Joint ventures in China - accounting implications.

Since 1979, China has encouraged foreign investment, particularly through the medium ofthe joint venture.Experience of the operation of these foreign joint ventures has highlighted some key featuresof the Chinese business environment. These include the need for a long term view,problems of corruption, a capricious legal framework, some distinctive issues in assetvaluation, and problems in remitting profits.The traditional Chinese accounting framework was not applicable to a profit orientatedventure with foreign partners, accordingly a special system of accounting regulation, basedon International Accounting Standards (IAS’s), applied to foreign joint ventures. In 1993 anew Chinese accounting system, drawing largely on IAS’s, applied to both foreign ownedand national enterprises in China..The foreign partner in a Chinese joint venture consequently needs to be sensitive to specialissues in investment appraisal, particularly internal control needs relating to corruption,the distinctive character of certain items in the accounts, and the prospects for the futureevaluation of Chinese accountin