Tag Archives: PricewaterhouseCoopers

China’s Chemicals Industry Gets Special

Another China-is-the-world’s-largest-market is in prospect. This time it is for chemicals, driven by the growth of industries as varied as construction, car making, electronics and alternative energy. Next year is the forecast tipping point. But the key shift is from commodity to specialty chemicals, according to a new briefing from Pricewaterhouse Coopers, as demand increases for fine chemicals, surface treatments, advanced polymers, pigments and additives.

Four of the strategic emerging industries identified in the current five year plan are closely tied to the chemicals industry–new materials, alternative energy, green vehicles, and sustainability and energy conservation technologies. This should magnify the trend. Datamonitor forecasts that  the Chinese specialty chemicals market will be worth $81.6 billion by the end of the current five year plan in 2014, up 44% from 2009’s level. The challenge for existing multinationals in the industry will be that the inevitable rising quality of domestic specialty chemicals producers will squeeze the margins of rivals that lack advanced technologies and manufacturing strength.

Leave a comment

Filed under Industry

New Rules For M&A In China, The Podcast

A quick update to a post from May about a paper from PricewaterhouseCoopers, the business advisory services firm, on the changing trends in M&A in China. We have now somewhat belatedly come across a 12-minute podcast version.

Three members of the firm, Alan Chu, China Business Services Leader in the U.S., Curt Moldenhauer, Transaction Services partner in Shanghai and Malcolm MacDonald, Transaction Services partner in Beijing, discuss the impact of the new five-year plan on M&A and the prospects for domestic, inbound and outbound deals as a result of Chinese firms having a combination of access to a fast growing domestic market and cheap capital. No great surprises, to our minds, but the trio rounds up the trends and issues into a coherent overview.

Leave a comment

Filed under Economy, Markets

Improving China’s Accounting Standards: Progress Report

Financial and accounting standards in China need to converge with global practices as the country becomes increasingly integrated with the world economy. Regulatory agencies are working on just that but there is mighty long way to go, both in bringing China’s accounting standards more in line with international financial reporting standards and with management practices for internal company controls and financial reporting. China’s version of generally accepted accounting principles (GAAP, but not the same as U.S. GAAP) is being replaced by a new code, known as CAS, based on international principle-based standards, and a version of America’s Sarbanes-Oxley internal financial controls for companies, known as C-Sox, being introduced.

The work, a massive undertaking, was started formally with new accounting standards legislation in 2007, although that, in the nature of Chinese legislation, was mostly an outline of the new system. A new report, Opportunities to improve financial reporting and internal controls in China CAS and C-SOX, by the management consultancy PricewaterhouseCoopers reviews progress so far on both fronts, with a look at the impact on the car industry in particular.

China’s old accounting rules and practices were a hangover from the days of a centrally planned economy, not fit for the country’s more mixed market economy and certainly not useful as a management tool for corporations involved in world trade and international capital markets. And, as we have seen with a succession of U.S. listed Chinese companies, they have embedded bad habits, such as not having to account for debt, that makes accounting fraud too easily become second nature.

One important caveat from the PwC report:

It is…important to recognize that these actions taken by the Chinese government are not intended to provide immediate and complete alignment with their equivalent global standards. Rather, they should be viewed as steps by the Chinese government to gradually establish a high quality financial management infrastructure that can support its rapidly growing economy—with consideration of its own unique set of circumstances.

Footnote: The U.S. Securities and Exchange Commission is investigating some accounting firms over their audits of Chinese companies whose shares trade in the U.S., and the inquiry is expected to lead to enforcement cases, the Wall Street Journal reports. Since February, about 40 Chinese companies have either acknowledged accounting problems or seen the SEC or U.S. exchanges halt trading in their stocks because of accounting questions.

Leave a comment

Filed under Industry

New Rules For M&A In China?

The marketplace for M&A deals in China is changing, with many western companies fearing a less hospitable reception as a result of new tax rules and regulations. PricewaterhouseCoopers, an international management consultancy, has a new paper in its 10 Minutes series arguing that the change is far broader than that as China’s priorities shift from acquiring capital to accelerating structural reforms, a change that “calls for a fundamental shift in deal-making strategy” on the part of foreign companies.

Its key points:

  • Inbound and outbound M&A in China is booming, as Chinese industries consolidate domestically and expand globally.
  • Foreign investors are entering or expanding in China for the China market instead of just manufacturing in China for export markets.
  • As a result, they are reassessing what Chinese partners bring to the table and cautiously exploring alternatives to wholly foreign-owned enterprises.
  • Private equity has emerged as an important provider of growth capital.
  • Some investors recognize that new regulations affecting M&A may be creating short-term concern, but the long-term trend is toward greater clarity in a maturing system.

Those highlights read a bit penny plain, and the underlying piece adds some color, but do they fit with your experience?

1 Comment

Filed under Markets