A new report looks at the need for robust accounting infrastructure alongside upgraded digital skills in countries along the Belt and Road routes
This article was first published in the November 2018 International edition of Accounting and Business magazine.
Much has been said about the business opportunities presented by the China-led Belt and Road initiative (BRI). But where can professional accountants add value in the chain of cross-border trade proliferation – especially given the huge disparity of accounting standards along the BRI routes?
A new report, Digital Connectivity in Accounting: A boost to the Belt and Road Initiative, helps navigate through the complexities. Conducted jointly by ACCA, the Shanghai National Accounting Institute (SNAI) and Yonyou Group, the research serves as an important reference for the discussion on how to realise digital connectivity along the BRI routes, and promote harmonisation of accounting systems to avoid duplication.
Put simply, says Yuki Qian, ACCA China’s head of policy, the report ‘breaks through the shackles’. It explains how the various standards, regulatory systems and talents involved can align with the development of international trade and cross-border capital flow, based on digitally enhanced transparency and sharing of data.
Qian says: ‘The purpose of this research is to improve the breadth, depth and quality of digital interconnection along the BRI routes.’ The report is timely, she adds. ‘More and more countries along the BRI routes have committed to enhance their overall IT infrastructure and consider the digital economy as a new engine of growth.’
Along with being an important information resource for ACCA members, the report will have special relevance for Chinese companies going global under the BRI, Qian believes. ‘We aimed to explore what is at stake here and set it out as future-ready. The ability to reshape and regenerate is becoming more ubiquitous. Every party involved will need to keep up to date with digital trends and methods in order to achieve a purposeful value proposition.’
For the research conducted in April 2018, leading accounting talents and EMPAcc students trained by SNAI, ACCA members and partners, and corporate clients of Yonyou were asked questions on accounting informatisation, digital competencies of accounting talents, and tax reform. A total of 257 valid questionnaires were retrieved.
Within the business community surveyed, the report finds enormous space for economic cooperation along the BRI routes, Qian says. More than 60% of the company respondents are operating in countries along the routes, while another 20% intend to follow suit.
‘More than 71% of these companies have set up fewer than 10 branches in the region, and they are still in the early phase of their business expedition,’ she says. ‘South-East Asia remains a key region for business along the BRI routes.’
‘Infrastructure construction’ remains the key area for respondents investing along the BRI routes, accounting for around 37%, followed by investment in plant construction, overseas market expansion, industrial manufacturing, financial services, and outbound mergers and acquisitions.
When asked about their current situation regarding accounting informatisation and application, Chinese companies going global cited the normal operation of accounting and financial modules (including financial accounting and financial reporting) as their main concern, followed by accounting internal control and risk management modules.
Their third and fourth concerns were decision-making support modules (such as cost management and internal reporting management), and modules to improve accounting operational efficiency.
‘Companies believe that the core value of accounting informatisation and application is supporting regular business development, followed by improving productivity/efficiency,’ Qian says.
Questions on digital competency revealed a general understanding of the technical domain, including popular office automation software, Chinese social media (WeChat and Weibo), and the accounting information systems. However, it also showed a limited knowledge of emerging technologies, such as big data, cloud computing, robotic process automation (RPA), Internet of Things (IoT), artificial intelligence (AI), and distributed ledger and cryptocurrency.
Among those surveyed, a professional qualification in digital competencies was the most common training method for upskilling accounting talents, followed by internal training and external forums.
US President Donald Trump’s tax reform and the base erosion and profit shifting (BEPS) action plan are also addressed in the report, noting the subsequent implications for foreign investment decisions and tax burdens on businesses. ‘Companies hope that the countries where they invest can reduce tax rates, offer tax incentives, enhance tax transparency, stability and legalisation, simplify tax collection and management procedures, and ameliorate law enforcement in order to increase corporate enthusiasm and confidence in outbound investment,’ Qian says. ‘At the same time, they expect China to further improve its local tax system, strengthen international tax coordination and eliminate duplicate taxation via tax treaties so as to support going global.’
The overarching takeaway, in Qian’s opinion, is that efforts should be made to quicken the pace of digitalisation on the BRI to pave the way for connectivity. ‘The connectivity of accounting and business languages is urgently needed in the regional economic cooperation and trade activities along the BRI routes,’ she says.
The findings also affirm that international application of accounting and financial management systems relies on the digitalised application infrastructure and cloud service. ‘For Chinese enterprises going global, accounting and financial management will be even more difficult in a multi-regional context with diversified economic situations,’ Qian says.
The establishment of corporate internal control systems will also see huge challenges. ‘The challenge lies in risk control and liquidity management,’ Qian explains. ‘The globalisation of financing channels, diversification of financial assets, and fluctuation of interest and exchange rates will intensify at the same time. Another challenge lies in the changing tax landscape, as tax accounting and management need to comply with local tax regulations. Given that, the tax service system should be able to support local tax data requirements and realise the connectivity of different tax systems.’
Therein lies the crux of the accounting profession’s role. ‘In addition to the right digital accounting ecosystem and oversight, we need professional accountants who have an in-built digital understanding and appreciation,’ Qian says.
‘In 2016, ACCA published its ground-breaking report Professional accountants – the future, where we isolated the seven professional quotients that all qualified accountants will need to develop. These professional quotients are a collection of technical knowledge, skills and abilities, combined with interpersonal behaviours and qualities.
‘The digital quotient – the awareness and application of existing and emerging digital technologies, capabilities, practices and strategies – is one of these seven key areas and ACCA is committed to ensuring our current and future members can navigate all the opportunities that a digitally enabled accountancy profession presents. In this way, we hope both ACCA and our members can play a major role in developing a Digital Silk Road that enables the BRI to reach its full economic potential.’
Peta Tomlinson, journalist
"More and more countries along the BRI routes have committed to enhance their overall IT infrastructure"