By Michael Foster, Big4.com Blogger

New Chinese regulations that would require accountants with Chinese qualifications to operate in the country are challenging the Big4 firms.

Greater regulatory pressure in Europe has already challenged the Big4 firms, and new regulations in China would limit their expansion potential even further. Likewise, some experts see the Big4 firms as an essential part to China’s economic development. According to visiting professor of accounting at Peking University Paul Gillis, “the Big Four play a critical role in the integrity of financial markets, it’s essential they have the right to practice in China,” according to Reuters.

Twenty years ago, KPMG, Deloitte, and Ernst & Young signed a joint venture agreement that allowed them to practice in China, and the agreement is set to expire later in 2012. PwC’s agreement expires in 2017.

The Ministry of Finance in China is looking to renegotiate their agreements with the firms that would include a requirement that all accountants earn Chinese qualifications to practice in the country. This would give domestic accountants a strong advantage, and it would force foreign firms to alter their practices more to the Chinese style. “The Chinese authorities have indicated for some time that the four will have to convert into the same mode of practice as local firms when the joint venture terms end,” according to Winnie Cheung, chief executive of the Hong Kong Institute of Certified Public Accountants.

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