Feb 22 (Reuters) – Concerns about data security have prompted Chinese authorities to ask state-owned firms to stop using the four biggest global accounting firms as Beijing seeks to curb the influence of Western auditors, Bloomberg News reported.
China’s Ministry of Finance is among government entities that gave informal guidance to some state-owned enterprises as recently as last month, urging them to let contracts with PwC, EY, KPMG and Deloitte expire, the report said, quoting people familiar with the matter.
While offshore subsidiaries can use the global auditors, their parent firms were urged to hire local Chinese or Hong Kong accountants when contracts come up for renewal, one of the people told Bloomberg.
The Ministry of Finance did not immediately respond to Reuters requests for comment. PricewaterhouseCoopers (PwC) declined to comment and the other leading audit firms did not immediately respond.
Data policy is one of several areas over which China has tightened its scrutiny to try to ensure practices do not threaten the country’s national and economic interests.
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At the same time, geopolitical tensions are running high, with some business leaders voicing concerns about the decoupling of China, the world’s second largest economy, from the United States, the largest.
China implemented its Data Security Law in September 2021, broadly requiring Chinese companies and localities to categorise data based on its relevance to national security and the economy.
The leading accounting firms in the world by revenue are Deloitte, PwC, Ernst & Young (EY), and Klynveld Peat Marwick Goerdeler (KPMG), or the Big Four.
They collectively received revenue of 20.6 billion yuan ($2.99 billion) from all Chinese clients in 2021, Bloomberg said, quoting finance ministry data.
China has been reluctant to permit offshore authorities to access U.S.-listed Chinese companies’ audit papers without its approval, citing national security concerns.
The two sides reached a deal last year to allow U.S. securities regulator to inspect the documents in Hong Kong. The U.S. accounting watchdog in December said it has full access to inspect and investigate firms in China for the first time.
($1 = 6.8951 Chinese yuan renminbi)
Reporting by Nilutpal Timsina and Maria Ponnezhath in Bengaluru, Selena Li in Hong Kong; Editing by Muralikumar Anantharaman, Sonali Paul, Kim Coghill and Barbara Lewis