Evolving trends in China's accounting landscapeFrom top accounting technologies to digital currencies, Liu Qin, professor and vice-president of the Shanghai National Accounting Institute, reveals recent trends among China's accounting practitioners.
Shanghai National Accounting Institute (SNAI), established in 2000 as an accounting education and research institute affiliated with China’s Ministry of Finance, has its eyes set on training and upskilling China’s accounting professionals. It also advises on national accounting policymaking.
Its activities range from short-term courses for senior accounting and finance executives and online seminars for accounting practitioners to full-fledged postgraduate programmes in accounting. Its Belt and Road Financial Development Research Center is researching accounting practice and standards to lay the tracks for Chinese companies’ continued expansion overseas.
Liu Qin, professor and vice-president of SNAI, spoke to FM magazine recently on the results of SNAI’s 2020 survey (in Chinese) on top technologies impacting accounting practitioners in China, his thoughts on evergreen skills for accountants, and the possible effects of China’s central bank digital currency on finance teams.
Could you share some highlights from SNAI’s survey on the top accounting technologies in China this year?
Liu: In the financial services industry, there’s fintech. In accounting, we are increasingly thinking about “accountech” (technologies for accounting). What are they exactly? That’s what we needed to find out and have been doing so since 2017 when we first conducted this annual survey.
We noticed that the AICPA has done such surveys in the past, and we often look at the survey results in our classes. But technologies that China’s accountants care about may be different, and that’s why it is necessary for us to conduct similar surveys for China. These annual survey results serve as a signpost for changes in the country’s accounting industry.
The top ten technologies for 2020 voted by more than 5,300 participants are cloud accounting, e-invoicing, big data technology (data management, analytics), digital files, RPA (robotic process automation), next generation ERP (enterprise resource planning) systems, blockchain, mobile payments, data mining, and online audit tools.
How are this year’s results different from past years’ results?
Liu: Cloud accounting and e-invoicing have been in the first and second spot for the past three years. In previous years, RPA was not even in the top ten, but this year, it entered the top five list. This shows how RPA has grown in importance and in adoption rate.
A reason that cloud accounting and e-invoicing are major technologies in China’s accounting industry is because many shared service centres, which these two technologies play a central role in, are being set up by many Chinese companies.
Due to technological changes, shared service centres became a huge trend after 2010. Today, most large enterprises in China have their own shared service centres. Some would have run [centres] for three to four years, and the earlier ones would have run them for seven to eight years. The introduction of shared service centres not only enabled enterprises to save on headcount, but it also started an evolution in management models.
SNAI also introduced a new category this year to find out about emerging technologies in accounting. Tell us more about that.
Liu: A new category we introduced this year is the top emerging technologies where blockchain invoicing, digital currency, internet of things automation, 5G, and distributed ledger were voted as the top five by leading accounting experts in China.
These are technologies that have yet to be adopted widely but are expected to gain greater importance in the next three to five years. And if you look at these emerging technologies, three out of the top five are related to blockchain technology. That just tells us that accounting experts consider blockchain as a major game changer in China in the coming few years.
With such rapid technological changes in accounting practice, how has accounting education in China kept up?
Liu: From doctoral to bachelor’s degrees in accounting, there are almost a million graduates every year. China’s tertiary accounting education has been undergoing changes the past two years. You will notice universities now are offering courses relating to accounting and big data or accounting and IT.
In our master’s programme, we also have incorporated big data as a major component of the curriculum.
In continuing education such as CPDs and trainings on accounting standards, the current curriculum is actually not keeping up with changes because accounting standards and the business environment are moving too rapidly. Most universities and institutions have continuing education courses to help accounting professionals keep up with changes, but some are still unable to offer such curriculums.
We’re a bit different in that we’re focused on application. So we use case studies. We look at frameworks in class and then look at case studies together to apply these frameworks. Because the truth is, producing a comprehensive curriculum that takes into account the many changes happening is a very difficult task.
The technology tools used in accounting are changing rapidly. Are there evergreen skills that accountants can hold on to amidst this flurry of change?
Liu: This is a concern for many, isn’t it? Will we lose jobs in the accounting profession? We’ve analysed this, and when it comes to management accounting work, we think the extent of automation is still limited. The conversation for a lot of management accountants in China is mostly focused on how the transformation in this digital era will look like for us; what will an accountant do in the future?
When it comes to skills for the future, I would like to suggest four: analytical skills, innovation, systems thinking, and bottom-line thinking.
Data analysis skills will not become irrelevant. Accounting is the language of business. It’s also a way to manage and provide information. Data analysis is an extremely important skill in this context. Looking at shared service centres’ future trend, they will develop to become big data centres. When that happens, what do accountants do? They will analyse the data. This will be core to an accountant’s skillset, and it doesn’t go away. It’s just that the tools used will be different. In the past, it may be Excel; in the future, it could be an AI tool or a data mining tool to conduct analysis.
The second skill is innovation. Why is this important? Many industries are undergoing changes, revolutionary changes, that for some are destroying their own business models. Look at banks. Many of their counter staff have been reduced. If such employees are no longer available at banks, they need to consider other methods to meet customers’ needs. In this environment, an important skill for accountants is to innovate continuously and to introduce reforms. For instance, in our classes, students are taught on the latest technologies, and they are asked to find use cases for them. If you can find a suitable use case, then you’re an innovator and you will survive and stay in the game longer than others.
The third skill is systems thinking. The most traditional view of an accountant is one who records numbers, a bean counter. But the reality is, accountants today have to know the business and business strategy. If you don’t understand the company’s direction, if you don’t understand its value chain, its supplier chain, you can’t be a good accountant. To understand all these, you need systems thinking, a macro view, and see the company as a whole. This will help accountants see what roles they are playing and what roles they should play in the company. If you’re a soldier and you don’t even know what the chief commander is thinking, how can you do your job well? It will be an automatic defeat.
The last is bottom-line thinking. Accounting can lead to higher economic efficiencies and increase quality of life. But if accounting is managed wrongly, it can lead to falsified accounts and fraud. The former Chinese premier Zhu Rongji gave our institute a motto: “Do not falsify accounts”. We’ve taken this to heart and made it a core aspect of our accounting education.
If we fail to prepare accounting reports according to what’s happening in reality and according to accounting standards, it will lead to inaccurate information. Accountants are managers and providers of information. If the information provided is incorrect, it can mislead investors or strategic leaders in an organisation. That’s why an accountant needs to have these ethical bottom lines that they will not cross. Not tampering with the books is one example of this, and it’s a core skill of a good accountant.
The People’s Bank of China is testing its central bank digital currency in various cities around the country. How do you think the adoption of digital currencies will alter accountants’ work?
Liu: How the digital yuan will continue to develop is still unclear since testing is still ongoing. But even before this digital currency, the use of cash for payments is already extremely low because of mobile payment platforms such as Alipay and WeChat Pay. To consumers, digital currencies would be just another Alipay or WeChat Pay. So it would not be too big of a difference for them. The difference, however, could be in other areas such as data encryption and privacy terms. For finance professionals, it will probably be just another digital payment channel.
The bigger challenge from noncash digital payments is their effect on accountants’ work. As far I know, a lot of accountants are still trying to figure this out. In the past, we accepted cash and these payments go through the bank or, if it’s a postal order, through the post office. When third-party payment platforms emerged, finance teams had to manage so many more channels of incoming payments. If an intelligent system is not in place to support this change, it would be a dreadful job managing these digital payment channels.
For instance, at our institute, we provide online training to about 700,000 people every year. The training fees are usually online, and the amount is small, say about CNY 100 ($15). In the past, they would pay this through the bank. Now they use Alipay or WeChat Pay. We have to use a different method to figure out how a person paid and for which training, to reconcile the numbers.
This challenge is huge. If I don’t have automation or new systems, then this job will be very labour-intensive. So new payment methods will require a new system to support them.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.