By Ian Lavis, on behalf of Praxity
China’s bid to create a third global trade axis could be good news for accountancy in more ways than one.
The Belt and Road Initiative (BRI) promises to transform the infrastructure and economies of more than 60 countries, and accountancy firms will be at the heart of the transformation.
The hugely ambitious scheme to increase trade between East and West along key routes across Asia, Africa and Europe is an attempt to change the global trading landscape based on regional, international and inter-governmental cooperation.
The initiative, also known as One Belt One Road (OBOR), offers significant business opportunities for accountancy firms to work in collaboration on cross-border projects. It could also be a key driver for improvements to global accountancy practice, including the development of international reporting standards and more uniform ways of working.
Around €US1.1 trillion of investment has already been committed and 900 projects are planned or underway, benefiting 80 countries, according to HSBC. China’s government expects trade with BRI countries to exceed US$2.5 trillion a year within the next decade.
For the project to succeed, it requires inter-governmental and financial cooperation, monetary stability, investment and financing, and credit construction across Asia, not to mention the removal of barriers to investment, the development of free trade opportunities, and the promotion and exchange of talent throughout the BRI and beyond.
Despite these challenges, companies are keen to tap into the business potential of the project. This has led to a surge in demand for expertise in international tax services as companies seek to overcome the challenges of working across borders. In addition to the opportunities for business growth, it is hoped the BRI will lead to greater coordination of accounting, taxation and finance policies throughout the East–West axis.
Progress has already been made on convergence following a meeting between BRICS (Brazil, Russia, India, China and South Africa) finance ministers and the Central Bank of Governors in Shanghai in June 2017.
The Chinese government has demonstrated its commitment to global tax reform with the implementation of regulations related to Base Erosion and Profit Shifting (BEPS), the tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.
While Chinese accounting systems are becoming more internationalised, many other countries within the BRI have very different standards. Greater cross-border harmonisation will be one of the key challenges as businesses seek to exploit the opportunities the BRI offers.
Commenting in the China edition of Accounting and Business magazine, Helen Brand, ACCA’s chief executive said: “Such an ambitious plan will only succeed if the economies along the Belt and Road cooperate. Our ethos in accountancy has always been to facilitate links that promote sustainable growth”.
The need for greater cooperation between economies and greater harmonisation of accounting standards is global, but given China’s determination to create a third global trade axis, the BRI may be the catalyst to make it happen.