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July 4, 2018

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Home » Opinion » Chinese Views

Belt and Road challenges are opportunities for all

DURING a recent study trip to the northwestern Xinjiang Uyghur Autonomous Region and Kazakhstan, Li Kouqing noticed something interesting about the trains he took.

The president of the Shanghai National Accounting Institute (SNAI) said he had to change trains when crossing the border into Kazakhstan because the track gauges were different. China’s is smaller.

As a result of the Soviet legacy, the Kazakh rail system conforms to the Russian rail gauge instead of the international gauge, which the Chinese rail system adopts.

The finding has so impressed Li that he, at a recent forum on cooperation between Belt and Road (B&R) countries, used the rail gauge as a metaphor for the difficulty of accommodating different accounting systems of B&R countries.

Since its inception, the B&R Initiative has considerably boosted exchanges in sectors like transport, logistics and energy among nations.

But differences between accounting and financial management remain a big obstacle to a freer flow of goods and capital.

“It will tremendously increase the transaction costs,” Li said. He believes that in addition to building physical infrastructure to bolster connectivity, namely, roads, railways, bridges, ports and airports, greater efforts must be made to strengthen what he called “invisible infrastructure.”

And a significant component, he suggests, is to build up accounting infrastructure in B&R countries.

Chinese business leaders who spoke at the forum on June 25 at the SNAI also brought their own stories and perspectives to highlight the accounting problems that hamper their operations in B&R nations.

Lian Min, deputy general manager of the financial division of the China Communications Construction Corporation, told the forum that last year his employer set up a financial shared-service center in Malaysia to handle all the accounting related to major projects.

However, the work got bogged down due to the differences between Chinese and Malaysian accounting and auditing standards. And no agreement has been reached on how to bring Chinese business practices in line with the requirements of their host country.

To make things more complicated, even the financial software the Chinese company uses is found to be inadequate, as it is unable to adjust for accounting and legal differences in a foreign environment.

A widely shared viewpoint at the forum centered on the different IT infrastructure in many B&R countries and how China can help to build their IT capacity to enhance digital connectivity.

Liu Qin, vice president of SNAI, cited a study by China’s State Information Center in saying that B&R nations vary grossly in their levels of development in IT infrastructure.

The study looks at a set of factors including a country’s per capita GDP, broadband speed and fees and mobile phone penetration.

Its findings were published in the form of a ranking in which Singapore came on top as the country with the best IT infrastructure of all, while Yemen, Laos and Afghanistan were stuck at the bottom of the list.

The huge discrepancy in IT capacity, combined with the shortage of talent, will complicate the efforts of Chinese businesses to maintain consistency in bookkeeping practices. Still, technology could play a key role in narrowing the digital gap, and the kind of technology most instrumental in this enterprise will be a cloud computing model in which a third-party provider hosts applications that customers can access via the Internet, said Liu.

He explained that China can employ its powerful cloud services to help countries with underdeveloped IT infrastructure to enhance their financial management capability.

Nonetheless, he conceded this endeavor might be held back by legal, cultural, political and educational constraints.

But to look on the bright side of things, this means there will be an opportunity for established IT players from China and other leading Asian economies to tap the market in countries with less desirable IT infrastructure.

The latter also stand to gain by investing relatively small sums on mobile telecommunications and financial shared services — steps that lead to better digital connectivity, said Liu.


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