Year of the Accountant? Shanghai Is Booming, but as the Broader Chinese Economy Stumbles a More Open Business Culture Could Prove Essential for Future Growth. Victor Smart Explains Why Management Accountancy Has a Vital Role
Smart, Victor, Financial Management (UK)
I have seen the future and it works. That's the sense that the bustle and runaway consumerism of downtown Shanghai gives a visiting foreigner. Most vestiges of the past--the old lanes and quaint residential districts--have been obliterated. Today its streets are lined with chic boutiques, luxury car showrooms and gleaming glass-and-steel towers.
Shanghai isn't typical of China, of course. Further south, where many export factories are clustered, the sharp economic downturn is causing firms to lay off workers. Discontent is rising as years of double-digit growth shudder to a halt. In only a few months business confidence has taken a serious knock. Bad news trickles in from one company after another.
But the jolt that Shanghai's eye-popping prosperity gives visitors illustrates how far China has progressed towards overtaking its economic rivals. As the "rich" world looks to China to help provide global economic stability in turbulent times, one think-tank in Washington DC has predicted 2025 as the year when US economic supremacy will end.
That said, China's route to success has been anything but smooth. The country is having to cope with that most disruptive of market phenomena: a bursting speculative bubble. And a lot of ordinary people have invested in property and equities--there aren't many other assets available.
Furthermore, regulatory and other standards that are taken for granted in the West haven't existed in the PRC. The breakneck race to develop has incurred heavy environmental and other costs. And the standards of governance, transparency and honesty in most Chinese companies are still far short of those aimed for by listed companies in the West. Intellectual property rights, for example, have been a joke. As I wandered the streets of Shanghai, I saw many street vendors selling knock-off western management books.
So is this about to change as the nation adopts a more recognisable managerial culture, and ethical and other standards? Optimists say an emphatic yes. The PRC is promising to converge with international accounting standards and last summer (like India) it adopted anti-trust rules based on those of the European Union. Some observers believe that the country is poised to impose regulatory regimes covering the full gamut of corporate life, which will force up standards. Over the next ten to 15 years the corporate environment could become far more organised as companies accept that they are bound by the rights of, and their responsibilities to, stakeholders ranging from employees to environmental campaigners.
Leadership from Beijing will be crucial, but the problems are deeply rooted. An authoritarian culture is embedded at the core of most Chinese enterprises of any size.
Jennifer Zhao ACMA, a finance manager at Shell Bitumen, recently moved into its new offices in the Chao Yang district of Beijing. The previous tenant was a Chinese firm and the layout is a warren of small offices. "Typically in China people meet in small offices and sometimes only the boss talks," she says. "Shell, like most multinationals, has a much more managerial approach where everybody gives their views."
A bulldozer-style of management is valuable if you are trying to force a way through China's undergrowth of bureaucracy, according to one independent consultant. "You need a big, robust personality to get anything done," he says.
But in this kind of top-down management culture you aren't expected to tell your bosses anything they don't want to hear--which can severely compromise the integrity of management information. For companies such as Unilever China, which is based in Shanghai, this is a serious problem. It runs its business not only by the book, but by the "bulletin"--a thick internal report updated monthly with facts and figures showing how each product line, from shampoos to a new range of deodorants, is faring with the PRC's 1. …