China moves to local control of foreign auditors By Simon Rabinovitch, FT.com May 11, 2012 -- Updated 0259 GMT (1059 HKT) China aims at localising the mainland operations of foreign auditing firms, including the "Big Four." Foreign auditing firms will have to appoint a Chinese national as their chief partner in China The regulations aim at localising mainland operations of foreign auditing firms and limiting controversy Over the past years, China saw fraud allegations against Chinese companies listed in overseas markets (Financial Times) -- Foreign auditing firms will have to appoint a Chinese national as their chief partner in China as part of a sweeping overhaul of the country's accounting industry. The regulations, unveiled on Thursday, are aimed at localising the mainland operations of foreign auditing firms, but they also provide for a lengthy transition period and wiggle room to limit controversy over the changes. Chinese auditing standards have come under fire over the past year after a number of fraud allegations against Chinese companies listed in overseas markets. The restructuring of the China operations of foreign auditing firms, including the "Big Four," threatened to fuel concerns by forcing them to replace all of their foreign partners with Chinese partners. Beijing has tried to allay such fears, however, by giving foreign groups time to adjust. Up to 40 per cent of their partners in China will be allowed to continue operating without Chinese qualifications this year, the finance ministry said. That cap will then be reduced to 20 per cent by the end of 2017. "They have made huge concessions here to try to have a smooth transition," said Paul Gillis, a professor of accounting at Peking University. The Chinese joint venture agreements of the four biggest accounting firms -- Deloitte, Ernst & Young, KPMG and PwC -- start to expire this year and Beijing could have imposed the rule changes as soon as they come up for renewal. The normal situation in the world is that accounting firms must be owned by locally qualified accountants. That is the case in most countries in the world. China is actually being more open to non-qualified foreigners participating in their practices," Mr Gillis said. Nevertheless, the restructuring will pose a challenge for foreign firms. Given how young the auditing industry is in China, they have few local employees who are ready to be senior partners. The restructuring announcement comes a few days after US officials said that China was considering a compromise on another contentious issue: joint US-China audit inspections. After the rash of accounting scandals at Chinese firms, the US government had asked Beijing to open its doors to the US body that oversees the auditors of publicly listed companies. James Doty, chairman of the US Public Company Accounting Oversight Board, said last week that China might agree to allow it to observe the audits of Chinese companies listed in the US. In a reminder of the concerns surrounding the Chinese industry, the US Securities and Exchange Commission said on Wednesday that it was investigating a client of the Chinese arm of Deloitte on suspicion of accounting fraud. The SEC also filed an administrative action against Deloitte for failing to provide audit documents related to the company -- something which Chinese regulators have barred it from doing. May 9, 2012 -- Updated 1441 GMT (2241 HKT) High school students in China were hooked with IV drips supplied with amino acids to boost energy levels before exams. May 8, 2012 -- Updated 2159 GMT (0559 HKT) Stan Grant reports on the fallout for foreign media in China over the ongoing story of activist Chen Guangcheng. May 6, 2012 -- Updated 0140 GMT (0940 HKT) Could the separate crises engulfing disgraced politician Bo Xilai and blind dissident Chen Guangcheng together influence dramatic change? May 3, 2012 -- Updated 0217 GMT (1017 HKT) Long before Chen Guangcheng became internationally known as a human rights crusader, his neighbors knew him as the man to go to when they had trouble with local authorities. May 5, 2012 -- Updated 0145 GMT (0945 HKT) A CNN team attempted to visit Chen Guangcheng's hometown of Dongshigu. But mention of his name seemed to provoke awkward and evasive reactions. May 1, 2012 -- Updated 0921 GMT (1721 HKT) According to activists, China's one-child policy has resulted in cases of forced abortions and sterilizations. April 20, 2012 -- Updated 0708 GMT (1508 HKT) China downplayed India's successful missile launch this week, saying that the two sides are not rivals but cooperating partners. April 20, 2012 -- Updated 1906 GMT (0306 HKT) He was the youngest player to participate in a European Tour event but 13-year-old Guan Tian-lang's debut did not have a dream ending. April 9, 2012 -- Updated 1043 GMT (1843 HKT) Tamara Rojo, often described as the greatest dance actress of her generation, is going to Beijing to immerse herself in the traditions of Chinese dance. April 2, 2012 -- Updated 1344 GMT (2144 HKT) China makes arrests, shuts down several websites and restricts comments on microblogging services, CNN's Stan Grant reports.