
special transactions be treated in different types of FIFs?
Regulators adopted an approach that permitted making
special provisions for each type of FIFs, for example pro-
ducing rules on how to account for funds in Chinese-
foreign equity JVs that were not required in other types
of FIFs.
Regulator 5 said that due to the dual pricing system, the
MoF wanted to use market rates for accounting purposes,
but the People’s Bank of China (PBC, China’s Central
Bank) insisted on using the of?cial rates. The Regulatory
Bureau of the State Council required the MoF and the
PBC to reconcile their positions, forcing both to agree on
using the PBC’s year-end of?cial currency exchange rate
for balance sheet items, and the annual weighted average
currency exchange rate for income statement items.
Regulator suggested that the development of the 1992
regulation involved a ?ne balance of power and negotia-
tion between his department, the Department of Finance
and the Department of Taxes at the MoF. For example, in
negotiating provision for bad debts
14
:
I didn’t like to give a percentage in the regulation; it
[3%] was a product of compromise, because the state
taxation bureau didn’t like the idea of allowing the
enterprise to make provision for bad debts, also for
the inventory value to be below cost. . . because it
means less tax revenue... However, the percentage
was not imposed by tax staff, but by the Finance
Departments of the MoF. When I had the new idea of
allowing FIFs to provide for bad debts, the Finance
Departments said no at ?rst, because enterprises were
not allowed to do that. Finally, they agreed although
they insisted that I must determine a percentage
because we had a ?xed asset depreciation rate. If I
didn’t agree with them, this regulation would have
not emerged. I did not want any percentage. I just
wanted to produce a policy you can use, so the percent-
age could be decided according to the situation and IJVs
can make their own judgment.
[Regulator 5]
The above quote illustrates part of the complexity of the
Chinese accounting regulation process: multiple actors
with different roles and interests in the regulation process
were pushing in different directions to construct a new
actant. Tax authorities were concerned to avoid making
concessions by allowing greater provisions for bad debts
and reducing tax revenue. Yet, the power of determining
the percentage of provisions lay with the Department of
Finance whose concern was to ensure consistent
accounting practice across businesses. Regulators, the
Accounting Department (MoF) and the Ministry of
Foreign Trade were concerned to attend to the demands
of foreign partners in FIFs, the World Bank, and the
increased pressure to harmonize Chinese accounting more
closely with IAS. Regulator 5 had to negotiate hard and to
accept a compromise solution of a ?xed percentage against
his better judgement that provisions should vary depend-
ing on the situation. However, he felt that this compromise
still marked a radical departure from the 1985 regulation,
for at least the need to allow for provisions was accepted.
When asked how he managed to secure their agreement,
Regulator 5 answered:
I had a strong argument. What they were worried about
in this policy was the damage to the state tax revenue. I
said, if you don’t use the policy, you will damage assets
more. Because if companies have bad debts and we
don’t allow companies to make a provision, they may
have big pro?ts. Although a big pro?t will lead to a
big income tax, a big pro?t leads to a big distribution
of pro?t, so you may make some evil pro?t for the
shareholders of the company which will damage the
future prospects of the enterprise. If we want the enter-
prise to grow, we should allow it to make some reason-
able provision for this potential loss. Even though the
regulation allowed FIFs to provide for a 3% provision
for bad debts, the amount is not automatically deducted
from taxable income, because the reduction would have
to be approved by the tax authority.
Regulator 5 spoke a language that connected with the
interests of the target audience. He attributed his success
in convincing ?nance and tax of?cials to having a ‘‘strong
argument”. Having identi?ed their interests as protecting
tax revenue, he contrasted this against shareholders
receiving more evil ‘‘pro?ts” which he construed as an
impediment to enterprise viability. He could thus argue
persuasively that provisions for bad debts are necessary,
while minimizing the effect on tax revenue by stating that
provisions could not be deducted from taxable income
without the approval of tax authorities. Such consideration
by the regulators of the implications of a new accounting
regulation on state revenues underscores an important
Chinese characteristic – the in?uence of the central plan-
ning system on accounting which resulted in capping the
provision for bad debts at 3%.
Chinese characteristics
Politically, the attitude towards adopting Western
accounting became somewhat more relaxed than previ-
ously. The view that accounting is not ideological began
to gather a stronger momentum (Yang, 1993). This was
facilitated by the 13th CPC Congress held in 1987 embrac-
ing the Theory of Primitive Socialism (Zhao, 1987) which
shifted the emphasis from class struggle to economic
development and promoted a commodity economy. The
debate on further accounting reform continued and con-
cern with Chinese characteristics remained paramount.
Efforts were made to articulate the meaning of Chinese
characteristics. Yang (1985) argued that for accounting to
14
In the late 1980s and early 1990s, there was a debt crisis (i.e.,
companies using supply chains were unable to repay debts) which
encouraged provision for bad debts, because the government could protect
SOEs, but could not provide insurance for non-SOEs.
70 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
be consistent with Chinese characteristics accounting
should re?ect China’s experience supplemented by selec-
tive adoption of foreign accounting, help improve macro-
and micro-economic ef?ciency, help establish economic
responsibility centres and strengthen monitoring, and
serve the purposes of planning and markets. The
Accounting Society of China (ASC) (1985) made similar
comments and emphasized public ownership as the pri-
mary form of ownership. The ASC (1987) also produced a
research plan for the following four years aiming to
develop an accounting system with Chinese characteristics
that suits the needs of the four modernizations by adopting
elements of Western accounting deemed compatible with
Marxist principles and China’s planned economy.
Compared with the early 1980s, the debate on Chinese
characteristics focused upon speci?c issues at a deeper
level. He (1988) proposed an accounting system with
Chinese characteristics that emphasizes political economy,
dialectic and historical materialism, planned commodity
economy, systems theory, control theory, information the-
ory, shortage economics, and planning and control meth-
ods. He (1988), Yu (1989), and Jiang and Li (1991), all
MoF regulators, reiterated the importance of preserving
the socialist nature of accounting while embracing reform
and hence developing an accounting system with Chinese
characteristics. Xie (1990) stressed that Chinese character-
istics should emphasize the integration of enterprise and
national interests, mass participation, and permit selective
use of Western accounting suited to China. Commentators
argued that copying foreign accounting wholesale is incon-
sistent with Chinese characteristics because of differences
between the West and China; for example the prominence
of private ownership in the West compared to public own-
ership in China (Zhang, 1991).
In response to these calls, a symposium on accounting
standards was organized in 1990 with participants from
all SEZs. The delegates stressed that the new accounting
regulation for FIFs must set accounting standards based
on Chinese characteristics and socialist economics while
being ?exible as enterprises become gradually more inde-
pendent producers and traders of socialist commodities,
draw on over forty years of socialist accounting experi-
ence, and recognize the inexperience of practicing
accountants (Cai, 1990). The call for ?exibility implies
that the symposium participants considered that
Chinese characteristics should change as the regulatory
environment changes.
These interpretations of Chinese characteristics re?ect
understandings ranging from strict to liberal. Actors
deduced Chinese characteristics from what they deemed
an ‘‘acceptable” accounting regulation, and thus the object
of regulation recursively impacted the meaning of Chinese
characteristics. Chinese characteristics were rendered into
a malleable concept that could be de?ned variably. Such
malleability endowed Chinese characteristics, as a discur-
sive OPP, with conceptual mobility and durability, for such
malleability opened up a space for actors with differing
agendas to be part of the regulation debate. Meanwhile,
the Shanghai and Shenzhen Stock Exchanges were inaugu-
rated in 1990 and 1991 respectively as means of increasing
marketization, signalling a stronger desire that Chinese
characteristics should be ?exible in order to accommodate
more Western ideas to facilitate China’s drive to belong to
the modern ‘‘world order”.
In 1992, the MoF issued the Accounting System for
Foreign Invested Firms to replace the 1985 regulation. The
regulation included as new additions valuing long–term
investment at cost if the investment was 25% or less, and
using the equity method if the investment was above
25% of the total capital of the investee. It required FIFs to
prepare consolidated ?nancial statements if their invest-
ment in a third party accounted for over 50% of the inves-
tee’s total capital; adopt LIFO for stock valuation; and unit
of production or service and reducing balance for ?xed
assets depreciation with the residual value capped at
10%. It also allowed provision for stock impairment subject
to government approval.
To comply with the interpretations of Chinese charac-
teristics, the regulation did not allow companies to deter-
mine the rate for provision for bad debts but ?xed it at
3%, nor did it include conservatism as an accounting prin-
ciple. The regulation re?ected other concerns with Chinese
characteristics: the complexity of the regulatory process
(Regulator 5), the gradual adoption of economic and
accounting reform, the developing nature of the market
economy (Regulator 3), and the uncertainty in the emerg-
ing commodity/market economy which created a need for
bad debt provision (Ge et al., 1988). Also, it helped the UAS
which re?ected elements of Chinese characteristics
(Regulator 5): China still had a planned economy, and
accountants and tax of?cials were used to a chart of
accounts and the UAS made it convenient for government
departments to aggregate ?nancial statements, so that
‘‘these elements are carried on and become Chinese char-
acteristics.” (Regulator 7)
Enrolment and mobilization
The 1992 regulation was disseminated quickly and, ini-
tially, was seemingly well received:
In 1992, many nationwide training sessions were held.
The reaction was very positive. It [the new regulation]
was published in Economic Daily and broadcasted on
national TV news; the latter never happened before.
[It received] a lot of praise. IJVs felt that it was more
convenient for them.
[Regulator 4]
Regulators at the MoF mobilized a network (including
other ministries, LFBs, accounting societies, IJVs, and aca-
demics) to disseminate the 1992 regulation via training
sessions, workshops, seminars, TV broadcasts, and news-
paper articles. The MoF circulated the 1992 regulation to
all ministries and LFBs, along with a document explaining
how to treat speci?c types of transactions to central gov-
ernment and provincial governments.
Various accounting and ?nance magazines edited by
national and local associations and universities promoted
the 1992 regulation. A search of titles containing
‘Accounting Systems for FIFs’ in the Chinese Knowledge
Network Periodicals Database shows many articles explain-
ing the regulation written by academics, practitioners and
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 71
government of?cials published in 1992/1993 in magazines
such as CPA Communications (CICPA), Finance and
Accounting Communications (Hubei Accounting Society),
Finance and Accounting Monthly (Wuhan Accounting
Society), Finance and Economic Studies (Shanghai
University of Finance and Economics), Finance and
Commerce Research (Anhui Institute of Finance and
Commerce), Journal of Guangxi Institute of Finance and
Economics, Guangxi Finance and Accounting (both Guangxi
Accounting Society), Shanghai Accounting (Shanghai
Accounting Society), and International Taxation (Chinese
Association of International Taxation). However, the regu-
lation still attracted criticism:
Academics and practitioners were free to write articles
to analyze and discuss the new regulation. They would
also raise issues, sometimes, quite critical, when we
gave seminars. Once I was giving a lecture at a work-
shop in Shanghai and met some participants who were
critical of aspects of the FIF accounting regulation. I said
to them, ‘‘O.K., you think there are problems with it and
some requirements are inconsistent with your theory,
but we have to issue a regulation that is workable in
practice, even though it is not entirely consistent with
accounting theory.”
[Regulator 5]
In summary, the 1992 regulation was construed as a
pragmatic means of attending to both technical and polit-
ical concerns whilst preserving malleable translations of
Chinese characteristics, but it also had its critics as soon
as it was promulgated.
The 2000 enterprise accounting system (EAS)
Problematization and interessment
Initially, commentators ascribed several positive attri-
butes to the 1992 regulation; it was assessed to have:
provided good solutions to accounting and reporting
issues in FIFs at the time, improved investment condi-
tions, strengthened investors’ con?dence, and pro-
moted growth in foreign investments. . . it helped
spread market ideas, train many accountants who
became familiar with international accounting conven-
tions, promote accounting research, and accumulate
many important experiences that became useful for
transforming China’s accounting model into a market-
based accounting model.
[Regulator 9, our emphasis]
Thus, the 1992 regulation was construed as being
responsive to the needs of FIFs whilst observing interna-
tional conventions, thereby underscoring attention to local
needs and global accounting regulation. However, this
endorsement was simultaneously a thinly veiled prob-
lematization, for it temporally framed the 1992 regulation
by the expression ‘‘at the time” to denote its short shelf-
life. Actors criticised the elements of central planning
retained in the 1992 regulation and its problematic treat-
ment of bad debts:
It [the 1992 regulation] was stipulated at a time when
the economic system was experimenting with the inte-
gration of planning and market economies. Therefore, it
carried numerous traces of the central planning system.
For example, it could not re?ect the changes in asset
values because it required ?rms to use historical cost
to value short-term and long-term investments. This
became increasingly inappropriate because under a
market economy the market can change very quickly
and as a result the value of the ?rms’ assets will change.
Also, it required ?rms to expense bad debts when they
occurred or permitted provision for bad debts at a uni-
form low percentage of outstanding debts [3%]. This
produced much larger accounts receivable than the
amount that can be realistically received which over-
stated pro?ts.
[Regulator 11]
The 1992 regulation was construed as a hybrid of cen-
tral planning and market economy because at that time
China was experimenting with a dual system based on
both. Critics lamented the regulation’s reliance on histori-
cal cost rather than market value for valuing investments.
With increased marketization, more limitations were iden-
ti?ed: ‘‘the reaction [to the 1992 regulation] in my SEZ was
that the degree of harmonization was not enough”
(Government Of?cial 1). The regulation’s subordination to
tax and ?nance logic at the expense of relevance to the
changing context of FIFs and market reforms was stressed:
A change in accounting regulation. . . was in essence
determined by ?nance regulations. Finance regulations
originally included tax regulations and accounting was
merely a tool for implementing ?nance regulations.
Finance regulations neglect the ?rm because they
mainly concern ?scal revenues and tax and are lag-
gards, not appropriate for the ?rm. If we used these sys-
tems, we would lose competitive advantage, and
marketization will be undermined.
[Practitioner 18]
FIFs raised queries about taxation (Regulator 12).
Although companies could determine the useful lives of
?xed assets for depreciation purposes, they had to make
adjustments to meet tax requirements. This created two
different accounting practices: most FIFs, mainly small-
sized, followed tax requirements to avoid making the
adjustments required, but large FIFs estimated useful asset
lives differently from tax regulations (e.g., Practitioner 18’s
?rm). Further, foreign investors preferred to use their
domestic accounting standards for consolidation purposes
in order to be consistent with parent company accounting.
For example, while the 1992 regulation permitted the use
of LIFO for inventory valuation, Practitioner 18’s foreign
partner ?rm required its subsidiaries to adopt the moving
average cost method.
As FIFs became more diversi?ed and complex, the 1992
regulation was deemed inadequate:
The regulation was industry-based. Sometimes there
were inconsistencies between industries and with tax
rules. Companies felt the regulation was troublesome
because the inconsistencies meant that companies had
72 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
to make many adjustments. As a result, accounting
information lacked comparability even in the same
industry. This meant that there was scope for manipu-
lation.
[Practitioner 33]
Although the 1992 regulation permitted several speci?c
applications of conservatism, it did not adapt conservatism
as a principle. This was remedied in General Accounting
Standard for Business Enterprises (GASBE) issued a few
months later in 1992. GASBE went beyond the 1992 FIFs
regulation by providing de?nitions of ?nancial statement
elements and adopting as principles conservatism, truth-
fulness, understandability, and comprehensiveness.
However, extensive earnings management and false
reporting by companies still occurred and were assessed
by regulators and investors to have hampered the develop-
ment of the stock markets (Chen, Hu, & Xiao, 2010; Li,
2001, chap. 9). This attracted the attention of senior politi-
cians such as Premier Zhu who, in launching the National
Institute of Accountancy in Shanghai in 2000, demanded:
‘‘Do not fake accounts”. To minimize manipulations, in
1999 companies were required by law to use conservatism
(Liu, 2000). Similarly, the State Council (2000) issued an
Enterprise Financial Reporting Regulation (EFRR) which
?nancial statements elements in line with IAS and stipu-
lated responsibilities and liabilities of parties involved in
accounting, auditing and reporting, thereby shifting the
emphasis from the income statement model to the balance
sheet model.
Regulator 10 stated that since 1992 legal rules relating
to accounting developed rather quickly and the EFRR rede-
?ned elements of the ?nancial statement that were ‘‘tigh-
ter and more re?ned than those provided in the [1992]
Accounting Systems for FIFs”. Further, the ?nancial state-
ments produced under the 1992 regulation and the EFRR
were not comparable: ‘‘This caused problems for Chinese
partners in IJVs when evaluating investment performance”
(Regulator 9).
More Western accounting elements were introduced
into universities (Yang, 1998), and Western texts were
translated into Chinese, e.g., International Accounting
Standards edited by the AICPA (Chen & Jin, 1999). Based
on GASBE,
15
by the year 2000, ten accounting standards
had been issued concerning cash ?ow statements; debt
restructuring; non-monetary transactions; contingencies;
changes in accounting policies and accounting estimates
and correction of accounting errors; disclosure of related
party transactions; post-balance sheet date events; rev-
enues; construction contracts; and investment. However,
the regulators felt that it would be dif?cult to discard the
UAS because ‘‘accountants would not know what to do
which would cause disorder” (Regulator 6), and that govern-
ment needed time to promulgate more standards.
Chinese characteristics
The debate focused on the adoption of more IAS while
maintaining Chinese characteristics. Zhang (1992),
Deputy Minister of Finance, suggested that China’s circum-
stances and the adaptive capacities of Chinese accountants
should be borne in mind when considering adopting
Western accounting. With the 14th CPC Congress embrac-
ing the Theory of Socialist Market Economy (Jiang, 1992)
and the CPC Central Committee (1993) producing Decision
on Issues Relating to the Establishment of a Socialist Market
Economy, the MoF stated that accounting reform must draw
on Chinese accounting experience while using Western
accounting consistent with Chinese characteristics.
Yang Jiwan (cited in Xia & Ma, 1993) emphasized that
accounting should serve macro-economic management
and accommodate China’s special circumstances during
the transition period (e.g. the dual pricing mechanism),
and that Western accounting should be customized to suit
China. He suggested that one should identify Chinese char-
acteristics from practice, rather than conceptually, and that
differences in accounting practice between countries and
?rms will exist, thus treating these differences as Chinese
characteristics is problematic.
The debate on the relation between internationalization
(China’s transformation) and Chinese characteristics deep-
ened. First, there were attempts to identify favourable and
unfavourable conditions for internationalization. Wu
(1998) identi?ed circumstances that favour international-
ization: change from class struggle to economic develop-
ment, recognition that Western economics can help
tackle problems of economic growth, and change in the
relationship between capitalist and socialist countries
from con?ict to cooperation. Feng (2002) emphasized bar-
riers to internationalization: less developed markets, ?rm
performance evaluation based on past earnings not future
cash ?ows, government as the largest shareholder, weak
corporate governance, and modest experience of Chinese
accountants. Further, Feng argued that internationalization
and Chinese characteristics are not contradictory. The rela-
tionship between internationalization and localization,
borrowing from abroad and promoting innovation, and
being realistic and forward-looking were also discussed
(Wu, 1998; Wu, 2000). A Special Section on Accounting
Theory and Methods with Chinese Characteristics was
established in the ASC led by Feng Shuping, Director of
the Department of Accounting and Assistant Minister of
Finance, and symposia on the development of accounting
with Chinese characteristics were organized by MoF in
1999 and 2000 (Li, 2001).
For some, the question of Chinese characteristics was
framed into the issue of whether or not China should main-
tain a UAS or develop accounting standards:
We should have put more emphasis on them [account-
ing standards] than on the UAS. I suggest we abandon
the latter. There is no need for the UAS because there
are con?icts between the UAS and accounting stan-
dards. Standards are clear enough and there should be
scope for ?rms to design their own accounting systems.
[Practitioner 34]
15
GASBE was stipulated as a response to the need for a uni?ed accounting
system for all enterprises: there were 56 industry and ownership-based
accounting systems before it was issued which GASBE consolidated into 11
industry-based and two ownership-based accounting systems. SOEs
needed international harmonisation because most Chinese partners of IJVs
were SOEs and their accounts were not understood by foreign investors.
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 73
In contrast, senior staff at the China Securities
Regulatory Commission (CSRC) linked the meaning of
Chinese characteristics to the market context at a particu-
lar point in time: ‘‘whether the investors are mature
enough,. . . whether the ?nancial intermediaries are mature
enough,. . . [and] whether legal requirements are meaning-
ful or not or to what extent they are meaningful”
(Regulator 8).
Others sought to probe further the theoretical basis of
accounting with Chinese characteristics. Wu (1998) argued
that as accounting is socially constituted and also consti-
tutes the social, Chinese accounting should re?ect these
characteristics. While some (e.g., He, 1988) argued that
Chinese characteristics should feature in accounting only
at the theoretical level, others (e.g., Liu, 2000) contended
that international accounting harmonization can only be
achieved at the technical level with Chinese characteristics
persisting at the social level. Liu (2000) stressed that
Chinese characteristics are re?ected in the MoF setting
accounting standards, accounting training, entry quali?ca-
tions, and accounting experience. Further efforts were
made to rede?ne Chinese characteristics. For example,
Luo (1999) argued that Chinese characteristics should be
things unique to China, should permit the adoption of
advanced accounting methods, and must be consistent
with the development of China’s productive forces.
Others emphasized the dynamic nature of Chinese
characteristics:
I understand that a system with Chinese characteristics
is dynamic. Today’s Chinese characteristics are different
from yesterday’s. Marketization level is certainly a
major determinant of Chinese characteristics. As the
Chinese market develops, Chinese characteristics
become fewer, but those relating to non-market
areas remain the same, which has something to do
with tradition and culture, but the in?uence of such
factors on accounting and auditing standards is not
critical.
[Regulator 12]
The above quote suggests that those elements of
Chinese characteristics related to markets must change as
markets develop and should have a signi?cant impact on
accounting, whereas traditional and cultural elements
remain unchanged but that their in?uence on accounting
is marginal.
A reminder of the constructed, political nature of
Chinese characteristics is provided by Aufrecht and Bun
(ibid: 177) who note that ‘‘not all traditional Chinese char-
acteristics are sacred. Some are seen as evil remnants of
feudalism. Thus, the Chinese leadership ?nds itself in the
position of de?ning which Chinese characteristics are to
be preserved and which are to be suppressed.” Thus, the
changes that accompanied the various stages of China’s
transformation were understood by reform advocates to
necessitate shifts in the interpretation of Chinese
characteristics:
In the 1980s, accounting with Chinese characteristics
was consistent with the Soviet model because the two
countries were in the socialist camp. Then there was
the transition to planned commodity economy, then
the combining of planning and market elements.
[Regulator 12]
Yang (1998), an academic, argued that Chinese charac-
teristics should not be a criterion for judging accounting
reform but the criterion should be whether accounting
helps develop productive forces and serves domestic and
international needs. Others argued that there is no need
for Chinese characteristics because accounting is the lan-
guage of business and too much emphasis on Chinese char-
acteristics will hamper harmonizing Chinese accounting
with IAS at a time when IAS have greatly reduced differ-
ences in accounting among countries (Li, 2001). Regulator
5 stated that differences between Chinese accounting and
accounting in other countries re?ect Chinese circum-
stances, but these differences are not fundamental, and
state ownership should not be part of Chinese
characteristics.
There were calls for non-politicizing the debate on
Chinese characteristics (e.g., Yang Jiwan, cited in Xia &
Ma, 1993), but these were countered by the view that
choosing between maintaining Chinese characteristics
and internationalization is a matter of con?icting national
interests which is necessarily political (Feng, 2001b).
Indeed, it was during this phase that discourses consti-
tuted Chinese characteristics as political more frequently:
In the ?rst place, [Chinese characteristics] are a political
concept.
[Regulator 3]
Applying Chinese characteristics to accounting is far-
fetched. This way of thinking has a bit of a political col-
our. When there is a slogan, it will be followed.
‘Accounting standards with Chinese characteristics’ is
a slogan that must be used by a CPC cadre who manages
an enterprise or a sector, a necessary political gesture
by adding the addendum ‘Chinese characteristics’.
Chinese characteristics is a political concept; everyone
understands this connotation. We raise a ?ag then ?nd
the justi?cations to support the ?ag.
[Regulator 5]
As a malleable container, Chinese characteristics were
susceptible to assuming different meanings depending
upon actors’ cognitions and interests. Interestingly, the
reconstruction of Chinese characteristics as essentially
political seems to signal their demise as an OPP for
accounting regulation:
There is a political colour in ‘‘Chinese characteristics”;
we removed them from the ASC’s articles of association
last year. I simply kept the word ‘‘Chinese” (Regulator 12)
Others also suggested that by 2000, Chinese character-
istics had little in?uence on the adoption of International
Financial Reporting Standards (IFRS):
In the 1990s, we said we want to maintain Chinese
characteristics and achieve international harmoniza-
tion. Today, we talk about convergence in China, not
adoption. Times have changed. Now we feel it is no
longer necessary to stress Chinese characteristics.
[Regulator 3]
74 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Saying ‘accounting with Chinese characteristics’ is a
political gesture and is not realistic. The reality is that
our standards have converged with IFRS on a large
scale, and we have adopted everything we can use.
[Regulator 5]
The message here is that increased convergence with
IFRS means that Chinese characteristics are becoming
increasingly redundant. So, the question now is how did
Chinese characteristics change from being a discursive
OPP to becoming redundant in China’s accounting regula-
tion? And what, if anything, replaced them? With the
greater marketization of China and the expansion of pri-
vate ownership, discourses constructed Chinese character-
istics as too broad to help guide accounting regulation.
Regulator 12 lamented: ‘‘The concept of Chinese character-
istics is too general, not speci?c.” Rather than rede?ning
Chinese characteristics to connote new, more suitable,
attributes as was the case previously, an alternative con-
cept was advanced: gouqing (Chinese circumstances):
We did not mention Chinese characteristics as often as
before, but we used a different term: Chinese gouqing
thus signalling that as China’s circumstances change
so does Chinese gouqing. We developed EAS which
re?ected Chinese guoqing.
[Regulator 12]
Chinese characteristics were deemed too restrictive and
a more expedient replacement was forged; ‘‘circum-
stances”. The lack of adequate training for Chinese accoun-
tants and the existence of many related party transactions
were considered part of Chinese gouqing, which also
included some aspiration to socialism and recognition of
the less developed Chinese markets. Gouqing was advanced
by these actors as underscoring dynamism in comparison
with what they construed as the out-dated Chinese
characteristics:
If we do not use something it is because of Chinese circum-
stances, and not because we do not want to use them. In
this sense, why do we stress Chinese characteristics?
[Regulator 5]
At the time of concluding our interviews, Chinese cir-
cumstances were just beginning to undergo a process of
elaboration; hence we can only comment very brie?y on
this:
What are Chinese circumstances? In the beginning, they
were ‘? ?? ? ’(meaning ?rst poor and second back-
ward’). Later, they meant having a large population and
a large geo area with rich resources, and farmers mak-
ing up the main population. In the beginning central
planning was Chinese circumstances. Later we devel-
oped a market economy which is also Chinese circum-
stances.
[Regulator 5]
Thus, Chinese circumstances underwent signi?cant
change: from being poor and backward and embracing
central planning in the beginning, through having rich nat-
ural resources and a large population, to developing a mar-
ket economy.
Whether the discourse of accounting regulation
invoked Chinese characteristics or Chinese special circum-
stances, one issue remained the same: most Chinese regu-
lators and academics were against full convergence to IAS/
IFRS for practical and cultural reasons:
No matter who it is, it is not possible to completely
Westernize.
[Regulator 12]
. . . (full) adoption of IFRS may send the wrong political
signal to people: How can we just copy from another
country and completely Westernize? In addition to
direct copying, what about the operationalization of
IFRS? Some of them may not suit Chinese circum-
stances.
[Regulator 5]
In the quest for China’s transformation into a modern
state, Chinese characteristics were rede?ned in ways that
facilitated China’s push towards this ideal, and during the
later stages Chinese characteristics were deemed to have
gone past their shelf-life and were replaced by the even
more malleable Chinese circumstances.
The debate on Chinese characteristics/circumstances
strongly impacted the 2000 accounting regulation. For
example, even though the regulation largely converged
with IAS the UAS was retained because as it was consid-
ered part of China’s accounting tradition (Li, 2001). In this
regulation, however, fair value was not adopted because
the Chinese market (considered an element of Chinese
characteristics) was not well developed. Further, the
Chinese regulation on related party transactions differed
from IAS in at least two ways (Regulators 3 & 6): ?rst,
unlike IAS, the Chinese regulation does not treat entities
under common control as related parties if they did not
conduct material transactions, and (2) China’s de?nition
of family members as related parties provides a broader
scope to re?ect China’s collectivistic culture.
Enrollment and mobilization
The development of the EAS went through four stages:
project initiation; ?eld work; drafting and feedback; and
revising and ?nalizing (Feng, 2001a). In 1999, the
Department of Accounting (MoF) surveyed the implemen-
tation of industry-based UASs and concluded that a UAS be
established to meet the needs of companies working in
multiple industries.
The MoF identi?ed target audiences for enrollment:
government departments, political leaders, CPC members,
partners in FIFs, practitioners, members of national and
regional accounting bodies, academics, and international
bodies such as the International Accounting Standards
Board, the World Bank, and the WTO. Interactions between
the MoF and the CSRC provide insight into the translation
process. According to Chinese law, the MoF is responsible
for producing accounting regulations, and the CSRC
enforces their implementation. In deliberating over the
form of EAS, regulators and of?cials considered two possi-
bilities: to produce detailed accounting standards or to
develop a UAS. The MoF opted for the latter, an approach
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 75
not favoured by the CSRC which considered issuing a UAS
‘‘a setback” for accounting reform, because for ‘‘?ve years
from 1992 to 1997 the MoF did not publish any detailed
standards” (Regulator 8). Both sides realized that they
needed ‘‘to coordinate” if the 2000 EAS were to emerge.
By using their right to in?uence the way companies report
their ?nancial statements, e.g., using accelerated deprecia-
tion rather than straight-line depreciation, the CSRC was
able to ‘‘create de facto accounting standards” (Regulator
8). The MoF published a standard on bad debt restructur-
ing which the CSRC argued was used by companies to
manipulate pro?ts, but ‘‘several years later after negotia-
tions between the MoF and the CSRC, we see the MoF
change the original requirement” so that companies had
to use book value rather than fair value (Regulator 8).
On 31 July 2000, the Department of Accounting pub-
lished ‘A Call for Feedback on Enterprise Accounting
System Reform’ in the China Finance and Economics news-
paper (MoF, 2000b). It was also sent to LFBs and central
ministries for comment on such issues as: (1) which trans-
actions require supplement guidance beyond an overarch-
ing UAS for larger and middle sized-?rms compared to
small sized-?rms? (2) Should the revenues from main
operations be presented separately from other revenues?
(3) Which assets require provision for impairment, and
should the provision be presented item by item or in total?
And (4) is there need to stipulate speci?c requirements on
notes to the accounts of different industries? A common
theme in the responses was the need to establish an over-
arching UAS (Feng, 2001a).
The Department of Accounting organized two seminars
in Beijing on the EAS Exposure Draft, with participants
from the CSRC, the Shanghai and Shenzhen Stock
Exchanges, CPA ?rms, academics, LFBs and relevant
departments in the MoF, and received feedback from for-
eign experts. Most participants called for establishing a
comprehensive UAS consistent with IAS, with a minority
preferring producing accounting standards. The MoF
adopted a ‘‘substance over form” principle which incorpo-
rated more IAS while using a UAS.
In 2000 the MoF promulgated the EAS amid considera-
tion of alternative options:
In designing the EAS, there was a debate about whether
to require FIFs to adopt EAS or the Accounting System
for Small Enterprises (ASSE). . . Although it was realised
that many FIFs would be classi?ed into small enter-
prises, it was agreed that they would be required to
adopt EAS because accounting and tax were not com-
pletely separate at the time. FIFs were already given
many more tax bene?ts, and if they were allowed to
adopt the ASSE, then they would be given further tax
privileges.
[Academic 4]
The MoF published EAS lectures (Department of
Accounting, 2001) and organized training sessions for
accountants and managers (e.g., Liu, 2001). Regulators,
LFB of?cials, and academics published articles on the
advantages and implementation of the EAS in newspapers,
websites, magazines and academic journals, and the EAS
was incorporated in university curricula. The MoF used
novel approaches, especially newspapers, to garner sup-
port for the EAS:
We [the Department of Accounting] used newspapers
to receive feedback from the broadest stakeholders:
we presented the issues using a public medium. This
approach has not been used before . . .In the adoption
of IFRS, comments were solicited openly and nationally.
The approach mobilized the whole society to partici-
pate in accounting regulation, rather than setting regu-
lations behind closed doors.
[Regulator 11]
This approach was considered more inclusive and far
reaching:
A public survey is different from collecting feedback
from LFBs and other ministries, from running seminars
and visiting companies. A public survey is more open
and more inclusive whereas these other more tradi-
tional means are much more selective; they are mostly
restricted to government. Not only could the new
approach raise awareness, it also could secure more
acceptance for the regulation.
[Regulator 12]
Government of?cials claimed that the EAS brings
Chinese accounting closer to IAS. Arguments propounding
the merits of the EAS compared to the 1992 regulation
were circulated by the regulators in order to enrol and
mobilize alliances in support of the EAS:
The EAS is superior to the 1992 Accounting System for
FIFs in many respects. It adopted the principle of sub-
stance over form, signi?cantly reduced the impact of
government on accounting, gave ?rms more autonomy
in setting accounting policies, and showed more consid-
eration of market risk. This can be seen in many new
requirements, such as permitting ?rms to provide for
impairment in eight types of assets, and giving ?rms
more scope in determining depreciation policy and
the rate of provision for bad debts. The EAS also
required segmental reporting which was absent in the
1992 Accounting System for FIFs. These improvements
were considered to appropriately re?ect the conditions
of the emerging market economy and the trend toward
international accounting convergence.
[Regulator 9]
The EAS merged accounting for SOEs and FIFs. One key
issue was the treatment of assets in SOEs compared to FIFs.
Local Government Of?cial 2 stated that ‘‘In a foreign
invested ?rm, if an asset is no longer useful, it would sim-
ply be disposed of.” In contrast, in SOEs ‘‘the previous man-
ager of the company would have made the decision to buy
the asset, but the successor could not dispose of it even if s/
he knew that the asset would not be useful, because the
asset is state-owned, and there are many rules relating to
when and under what conditions assets can or cannot be
written off.” In an IJV where the Chinese partner is an
SOE, the balance sheet includes assets with no future eco-
nomic bene?ts, prompting the foreign partner to ‘‘request
revaluation of the assets. Therefore, many IJVs that were
76 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
previously SOEs also believe there is a need to unify the
?nancial statements. Otherwise foreign partners will not
understand them” (Practitioner 27).
Government of?cials cautioned against the possibility
of FIFs exploiting the ?exibility of the EAS to manipulate
pro?ts and pay less taxes because of China’s weak legal
system:
Foreign invested ?rms welcome the eight provisions
[for asset impairment]. . . because on the one hand they
are consistent with international practice. On the other
hand, they could also use the eight provisions to manip-
ulate numbers. Indeed, more than half of our foreign
invested ?rms. . . could use regulations to avoid or
reduce tax. This is because in our country, many other
regulations are slow coming. This is an indirect tool
for tax evasion.
[Local Government Of?cial 4]
Regulator 10 echoed these concerns, claiming that FIFs
are willing to adopt EAS because ‘‘EAS is more conservative
and FIFs would like to show a loss or a smaller pro?t
because that would help avoid or reduce tax”. In contrast,
SOEs are more reluctant to adopt EAS because some SOEs
have a deferred expenses account which if expensed
according to EAS ‘‘would cause a huge loss and a signi?cant
reduction in state revenues.” Further, some practitioners
were concerned about the potential misuse of EAS because
making sound professional judgement is dif?cult:
EAS requires that accountants are well quali?ed and are
able to make judgment. . . Many accountants cannot. . .
make professional judgment.
[Practitioner 18]
Other FIFs emphasized the high workload caused by the
EAS:
The workload for adjusting ?nancial accounts for tax
regulations is high. For example, there are over 4000
?xed assets in [my] company and the depreciation cal-
culation of almost half of them needs to be adjusted for
tax purposes.
[Practitioner 34]
Practitioners complained that the preparation of con-
solidated ?nancial statements in older FIFs required
numerous adjustments from the 1992 system to the EAS
in areas such as: ‘‘income recognition, depreciation, and
asset impairment” (Practitioner 33). However,
Practitioner 32 stated that his company used tax rules for
?nancial accounting purposes and hence the impact of
the EAS was small: given his company’s quick turnover
stock impairment was minimal.
As in previous regulations, the process of promulgating
the EAS exhibited multiple translations. In the project of
China’s transformation to become part of the world order,
the debate on Chinese characteristics/circumstances
re?ected much of this heterogeneity and multiplicity. The
reception of the EAS also showed considerable diversity
in opinion, ranging from those who extolled its virtues to
those who felt it was too conservative, susceptible to
manipulation, and imposing a big burden on the profes-
sional judgement of accountants so, like the two previous
regulations, its problematization began with its
promulgation.
Discussion and conclusion
Drawing on ANT, this paper focused on how IAS were
translated into accounting regulations for FIFs in China,
and how ‘‘Chinese characteristics” as a discursive OPP rec-
onciled the tension between achieving greater conver-
gence to IAS and preserving Chinese cultural identity.
Law (1992: 386) notes that the object of doing ANT
research is to ‘‘explore and describe local processes of pat-
terning, social orchestration, ordering and resistance”, and
this paper has analyzed these processes. We conceptual-
ized accounting regulations as actants constructed in trials
of strength with the process of translation producing alli-
ances around shared interests and countering resistance
to reform in the context of accounting regulations for
FIFs in China. Each accounting regulation was the outcome
a complex interaction of power relations and multiple
translations that were undertaken to build and maintain
networks, as actors negotiated their heterogeneous inter-
ests to achieve some common purpose (Law, 1992, 1999;
Mol, 1999). The new regulations had diverse spokesper-
sons (Latour, 1987): politicians, regulators, practitioners
and academics who translated Chinese characteristics dif-
ferently, and ultimately replaced them with Chinese cir-
cumstances, to speed up the adaptation of IAS. The
networks were expanded and regenerated over time
(Latour, 2004), and made to appear stable through transla-
tion and transformation (Latour, 1999b; Latour, 2005). The
trials of strength were games in which elements of
accounting regulations were involved, with some ignored
(e.g., all elements of conservatism in the 1985 regulation)
and others emerging (e.g., 3% provision for bad debts in
the 1992 regulation and the full adoption of conservatism
in the 2000 EAS).
The MoF was the formal institution responsible for
Chinese accounting regulations, and a medium through
which ideas for accounting reform were developed and
promoted. Other actors played key roles in the process of
translation, including the ASC and regional accounting
societies, LFBs, academics, FIFs accountants, foreign inves-
tors, and later the CSRC and the Chinese Accounting
Standards Committee. Actors constructed accounts of the
problems (Callon, 1986) with Chinese accounting, charac-
terized its information as unintelligible and uninformative,
provided arguments for producing new accounting regula-
tions for FIFs closer to IAS/IFRS but consistent with an
expedient interpretation of Chinese characteristics, and
stabilized networks by organizing seminars and confer-
ences, publishing articles and textbooks, mobilizing media
coverage, and providing training courses to target
audiences.
The context of our study placed limits on the extent of
heterogeneity and con?ict in networks: China is ruled by
a single party and can readily mobilize immense resources.
For example, the MoF mobilized national TV and newspa-
pers to disseminate accounting regulations, organized con-
ferences and workshops, arranged training programs, and
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 77
in?uenced university curricula. Further, the CPC controls
the National People’s Congress which promulgates new
accounting and auditing laws, the State Council which
issues regulations, the MoF, the CSRC, and other ministries
engaged in accounting regulation. The role of government
actors in the translation process has had a major impact
on accounting regulation. Emphasizing the power of the
political in organizations in accounting research is not
new. However, in this study our focus has been on state
politics and how this impacted the translation of Chinese
characteristics. Our emphasis on state politics connects
with the sparse literature that explores the relationship
between accounting and the state (e.g. Puxty, Willmott,
Cooper, & Lowe, 1987; Miller, 1990). We have shown
how a government with a single political party can shape
the course of accounting regulation, and how it manipu-
lates what is construed as limits (i.e., Chinese characteris-
tics) on the exercise of such power. In an earlier quote,
Regulator 6 stated ‘‘In China, if the central government
decided to do something, then people will follow”. While
this quote points to of?cial power, we have noted how dif-
ferent agents were pushing in different directions in the
debate on accounting regulation for FIFs, thus demonstrat-
ing that the process of translation does not fully accede to
such power.
Each accounting regulation was a partial trial and a step
towards getting closer to IAS. Chinese characteristics as a
malleable discursive OPP underpinned this gradual adapta-
tion of IAS and the orchestration of common interests, by
demonstrating capacity for progressive liberal interpreta-
tion over time. While anti-reformers invoked strict inter-
pretations of Chinese characteristics to forestall reform,
reformers gradually interpreted Chinese characteristics
more liberally to facilitate reform. For some, Chinese char-
acteristics meant everything deemed unique to China; for
others, they re?ected the needs of greater marketization;
for still others, they signi?ed the extent of maturity of
investors and ?nancial intermediaries; and ?nally they
were construed as a political slogan. Despite their contin-
gency as a signi?er capable of assuming alternative trans-
lations (Z
?
iz?ek, 1989), no credible debate on accounting
regulation for FIFs could avoid engaging with Chinese char-
acteristics, until their replacement with Chinese circum-
stances. As a discursive OPP, Chinese characteristics were
placed between global networks (international accounting
?rms, the International Accounting Standards Board, the
World Bank, the WTO, foreign venture capitalists) and local
networks (Chinese institutions engaged in accounting reg-
ulation), making it possible for local networks to attain
their identity and retain some independence (Bijker &
Law, 1994).
Political acumen and timing are interrelated qualities
that actors engaged in the process of translation exercise
in order to build stable networks and achieve their aims.
Political intervention invested in knowledge exhibiting
these qualities was deployed to adopt Western ideas
deemed by critics inconsistent with Chinese characteris-
tics. Acumen, or the gift of sound judgement, entailed the
Vice Minister of Finance being able to grasp several issues:
the political landscape; regulators’ desire to expedite
accounting reform for FIFs; resistance to change;
regulators need for political sanction to engineer account-
ing reforms, and how terms sought alien to the Chinese
characteristics, such as ‘‘capital”, can be made acceptable
vocabulary. But drawing on such knowledge can back?re
if timing is inappropriate. The Vice-Minister of Finance
had to judge his timing carefully so that his intervention
can achieve its desired outcome. Similarly, reformers had
to wait for the ‘‘right time” when it became possible to
replace Chinese characteristics with Chinese circum-
stances, before full conservatism was adopted in 2000.
The import of such political acumen and sense of timing
for ANT is thus in terms of their performative power: the
moments of translation are rendered more effective via
political intervention that displays both acumen and
timing.
In China’s quest to become part of the modern ‘‘world
order”, international bodies expected that they provide
the lead with China passively adopting the ideals of
advanced capitalism (see Mitchell, 2002: 223, for a similar
point about Egypt). In contrast, China embarked on a pro-
cess of translation, adaptation and customization of IAS/
IFRS. Chinese characteristics helped to mediate this trans-
formation by being the channel via which elements of
the West were adapted to China. There was consensus
against whole-mass importation of Western accounting
as reform was guarded, gradual and selective; a pragmatic
approach to mark China’s transformation. Far from the
‘‘desire to belong to the ‘West’ reported by a Russian audit
?rm in its drive to adopt International Auditing Standards”
(Mennicken, 2008: 388), the attitude of Chinese actors was
much more muted: IAS/IFRS was more like a necessary
price to pay for China’s transformation.
The intervention of Chinese characteristics as a discur-
sive OPP in the development of accounting regulations for
FIFs helped articulate the process of translation in the
broader sense advocated by Djelic (2008). She (ibid: 13)
argues that the term ‘‘translation” should be used in three
related ways: the construction of an identi?able, attractive
idea, building upon local experience and/or transnational
fora; mediation; and local adaptation and transformation.
Chinese characteristics were invoked to specify which
parts of IAS were acceptable and which were not at a par-
ticular juncture in time: they contributed to the construc-
tion of each regulation as an expression of local
experience, supplemented with adapted selections of IAS,
to make it attractive to the diverse actors involved in the
regulation debate; they impacted translation as a carrier
or media through which Western accounting travelled to
China; and they set the boundaries within which local
adaptation and transformation of Western accounting took
place.
The conceptualization of Chinese characteristics as a
contingent and malleable discursive OPP, susceptible to
political manipulation has import for ANT. These are not
negative qualities; rather they are the very qualities that
endow discursive OPPs with utility and signi?cance. As a
malleable signi?er, Chinese characteristics demonstrated
a capacity for adaptation, and an ability to remain central
to acts of translation and network building. Further, discur-
sive OPPs can open up spaces in which irreconcilable ends
can be made reconcilable: Chinese characteristics was the
78 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
means through which regulators introduced increasing
elements of Western accounting while seemingly preserv-
ing Chinese uniqueness. Malleable discursive OPPs gain
longevity by being a key weapon in the arsenal of both
those promoting and those opposing change, and by oper-
ating as the glue that holds networks and alliances
together, giving them the appearance of permanence and
stability. Chinese characteristics helped de?ne the con-
tours of the discursive ?eld of accounting regulation.
This depiction of the role of Chinese characteristics in
China’s experience has parallels in the critical literature
on diffusion (Djelic (2008), which focuses upon the
increasing similarity of forms and ideas across borders,
the interactions between objects, and the features of the
constellations where diffusion occurs. It underscores the
active process of translation that underpins the travel of
ideas (Czarniawska & Sevón, 1996), where translators edit
innovations (Sahlin-Andersson, 1996), add to, and change
elements of, the original object through hybridization
(Djelic, 1998), adaptation and interpretation (Westney,
1987), emphasizing that what travels is not always the
same (Czarniawska & Sevón, 2005). Thus, diffusion is both
mediation and construction, and it underscores the impor-
tance of actors and networks in the process of translation
(Djelic, 2004).
Also, under ANT a translation process transforms the
original idea/object, leaving out some components and
adding others (Callon, Lascoumes, & Barthe, 2009).
Chinese characteristics as a discursive OPP operated as a
conceptual gate-keeper through which Western account-
ing ideas travelled gradually to China in three accounting
regulations. In these travels, Western accounting ideas
interacted with Chinese characteristics: these ideas were
reinterpreted, adapted and changed as they arrived in
China. Our theorization of Chinese characteristics as a dis-
cursive OPP adds to this by emphasizing that the interac-
tion between ideas/objects and discursive OPPs is a
recursive process in which not only OPPs impact objects
but also objects reshape OPPs. Elements of Western
accounting assessed as incompatible with Chinese charac-
teristics remained part of the discursive ?eld of accounting
regulation. They contributed to shifts in the interpretation
of Chinese characteristics over time that rendered them
more accommodating to some of these elements in later
years. ANT should thus conceptualize the travel of objects
through OPPs as a recursive process in which both OPPs
and objects are mutually constituted. This theorization
helps explain how change can be engineered. To avoid
making a complete break with the past, elements of
Chinese accounting were retained and combined with
translations and editing of new elements of Western
accounting. The West as the ‘Other’ was rendered a subject
of translation and editing before it could arrive in China.
But the ‘Other’ also reshaped the meaning of Chinese char-
acteristics. Through ongoing change, a discursive OPP
writes itself in time. The emerging accounting regulations
are thus the outcome of interactions between objects and
discursive OPPs through which both objects and OPPs are
continually transformed. This also contributes to the liter-
ature on diffusion in showing how the translation process
is mediated by the development of malleable discursive
OPPs.
While state transformation towards the modern ‘‘world
order” is typically assessed in terms of the extent of same-
ness between a country undergoing transformation and
advanced capitalist countries, our paper has demonstrated
that the intervention of discursive OPPs places limits on
how much sameness can be achieved. As Mitchell (2002:
245) acknowledges, the logic of sameness ‘‘does not mean
that there are no other factors at work. The narrative gives
a place to all kinds of noncapitalist features.” Chinese char-
acteristics are an example of such ‘‘noncapitalist features”,
even though their later interpretations included some cap-
italist features, and we have shown how they impacted
China’s transition. In commenting on noncapitalist features
Mitchell (ibid) argues that ‘‘The narrative [of capitalism]
marks them as nonmarket factors meaning that it de?nes
their identity and signi?cance in terms of what they are
not. Their role is that of negative elements. They stand out-
side the principle of the market, as external, nondynamic,
generally residual, mostly local factors.” Our theorization
of Chinese characteristics as a discursive OPP extends
Mitchell’s argument, for we have shown that while discur-
sive OPPs emerged as noncapitalist, local factors, they
became malleable, dynamic, and later de?nable with refer-
ence to the market, and they carved out spaces where the
local maintained its identity and independence while
engaging the global.
Appendix A
List of abbreviations
AICPA – American Institute of Certi?ed Public
Accountants
ANT – actor network theory
ASC – Accounting Society of China
CICPA – China Institute of Certi?ed Public Accountants
CPA - Certi?ed Public Accountants
CPC – Communist Party of China
CSRC – China Securities Regulatory Commission
EAS – Enterprise Accounting System
EFRR - Enterprise Financial Reporting Regulation
FDI – foreign direct investment
FIFs – foreign invested ?rms
GASBE - General Accounting Standard for Business
Enterprises
IAS – International Accounting Standards
IFRS - International Financial Reporting Standards
IJV – international joint-ventures
LFB – local ?nance bureau
LIFO – last in ?rst out
MoF – Ministry of Finance, China
OPP – obligatory passage point
PBC – People’s Bank of China
SEZ – Special economic zone
SOE – State-owned enterprise
UAS – uniform accounting system
WTO – World Trade Organization
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 79
Appendix B
Schedule of Interviewees
Interviewee Company Experience Date of
Interview
Language Taped or
Notes
1. Regulator 1 Ministry A Retired. Involved in accounting regulation from
the 1960s to the early 1990s
2004 Chinese Notes
2. Regulator 2 Ministry A Retired. Involved in accounting regulation from
the 1960s to the early 1990s
2004, 2012 Chinese Notes
3. Regulator 3 Accounting
Professional Body
A
Involved in accounting regulation from the 1980s
to present and auditing regulation from the 1990s
to present
2004, 2006,
2010, 2013
English Taped
4. Regulator 4 Government
Agency A
Involved in accounting regulation from the 1980s
to the late 1990s
2004,2010 Chinese Notes
5. Regulator 5 Accounting
Professional Body
B
Involved in accounting regulation from the 1980s
to the early 1990s
2004,2006,
2012, 2013,
2014
English Taped
6. Regulator 6 Ministry A Involved in accounting regulation from the 1980s
to present
2004,2006,
2013
Chinese Taped
7. Regulator 7 Government
Agency B
Involved in accounting regulation in the 1980s and
early 1990s and auditing regulation in the 1990s
2006 Chinese Taped
8. Regulator 8 Ministry B Involved in accounting regulation from the late
1990s
2006, 2010 English Taped
9. Regulator 9 Ministry A Involved in accounting regulation from the early
1990s
2009 Chinese Taped
10. Regulator 10 Ministry A Involved in accounting regulation from the middle
1990s
2009 Chinese Taped
11. Regulator 11 Ministry A Involved in accounting regulation from the 1980s
to present
2010 Chinese Taped
12. Regulator 12 Ministry A Involved in accounting regulation since the late
1990s
2010, 2012,
2013, 2014
Chinese Notes/
Taped
13. Local
Government
Of?cial 1
Municipal
Government A
Accounting teacher for eight years. Practicing CPA
for three years. Involved in implementing
accounting regulations and setting local
accounting regulations since 1992
2004,2006 Chinese Taped
14. Local
Government
Of?cial 2
Municipal
Government B
Involved in implementing accounting regulations
and setting local accounting regulations since the
early 1980s
2004,2006 Chinese Taped
15. Local government
Of?cial 3
Local Municipal
Government B
Worked in the Finance Bureau from 1971 to 1994,
responsible for FIF from the early 1980s to 1994;
worked in the State Assets Management Bureau
from 1994
2006 Chinese Taped
16. Local government
Of?cial 4
Municipal
Government C
Worked in the Finance Bureau for more than 20
years as a senior accounting staff
2006 Chinese Taped
17. Academic 1 Research Institute
at Ministry A
Research Fellow 2004 Chinese Written
response
18. Academic 2 University A Full Professor, specialising in accounting for
foreign joint ventures
2005,2006 Chinese
and
English
Taped
19. Academic 3 University A Full Professor, leading ?nancial accounting expert,
involved in accounting standards setting from the
late 1980s
2005,2006 Chinese Taped
20. Academic 4 University B Full Professor, member of the Chinese Accounting
Standards Committee
2009 Chinese Taped
21. Practitioner 1 IJV(US) A (Beijing) Worked for Chinese-Foreign Joint-Ventures since
1998. Prior to that, CPA for a Big Five for ?ve years.
Currently Finance Director
2004 English Taped
22. Practitioners 2, 3,
and 4
IJV (US) B (Beijing) Currently Finance Director, Internal Auditor and
Finance Manager respectively
2004 English
and
Chinese
Taped
23. Practitioner 5 IJV (HK) C
(Beijing)
A former State Auditor. Currently Deputy Financial
Controller
2004 Chinese Taped
24. Practitioner 6 IJV (Germany) D Currently Financial Controller 2004 Chinese Notes
80 M. Ezzamel, J.Z. Xiao / Accounting, Organizations and Society 44 (2015) 60–84
Appendix B (continued)
Interviewee Company Experience Date of
Interview
Language Taped or
Notes
(Beijing)
25. Practitioners 7
and 8
Wholly Foreign-
owned Firm A
(HK) (Xiamen)
Currently Accounting Manager and Accountant
respectively
2004 Chinese Taped
26. Practitioners 9
and 10
IJV (US) E
(Xiamen)
P9 is currently responsible for ?nance as Special
Assistant to CEO. P10 is Head of the Finance
Department
2004 Chinese Taped
27. Practitioners 11,
12, 13, and 14
IJV (Taiwan &
Canada) F
(Xiamen)
P11 is Accounting and Personnel Of?cer for
subsidiary 1. P12 is an Accounting Manager for
Subsidiary 2. P13 is an Accounting Of?cer of the
group. P14 is accounting manager for Subsidiary 3.
The group is a private company. Each subsidiary is
a Chinese-foreign joint-venture
2004 Chinese Notes
28. Practitioner 15 IJV (HK) G
(Xiamen)
Currently Deputy CEO responsible for ?nance 2004 Chinese Taped
29. Practitioner 16 IJV (Netherlands)
H (Shenzhen)
Former state auditor. Formerly ?nance director
and currently Deputy CEO responsible for ?nance
2004,2006 Chinese Taped
30. Practitioner 17 IJV (HK) I
(Shenzhen)
Currently Head of Finance Director 2004 Chinese Taped
31. Practitioners
18-19
IJV (S. Korea) J
(Shenzhen)
Previously an Accounting Regulator at Ministry A,
P18 is currently Deputy CEO responsible for
external relations and ?nance. P19 is Head of
Finance Department
2004 Chinese Taped
32. Practitioners
20-21
IJV(HK) K
(Shenzhen)
P20 is currently Head of Accounting Department.
P21 is Accountant
2004 Chinese Taped
33. Practitioner 22 IJV (HK) Foreign
Partner A
Financial Controller 2005 English Taped
34. Practitioner 23 Wholly Foreign
Owned Firm (HK)
A (Shenzhen)
Owner and CEO 2005 English Taped
35. Practitioner 24 Wholly-Foreign-
Owned Firm (HK)
B (Beijing)
Owner and executive 2005 English Taped
36. Practitioner 25 IJV (HK) Foreign
Partner B
Financial Controller. Based in Hong Kong 2005 English Taped
37. Practitioner 26 Auditor of IJV (HK)
A
Partner of an auditing ?rm 2005 English Taped
38. Practitioner 27 Wholly-Foreign-
Owned Firm (HK)
C (Dongguan)
Owner and executive 2005 English Taped
39. Practitioner 28 IJV (UK) L
(Shanghai)
Finance Director 2005 Chinese Taped
40. Practitioner 29 IJV (UK) M
(Shanghai)
Finance Director and Deputy General Manager 2005 Chinese Taped
41. Practitioner 30 IJV (UK) N 31
(Shenzhen)
CEO 2005 Chinese Taped
42. Practitioner 31 Wholly-foreign-
owned Firm (USA)
(Tianjin)
Financial Controller 2009 Chinese
and
English
Taped
43. Practitioner 32 Wholly-foreign-
owned Firm
(Japan) (Tianjin)
Deputy Head of Finance Department 2009 Chinese
and
English
Taped
44. Practitioner 33 Wholly-foreign-
owned Firm
(Germany)
(Tianjin)
Deputy General Manager (Finance/Auditing/
Investment)
2009 Chinese
and
English
Taped
45. Practitioner 34 Wholly-foreign-
owned Firm
(South Korea)
(Tianjin)
Head of Finance Department 2009 Chinese
and
English
Taped
M. Ezzamel, J.Z. Xiao/ Accounting, Organizations and Society 44 (2015) 60–84 81
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