Have there been any significant regulatory developments in China?

In early 2023, the Ministry of Finance, together with two other regulators, issued the “Administrative Measures for the Selection and Appointment of Accounting Firms by State-Owned Enterprises (SOEs) and Listed Companies”. This regulation stipulates that SOEs should not, in principle, engage the same accounting firm for more than eight consecutive years. If an SOE requires continued engagement of the same firm beyond eight years due to business needs, it may extend the tenure appropriately—but not exceeding ten consecutive years—after comprehensively considering factors such as the firm’s prior audit quality, shareholder evaluations, and regulatory opinions, and completing corporate governance and internal decision-making procedures. This regulation aims to steer the listed company audit market toward greater order and standardization, mitigating potential long-term symbiotic relationships between auditors and clients that could compromise audit quality. Ultimately, it seeks to reduce audit risks and optimize the overall audit market ecosystem.

In 2024, annual report auditor changes involved over 1,000 A-share companies, marking a recent high. According to the Chinese Institute of CPAs, as of 22 April 2025, 62 accounting firms had filed change-of-auditor notices covering 1,110 listed companies. The shifting landscape reflects the combined influence of stricter oversight, policy guidance and a healthier market ecology. Accounting firms that seize the opportunity—by enhancing audit quality, expanding services to small and medium-sized clients, and strengthening risk management—will achieve sustainable growth.

On 18 June 2025, the China Securities Regulatory Commission (CSRC) released the “Guidelines on Establishing the Growth Tier on the Science and Technology Innovation Growth Board (STAR Market) to Enhance Institutional Inclusiveness and Adaptability”. These guidelines reopened listings for unprofitable companies while expanding eligibility to frontier sectors such as AI, commercial aerospace and low-altitude economy, allowing them to use the STAR Market’s Listing Standard V. This sends a clear signal that “hard-tech” remains a national priority.

The Growth Tier is a significant milestone in capital markets serving technological innovation. It creates a resilient runway for firms still in core-technology breakthrough or early commercialisation phases, which are not yet profitable but possess proprietary technology and a demonstrable growth trajectory. As implementing rules take effect and pilot experiences spread, the tier will create fresh exit routes for venture capital and revitalise China’s VC industry. The STAR Market is poised to become a listing venue of choice for global technology firms and a powerful engine for China’s new-productive-forces agenda.

How would you describe the health of the accounting industry in China in terms of customer demand, fee pressure, and staff recruitment and retention?

The A-share IPO market is expected to post modest growth in 2025. New listings will continue to prioritise quality and technological innovation, while the issuance and listing regime becomes more inclusive and adaptive. Mergers and acquisitions aimed at industrial consolidation and upgrading will also be encouraged. As a result, both the number of IPOs and total funds raised are forecast to edge up from 2024 levels. Meanwhile, emerging mandates such as ESG assurance and reporting, and data-asset recognition and valuation, have grown.

Yet, even as client demand broadens, accounting firms remain under intense fee pressure. Firms are becoming more selective in client acceptance and opinion issuance, and their ex-ante risk identification and exit mechanisms are maturing.

In the talent market, the gap for high-end, multi-disciplinary professionals continues to widen. Talent with deep industry experience, international standards expertise, cross-border tax planning, and data audit skills is scarce. Frequent regulatory penalties have tarnished some firms' reputations, caused salary fluctuations, and further increased industry turnover.

Overall, the Chinese accounting industry is experiencing short-term pain but long-term gain. Transforming regulatory mandates into quality advantages and converting investments in independence into brand premium will be key factors for firms to seek a competitive edge in the next cycle.

Are there any services areas where demand has grown over the last 12 months?

The stand-out growth area has been ESG and sustainability assurance and disclosure advisory. In February 2024, the Shanghai, Shenzhen and Beijing Stock Exchanges simultaneously released the final “Guidelines for Listed Companies’ Sustainability Reporting”, mandating disclosures for the first batch of 450+ A-share companies and encouraging all others to disclose to the fullest extent possible.

Data-asset recognition and valuation has also picked up. In 2023, The Ministry of Finance issued “Provisional Rules on Accounting Treatment of Enterprise Data Resources”, effective 2024, allows qualifying data resources to be recognised as intangible assets or inventory for the first time. Internet companies, smart-city operators and financial-credit-data providers have rushed to pilot the new rules.

Has there been any significant consolidation or merger activity in the accounting profession?

China has not seen any large-scale consolidation or merger activity in recent years, while strict regulation oversight and mandatory rotation have triggered frequent team movements. In 2024, roughly 200 former PwC China professionals joined RSM China’s asset-management service team. In 2025, Pan-China recruited more than 300 key financial-service professionals, including former core members from PwC China. Domestic firms are actively hiring and diversifying to plug capability gaps and attract high-quality talent.

What are your expectations for the next 12 months - are there any potentially significant developments in the pipeline?

On 1 July 2025, China’s new independence rules for auditors came into force. The Ministry of Finance enacted “Chinese Code of Ethics for CPAs – Independence Standard No. 1” and raised the bar for independence in financial-statement audits and reviews. Large accounting firms are expected to reinforce independence at both the policy and cultural levels, turning independence from a compliance baseline into a brand moat.

Mandatory rotation, already in force for SOEs and potentially extending to private enterprises, could trigger a systemic restructuring. High-quality team turnover will intensify, reshaping the competitive landscape. Accounting firms demonstrating agility in volatile markets, proficiency in managing high-risk and complex projects, and experience in joint audits will gain a competitive edge in the emerging landscape.