Political Ideology and Accounting Regulation in China

Table of Content

Accounting is recognized as a proficient instrument and pattern. Accounting policies served the dominant political orientation. Specific political orientations had attributed to accounting itself and the accounting profession. This paper examines the affect of political political orientation on China accounting ordinance that focal point on the displacement from Maoism to Dengism. Besides, the research workers besides investigate for the ground why political political orientation brings such impact, and its consequence. Under Maoism, the category battle, cardinal planning, and public ownership were mobilized. Under Dengism, a new ideological rules occurred which are economic development, marketization, and mixed-ownership.

Although our focal point is on accounting in general, there are three grounds for us to do some mentions to conservativism in exemplifying our statement. First, the rejection of Mao discourse and the acceptance of Deng discourse. Second, the discourses discourage conservativism under Mao and promote it under Deng. Third, conservativism contradicts to other accounting rules that are consistent with socialism ( consistence and objectiveness ) . In both the Western and Chinese literatures, conservativism typically refers to over-optimism in reported net incomes. Under Maoism, conservativism was prohibited because it was depicted as a agency of intentionally minimizing the net incomes for the intent of workers exploitation or revenue enhancement equivocation. Under Dengism, conservativism was approved in China because it helps to cut down the uncertainness and increase the dependability of accounting information.

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There are two parts from this paper. First, it focuses on the features of the accounting ordinance cause by the alterations in political political orientation. Second, it determines the consequence of political political orientation has on accounting ordinance in a China.


To expose the term of “ political orientation ” , the procedure of bring forthing thoughts and beliefs in societal life is needed. Thompson ( 1984 ) assumed that the political orientation helps to seek for how political and elites in China and released performative ideological discourses that impacted the accounting ordinance. Dominant political orientations can seek assorted schemes in which these schemes are interacted each other. It helps us to be more understood about the impression of “ dominant political orientation ” which is promoted by political and elect. Majority groups tend to advance and legalize their ain involvements by prolonging the political signifier of life in which the political orientation is being seen as a dianoetic field. Besides, their besides tend to emerged an integrated societal formation by all mode of persuasion. We must be cognizant of that non every belief/idea preserve needfully and no dominant political orientation can shut an ideological argument.

The “ Field of Discursivity ”

Ideology is about “ who is stating what to whom for what intent ” . It is a set of complex inside effects to talk about which operates through linguistic communication and discourse to bring forth specific effects. Laclau and Mouffe ( 2001 ) focal point on the different places and divide into four cardinal constructs: elements, minutes, articulation and discourse. If to the full ramblingly articulated all allowable elements, the dianoetic formation becomes a to the full constituted entirety and a closing is achieved.

The discourse of authorization and its “ worldly context ”

The exclusion of societal and political contexts has been criticized by the traditional discourse analysis. Foucault ( 1972 ) stated that the ordinances and formations of a discourse have to be published within their non-discursive conditions, such as, political events, economic phenomena, and institutional alterations. The relationship between the dianoetic and non-discursive ca n’t be determined.

Our analysis must concentrate on two dimensions in order to let the theoretical framing demo the importance of the discourse context, which is, the agents involved in let go ofing discourse and discourse sites. In discourse analysis, we must choose the discourse sites carefully for illustration locations, debated issues, and media to circulate discourse.

Accounting UNDER MAO

Accounting and Class Struggle Primacy

The Communist Party of China ( CPC ) and authorities chiefly concentrate on the Marxist impression of category battle between businessperson and labor. Class battle was gathered as critical constituent of political communicating and show in bulk political run.

In 1949, private and state-owned endeavors used double-entry clerking. Government and little endeavor used Chinese clerking method which is receipt-payment method. Therefore, inquiry rose whether China should follow foreign clerking method. Soon, argument shifted to whether accounting is inherently category based. From the argument, conservativism brings up the characteristics of capitalist accounting.

Yan, 1951 commented that conservativism is organizing the confidential modesty to cover the extra values and increase the capital accretion. Therefore, conservativism is tools for protecting capitalists ‘ involvements since it develop secret militias and minimise revenue enhancement liability. Socialistic accounting in China accepted Soviet Accounting, even though it has the parts of capitalist accounting.

Another argument on the characteristics of accounting happened in 1960s anterior and during Cultural Revolution. It takes into history the procedure aggregation of accounting papers and readying of fiscal statements which included in capitalist and socialist accounting. Gu, 1982 said that capitalists use accounting to pull strings working categories while socialists safeguard socialist belongingss and better socialism.

Accounting and Central Planning

Cardinal planning was used to equilibrate the demand and supply of resources. Government and CPC manipulate the hiring and fire of directors while endeavors holding minor liberty in implementing cardinal programs. The major inducement was granted rubrics as theoretical account workers/ first-class directors. Gu ( 1982 ) and Ge ( 1955 ) stated that socialist accounting should transport out the planned economic system since one of the chief intent in socialist accounting is to assist national programs the demands of national economic development jurisprudence and basic socialist economic jurisprudence. The achievement of cardinal programs was of import for authorities functionaries and endeavors. Standardized accounting system was used to help the execution of cardinal program. It was designed to maximise the province gross to keep and formalize cardinal planning and help political aim. Conservatism is tool that decreases the authorities control on steadfast net incomes.

The market mechanism signifiers parts of capitalist economy that oppose with cardinal planning. Therefore, capitalist accounting was dishonored. It is because development of socialist economic sciences in planned mode was interpreted as natural jurisprudence and conservativism presumed decreasing the effects of market uncertainness. Mao ( 1951, 1954 ) said that socialism is superior to capitalist economy ; hence conservativism was same as contradict with high quality of socialism and cardinal planning. Conservatism is excess since monetary values are stable and plus rating is based on historical cost.

Accounting and Public Ownership

At 1955, all private ownership was converted into public ownership to get rid of abuse and category differences ( Expert Group, 1995 ) . Other than arguments to take between Chinese Receipt-Payment and Western Debit-Credit method, there are farther arguments to follow either Chinese Increase-Decrease Method or Western Debit-Credit method.

In public ownership, province ownership endeavors are deemed as mills that pay the surplus to the province and expect the fund distribution from the province. Socialistic accounting created to bespeak public ownership. Gu ( 1982 ) stated that capitalist accounting dressed ores on capital and dividends while socialist accounting emphasiss on province fund. Accounting is a tool to cover with affairs considered to be contradictory involvements of the province, endeavors and single. The biggest job facing by public ownership is the life clip employment and societal public assistance.

Extreme public ownership reduced the division of duties between authorities with CPC, endeavors and proprietor. This signifier of duties has gain the credence of Chinese accounting and resources are distributed harmonizing to authorities programs.


Class battle primacy, public ownership & A ; cardinal planning are cardinal belief to Maoism. Therefore, category position based accounting being construed. The belief been naturalize and universalize. The constitution of accounting as category based was attained by building discourse obtained from Mao ‘s political political orientation. Conservatism is capitalist tool that contradictory with Maoist ideological forms. Maoist ideological and accounting discourses were constructed, expressed and distributed through mixture of media. In add-on, corporate accomplishments were assembled to bring forth dominant ideological discourses. History of China and seek for defence from external enemies and battle against internal enemies were deriving the dominance of category position accounting.

The Maoist discourse was supported by the discourse of authorization. It was the capableness of functionaries in authorities, policy shapers and CPC to recognize the promised hereafter into world. Disjunction may go on between discourse as vocalizations and applications. The differences between socialist and capitalist accounting did non wholly be after onto pattern because dianoetic look non clear or Maoist political political orientation retained the constituent of Western Accounting. Maoist discourse does non win in excepting the likeliness for discourses to look. However, faculty members and practicians remained to show their Rebel and uphold alternate discourse.

Accounting UNDER DENG

Under Dengism, economic development primacy replaced category battle primacy to advance economic reform. Second, market economic system replaced planned economic system and eventually, private ownership was encouraged as it developed socialism.

Economic Development Primacy

Following Mao ‘s decease, his replacement Hua implement a ”two whatevers ” policy which is to implement whatever Mao ‘s determination and to follow whatever Mao ‘s instructions. This policy was criticized to a great extent and it led to a national argument on the truth-testing standard. Deng to the full supported to utilize societal pattern as the truth-testing step. The argument spread across China and by December 1978, many party such as authorities and ground forces functionaries declared their support that societal pattern as the truth-testing standard.

Central Party Working Conference in November-December 1978 discussed the likeliness of altering the Party ‘s work to concentrate on economic development. Deng concluded that emancipating the head is a must to use Mao Zedong Thought right and for economic reform. He besides stated that the truth proving standard argument is necessary because a party or a state with fixed thoughts will non last.

At last, the 3rd Plenum was able to reprobate Maoist category battle rule and started economic reform to accomplish the Four Modernizations ( national defence, industry, agribusiness, and scientific discipline & A ; engineering ) . Besides that, the 3rd Plenum besides launched unfastened door policy to convey in advanced engineerings. This unfastened door policy shown China ‘s desire to do their economic system stronger and better the trade dealingss with foreigners. The pattern standard allowed China to follow a scheme of looking at reform results to find the rightness of reform.

Economic development has become the chief undertaking of socialism to run into China ‘s increasing stuff and cultural demands on cultural and material. Under Dengism, any ways can be used to construct up socialist productive forces. Capitalist accounting can be used if it brings a socialist terminal. This displacement had promoted a new argument on the accounting ‘s nature issues.

With the alteration to economic development primacy and truth standard argument, the discourse that promotes a class-based accounting position was progressively confronted by a discourse claiming accounting as a impersonal and besides proficient engineering. From 1979 onwards, the argument focused on the demand to come out with a tactic to cover with capitalist accounting.

Yang and Yan ( 1980 ) , suggested a dichotomy position of accounting where accounting as a direction map can be used to assist turn capitalist states and besides socialist China. Deng argued that scientific discipline & A ; engineering are the most important productive powers that provide a strong support for the impersonal position of accounting.

Ge ( 1980, 1981 ) , argued that accounting methods applied in capitalist states could besides be used in socialist China because both of them operate a trade good economic system. He besides suggested that conservativism should be adapted to any unsure trade good economic system. During the passage from the category position to the impersonal position, Western accounting methods have began more popular. Adoption of conservativism is ineluctable and it good suited to China.

However, the Maoist category battle influence still remained important. Li ( 1980 ) , argued that conservativism merely helps big capitalists to capture over little proprietors and do large net income from it. Yu ( 1981 ) and Zhang ( 1991 ) , viewed conservativism as lone satisfies capitalist involvements and hide development of working category.

In the 1980s, conservativism start to be adopted in proviso for monetary value cuts in trade good. By the 1990s, the class-based accounting position had lost its place and proficient position became more popular and of import. In 1992, the Ministry of Finance set conservativism as a criterion in the ASBE – Accounting Standards for Business Enterprises. It allowed the usage of LIFO methods in stock list rating and accelerated depreciation.

Accounting and Marketization

Market discourse has been started in China in the fiftiess with argument on trade good production. The allotment of production stuffs to merchandises and trade goods by the cardinal planning system caused jobs on trade good production and exchange. Hence, there was suggestion to allow SOEs to do determination based on the market monetary values. However, these proposals were rejected because there was still bar on the usage of market mechanism at that clip.

In a conference in late seventiess, the term “ trade good economic system ” has been introduced as a different new construct. It referred to the thought that the socialist merchandises should be changed to trade goods and the usage of market to command the production and exchange procedure. However, there was dissension about this term from some economic experts. Hence, this term was non incorporated in the study of the 12th National Congress of CPC. Nonetheless, the function of market has been recognized excessively in the study and in the hereafter.

Within the period January to February in 1992, Deng had his south China circuit and made addresss about reform to emancipate productive forces in China. Deng expressed that any reform should beneficial to the development of productive forces, the strengthening of national power and the elevation of populating criterion. In add-on, Deng convinced skeptics that his reform consistent with Marxist docket and focused on action more than words.

Deng ‘s addresss have been circulated throughout the CPC organisation and besides the populace. Deng obtained great support for his addresss to reform. At the same clip, cardinal planning has been discredited in both theory and pattern. Therefore, the 14th National Congress of CPC in 1992 approved the development of a socialist market economic system.

During Deng ‘s epoch, the range of province planning was diminished measure by measure. A formal double pricing system which included planned monetary values and market monetary values was used between 1985 and 1991. From 1992 onwards, the market monetary value became the dominant to replace the double pricing system. In add-on, the figure of monetary values of merchandises set by the cardinal authorities was bit by bit decreased. Due to these alterations, several jobs were occurred which included increasing competition, hazards, uncertainness and rising prices. Furthermore, the huge development of recognition market caused the economic system enduring from deficit of hard currency and besides bad debts during the 1990s.

Harmonizing to The Planned Commodity Economic Theory, trade good economic is really of import in socialist economic development and that the reforming of China ‘s planning system is necessary. This motivated people for accounting alteration. Several faculty members provided thought that conservativism is needed in accounting for trade good economic system to heighten its effectivity. However, there were still opposing sounds from cardinal planning and some faculty members because conservativism would cut down the financial gross.

Maoist-based resistance had prolonged the procedure of accounting alteration even though they failed to forestall it to the full. It took four old ages clip for the development and publish of Accounting Standards for Business Enterprises ( ASBE ) , which allowed portion of conservativism ( lone acceleration depreciation and LIFO stock list rating method ) as accounting rule. Deng ‘s addresss during his South China tour have been considered as the chief factor for the success of accounting alteration and publish of ASBE in China. Deng ‘s addresss were influential because Deng ever promoted actions more than words and he had the great power of authorization.

In add-on, Deng neutralized the function of accounting by saying that accounting criterions were accounting criterions without argument of capitalist accounting and socialist accounting. The accounting alteration in China besides caused by the ailments from foreign investors and conglomerates directors. The accounting alteration has been prepared early and merely waiting a right clip and signal for alteration.

The of import of market function could non be denied even though many jobs occurred such as increased hazard, corruptness and monetary value use. The force against Western accounting bit by bit decreased and the acceptance of Western accounting became broader, particularly the conservativism rule.

Accounting and Private Ownership

Under Deng reformation, private ownership was promoted. The issue of private ownership was really sensitive in China. There were four chief issues involved in the ownership argument. First, whether state-ownership is better than to other signifiers of public ownership? Second, whether public ownership is a important characteristic of socialism? Third, whether there is other class of ownership besides public & A ; private? And 4th, what is the nature of shareholding companies?

Early on in 1978, the provincials introduced a family contract duty system with direction specific economic duties and liberty. However, this system was banned. Later in 1984, the CPC approved the rural contract duty system in state-owned endeavors. The Theory of Preliminary Socialism believed that private ownership was indispensable and good. After Deng ‘s addresss in 1992, the CPC recommended the alteration of state-owned endeavors to shareholding companies.

Ownership issue was debated under two positions, whether a agency or an terminal. The means position stated that socialism could utilize any type of ownership to recognize its end of common wealth. Under the terminal position, public ownership was considered as kernel of socialism. Such argument made ownership a sensitive issue and ownership reform procedure slower.

In 1997, Jiang, Secretary-General of the CPC made a address and expressed that socialist should utilize any public ownership signifiers that are the most suited to develop the productive forces. Jiang ‘s position was influential because he followed the Deng ‘s position and agreed with the standard under agencies perspective on his statement.

The ‘three separation ‘ reforms caused the “ socialist Fe bowl ” became more vulnerable and encouraged the ownership reform. These ‘three separation ‘ reforms were dividing duty between CPC and authorities, between authorities and the SOEs, and between authorities as both decision maker and belongings proprietor. In the mid-1980s, different signifier of non-state-ownerships emerged. There was a alteration in political orientation and pattern where the private ownership has been accepted.

The Accounting System for Chinese-Foreign Joint-Venture was introduced in 1985 for the joint-ventures. This system adopted certain rules of Western accounting, included the accrual footing and historical cost. However, certain rules, such as conservativism and the usage of bad debts proviso were non adopted. This shown that the Maoist discourses still had influences at that clip.

Many faculty members viewed that the conservativism rule was necessary and of import to be adopted in China accounting system to better foreign investing and prevent directors from intentionally exaggerating net incomes to run into their ain aims. However, the conservativism rule was still non to the full supported and permitted in the accounting pattern even there was increased range for specific applications.

Before 1992, there were no accounting ordinances for joint-stock companies. This was because the shareholding system was ill-defined, full of uncertainness and had great contentions. In the 1992, after Deng ‘s addresss, the Accounting System for Companies Experimenting with Shareholding Systems was introduced. This system adopted conservativism with limited application.

However, the shareholding system was progressively accepted and being adopted. Therefore, the application of conservativism has be broaden and increased through the Accounting System for Shareholding companies in 1998 and the Enterprise Accounting system in 2000.


Through the outgrowth of Deng ‘s new accounting discourse, the unvarying accounting system by Mao became less dependable and non accommodate to the new Chinese context. In Deng ‘s political political orientation, scientific discipline and engineering was the most of import productive power for accounting ‘s development.

Under Dengism, the discourses were being stressed by explicating accounting as scientific discipline and it helps people in proficient parts. It besides represent cosmopolitan engineering that deter ideological prejudice and with no boundaries between states. Consequently, Mao ‘s unfavorable judgments on Western accounting which is category based were blamed by Deng. By organizing accounting as a scientific discipline, application disadvantages was being reduced and reformists clarified that any deemed utile accounting patterns should be adopt in China.

Accounting dramas of import functions in administering incomes, apportioning resources and protects assets and these functions are consistent with Deng ‘s market socialism. Conservatism is the right technique to be usage in state of affairss where extend competition ‘s degree, hazard, rising prices, bank loans and uncertainness by displacement in monetary value puting from authorities to market itself. On the other manus, it was a major betterment in Chinese-foreign joint ventures which use international criterions.

Therefore, this paper showed the importance of discourse of authorization in distributing political political orientation into accounting sphere. Speeches, ordinances, and articles by politicians, regulators, practicians and faculty members contained political political orientation rules besides helps to act upon accounting sphere.

The Mao ‘s category position on accounting was took over by Deng ‘s impersonal position on accounting but the Mao political orientation continued as statements after Mao ‘s decease. Therefore, this paper concluded by suggested five deductions for the connexion between accounting and political orientation.

First deduction, accounting ordinance is of import field where Maoist and Dengist discourses were each competed against each other ; the dominant political orientation will advance the values that merely compatible to it and minimise challenger ‘s thoughts.

Second deduction is accounting can be de-legitimized if delivered ideologically based and will take to capitalist development. On the other manus, it could besides assist to better legitimacy where discourses made harmonizing to or against alterations. The 3rd deduction is there will be a spread between lettering and patterns attempt in the name of the discourse which Maoist would non hold with conservativism that incompatible to their political orientation.

The 4th deduction is analysis of discourse is inevitable entwist with articulated context and will alter through deductive patterns therefore Mao and Deng accounting ‘s nature is important merely when connected to the constituted articulated context.

The last deduction is dominant political political orientation creates circumstance that can be discourage but ne’er stop because the alternate accounting patterns will go on to be debated due to ne’er to the full applied in the minute. Discourse by Maoist or Dengist on nature of accounting can be mass. Due to Maoism disagree with Western accounting constructs that related to Deng ‘s impersonal position on accounting so Dengism became dominant and the Maoist position on accounting was considered politically wrong. Therefore, the consequences showed that accounting could be change by the discourse of dominant political political orientation.

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