Reviewed by Yang Yuqi, Nihon University
Hiroshi Kawakita, Toa University
Yoshiro Kimizuka, Denkitsushin University, Emeritus

This book works to clarify the history, the status quo, and the unique characteristics of the Chinese Business Accounting System (CBAS) since 1949, when the People’s Republic of China (PRC) was born. To the best of our knowledge, it is the only systematic book on the modern accounting history of the PRC. The author, Xie Shaomin, was born in the PRC and is now an associate professor at Shizuoka Seika College in Japan. From 1986 to 1989, prior to earning her doctorate in 1995 in Japan, she was an assistant professor of finance and economics at Shanghai University. We cannot but admire her efforts as well as her talents that enabled her to master the intricacies of the Japanese language and complete this wonderful work in such a short period of time.

Dr. Xie Shaomin outlines her objectives in the preface: (1) to introduce the CBAS objectively and in its economic and social contexts; (2) to grasp the character of the CBAS as it re-flects accounting methods for state enterprises; (3) to under-stand trends through comparison and analysis of financial statements; (4) to hypothesize that the CBAS is a subsystem of public finance; that is, that that system evolved in response to changes in the distribution of economic profits; and (5) to explain how the new accounting system reflects a change in accountability from the government to the business entity itself.
This ambitious work is divided into two parts – the devel-opment of the Chinese accounting system and the internation-alization of that system. The three chapters in Part I describe the development of the planned economy following the revolution in 1949, the socialist market economy since 1979, and the socialist market economy since 1993 when CBAS, CPA Law, and Company Law were published.

Some of the interesting facts from Part I include the prob-lems caused by the Great Cultural Revolution (circa 1966 to 1977), creating disorder similar to the disregard for accounting practice following the 1917 revolution in Russia [Chapter 1]. Later, when the PRC reopened diplomatic relations with the

U.S. in 1979, economic innovation and the open-door policy resulted in numerous changes in accounting regulations. The ensuing trend towards separation of management from owner-ship introduced new forms of business as part or all of state enterprises were put out to contract, leased or sold to employee groups [Chapter 2]. As a result, the weight of state enterprises in the gross products decreased from 78.5% in 1979 to 48.1% in 1991, while that of group-owned enterprises increased from 21.5% and 38.0% respectively [p. 148].

Unfortunately, this reorganization of state enterprises was accompanied by the disappearance of enormous amounts of state assets as the hasty privatization bred private profiteering and hopeless disorder (similar to what has occurred more re-cently in Russia). It was estimated that between 1982 and 1992, 100 million yuan evaporated every day. Eventually, systematic accounting regulations, including standards of business accounting and finance, were introduced, including the modern concepts of GAAP, double-entry bookkeeping (assets = liabilities + capital), accounting for bad debts, and LIFO inventory cost flow. Accounting thus played an important role in the rationalization and modernization of the Chinese economy, resulting in renovations in numerous social and cultural institutions [Chapter 3].

Part II discusses the internationalization of CBAS and includes chapters on accounting for joint ventures, foreign investments, and equity-based enterprises. Though familiar in the West, these concepts were novel for accountants in the PRC. The efforts to establish Business Accounting Standards (BAS) began in 1988 at the Finance Ministry, though the Chinese Accounting Association had formed a research group the preceding year. A specialist on International Accounting Standards from the World Bank also participated in the standard-setting efforts. BAS became law on July 1, 1993. In Part II, Dr. Xie Shaomin also makes numerous comparisons between the Chinese accounting system and those of Japan, the U.S., and the IASC.

In our opinion, this extraordinary effort is a nonperishable fruit. Certainly, Dr. Xie Shaomin has made a notable and last-ing contribution to the study of Chinese accounting history. The abundant information and the many tables and figures help make intricate relations and unique terms understandable. Her earnest, wholehearted devotion to inquiry realized an abundant harvest, one that is professional, coherent, and read-able.

“. . . but you gods will give us/Some faults to make us men…” (Antony and Cleopatra 5:1, pp. 32-33). There may be no perfect writings without any demerits, and we find a few questions to be unresolved even in this work. First is the insufficient narration on the groundwork of socialism. As far as we know, socialist modes of production are built on the planned economy and state ownership of the means of production. A mere contrast of balance sheet items does not justify one of the author’s vital conclusions, that the nature of “traditional” Chinese accounting is a combination of public accounting and individual business accounting. We think the composition of the balance sheet is reasonable regardless of historic stage, such as feudalism or socialism, but the contents differ remarkably according to ownership.

Our next question derives from the first. Dr. Xie Shaomin regards the accounting system under the planned economy as “traditional,” but, as we read her description of the accounting books published in the PRC, the Soviet model appears to be the prototype of the Chinese “traditional” system. Evidence of this perception is the absence of any model to be applied to the socialist economy just after the revolution. Readers will not easily understand the meaning of “traditional” in this respect.

The second question leads us to the last. What is the difference between the early CBAS and the Soviet accounting system? We wish to know the differences, if any.

Despite the above comments, Professor Xie has bequeathed a monumental treasure to research in accounting history. The historians will say to her, “xie xie” (pronounced “shie shie,” meaning thank you in Chinese).