KPMG First Big4 Firm to Establish Local Chinese Partnership

By Michael Foster, Big4.com Blogger

China has approved KPMG’s plan to create a General Partnership in China. The new firm will be a step beyond the joint ventures that accounting firms have been establishing in the country with a local company, and it is expected to expand the firm’s operations in the Chinese economy. It is the first Big4 firm to get approval to create a local partnership.

KPMG had announced its plans to invest around $1.5 million in its Chinese operations by establishing a new firm in China. Now that those plans are approved, the firm will be free to operate without a local partner.

The Big4 firms have traditionally had to compete for contracts with the hundreds of local accounting firms that operate in China, yet opportunities for expansion in the company remain robust. The Chinese Institute of Certified Public Accountants said that local firms had experienced 38 per cent revenue growth in June 2011, when compared to the previous year. At the same time, the Big4 firms had seen a 25 per cent decline in Chinese market share, according to the CICPA.

CICPA also encouraged Chinese firms to “grow bigger and stronger” by expanding overseas. KPMG is taking the first step in the opposite direction in the hope that it can expand its Chinese presence.

At the same time, China’s Finance Ministry has requested that Chinese companies give less business to foreign companies. The position may be a response to faltering economic conditions in China, where a slowdown in manufacturing and a crash in real estate value has caused worries that China’s infamously explosive growth is endangered.

KPMG has successfully avoided the Finance Ministry’s appeal to Chinese patriotism by having 15 of its partners certified as being local. Many of those partners have Hong Kong qualifications.

Ernst & Young has submitted its own application to establish a local partnership. That plan is currently under review.