China sets new rules for Big Four auditing firms BEIJING - China announced new rules directed at the four largest foreign auditing firms that will require local control over time in one of the fastest growing markets for professional accounting services. The new regulations announced Thursday by the Ministry of Finance could crimp the expansion of the so-called Big Four auditing firms -- Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG -- which have hired thousands of new employees in recent years to serve the growing number of Chinese companies listing stocks domestically and overseas. Under the guidelines, the firms will first have to limit the number of foreign-certified partners in China to no more than 40%. By 2017, that cap will drop to 20% and all senior partners will have to be Chinese nationals. Only about 30% of the Big Four's partners in China are currently locally certified, said Paul Gillis, a professor of accounting at Peking University's Guanghua School of Management and a former partner at PricewaterhouseCoopers. Gillis said the time frame represents something of a compromise considering China could have demanded the changes take place this year. That's because three of the four firms" joint venture contracts expire in 2012. The firms were originally allowed to operate largely with foreign partners because qualified local staff were scarce. "I can't imagine the Big Four are overjoyed, but I bet they're relieved," Gillis said of the new rules. What China is really doing here is adopting the global norm. If you look at the Big Four around the world, China is an anomaly where foreigners control their practices. In the rest of the world, the Big Four are a collection of practices owned by local partners. The changes take place at a time when the Chinese auditing industry has been hobbled by accounting scandals involving several U.S.-listed Chinese companies, some of which have seen their shares delisted or halted. In the latest move, the Securities and Exchange Commission launched legal proceedings Wednesday against Deloitte Touche Tohmatsu, the Shanghai-based unit of the American auditing giant. American regulators are demanding that Deloitte hand over documents relating to their former client Longtop Financial Technologies, a Chinese software company whose shares were suspended last year on the New York Stock Exchange because of massive accounting irregularities. Deloitte says they are prohibited from sharing the documents because it would violate Chinese state secrecy laws. Fears of spying hinder U.S. license for China Mobile