Li Huiqi is the Deputy Chair of Grant Thornton China and Managing Partner of the Grant Thornton China’s Beijing office, the firm’s largest. He is also an advisor to the Accounting Standards Committee of the Ministry of Finance and a member of the Financial Statement Auditing Professional Technical Committee of the Beijing Institute of Certified Public Accountants. Grant Thornton is one of the world’s largest professional services networks of independent accounting and consulting member firms which provide assurance, tax and advisory services to privately held businesses, public interest entities, and public sector companies.

With the onset of the pandemic, the introduction of the new “Dual Circulation” economic policy stressing domestic industry and demand, and a more competitive business environment overall, there has been much discussion about a shift of foreign business activity away from China. But in this interview, Grant Thornton China CEO Li Huiqi says he believes the narrative of foreign enterprises withdrawing is too simplistic, and that the Dual Circulation policy is really an extra opportunity to leverage the immense potential of the market. He also looks at the top compliance issues within China’s finance sector and highlights how the regulatory environment is likely to become even stricter than other regions in the future.

What impact did COVID-19 have on Grant Thornton China and to what extent do you see a revival in business activity?

COVID-19 has undoubtedly had a significant impact on all industries, but being able to adapt to the unexpected change and capture business opportunities that the situation created is the real test of the strength of a professional organization. It is undeniable that the pandemic has changed the business landscape globally and it has had an impact on Grant Thornton China and our customers, especially during the initial outbreak—from the end of 2019 to the first quarter of 2020—as it was our year-end peak season. To a certain extent, it affected our normal business development, including clients’ visits, on-site audits and routine office operations.

The pandemic forced us to change the way we operated. We accelerated plans for digital innovation, remote auditing, flexible office operations and online project management. We managed to accomplish all of this in a timely fashion. Keeping close communication with our clients during this period has helped to minimize the impact of the pandemic on our business.

With most economic activities returning to normal here, our clients’ industries have mostly resumed business operations, and they have also normalized technological innovation models that emerged during the pandemic.

Based upon Grant Thornton’s activities and the visibility that your firm has, how would you characterize China’s economy right now, and what do you see as the prospects for the next few years?

Even though the economic growth rate has stabilized, the overall quality of economic development has continued to improve. The economy has shifted from a state of rapid growth to a state of high-quality development, with industrial structures continuously upgraded and optimized.

The government has been emphasizing the Dual Circulation policy this year, and as a participant in the Chinese market economy, we are firmly optimistic about the overall state of the economy. In the next few years, despite the impact of adverse factors, such as the global pandemic, economic downturn and the complexity of the international environment, I believe the economy will achieve sustained and healthy development and that growth potential will be fully realized. The domestic market will become stronger, the economic structure further optimized and innovation capabilities significantly improved.

From our professional view, we are confident that we will see a gradual recovery in the next two to three years. For specific industries such as bio-medicine, health care, internet services and new infrastructure, we will continue to see accelerated development.

To what extent is China’s business consultancy market different from other major markets and why?

Even though the field of professional services in China developed later than in our Western counter parts, it has caught up quickly. The services we provide are diversifying, not only involving traditional financial services, but also management consulting, transaction services, taxations and evaluations.

Chinese and foreign professional services agencies are the same. Both provide clients with professional services in specific fields under the constraints of laws, regulations and the industry standards to help them achieve their strategic goals. Differences appear in different law and regulation systems in various jurisdictions, and the industry in which a company operates. These factors determine the service model and strategy of a professional services organization.

China is still one of the fastest-growing markets for the global management consulting industry, compared with mature markets like the United States. The market concentration level is relatively low, and while there is a gap between first-tier cities and second-tier cities, they are equal for every competitor in terms of opportunities.

Grant Thornton works with companies to ensure compliance. What are some of the most common compliance issues that tend to come up with companies with which you are working?

A typical compliance risk lies in the understanding of the latest policies, regulations and supervision systems, as well as the establishment of internal compliance systems and training.

How does the regulatory environment of mainland China compare to that of other places, especially Hong Kong and Singapore?

The regulatory environment in various countries and regions is becoming more stringent. The regulation of emerging industries, such as fintech, blockchain, digital currency and digital tax is also maturing to meet technological developments and market environment requirements.

Chinese accounting standards have become highly convergent with international standards in recent years. The new securities law has increased penalties for violations and increased accountants’ responsibilities. From this perspective, China’s regulatory environment is likely to become stricter than other regions.

China is opening the finance sector to foreign companies in many ways. What regulatory changes would you like to see in your area?

The opening of the financial industry to the outside world is an important part of China’s opening pattern. During the 13th Five-Year Plan period (2016-2020), the pace of the country’s financial opening has accelerated and shown remarkable results.

We would want to remove restrictions on the proportion of foreign shares held in the field of banking, securities, fund management and futures, and we would like to reduce restrictions on the scale of assets. At the same time, we want to see transformations to national treatment in the fields of corporate credit investigations, credit ratings, payments and settlements, and actively promoting international integration of taxation and transaction accounting systems.

According to the country’s 14th Five-Year Plan (2021-2025) and the long-term goals of the government, we will continue to promote the opening of the financial industry, the creation of a market-oriented and legal financial industry environment, improving financial regulatory capabilities and enhancing the professionalism and effectiveness of financial supervision. We want to improve the ability to prevent financial risk and adapt the regulatory capabilities to the level at which China is opening.

There has been a trend of Chinese companies delisting in the United States and coming back to the markets of Shanghai and Hong Kong. What impact has this had on your business?

The return of overseas-listed companies to the domestic capital market, or the choice of a domestic secondary listing, is a recognition of the maturity of China’s capital markets, and being optimistic, I think also good for the domestic capital markets in which they can be valued.

As one of the first firms registered with the Public Company Accounting Oversight Board (PCAOB) in the US, part of the first batch of firms to obtain share audit qualifications, and obtain securities and futures business qualifications, Grant Thornton China has extensive experience in serving listed companies.

With the implementation of the registration-based Initial Public Offering (IPO) system, the Science and Technology Innovation Board (STAR) and ChiNext, companies can raise capital in shorter timeframes, and more options are available in the market to investors.

Not long after the registration-based system [for IPOs] was introduced, Grant Thornton China assisted two of the first 11 companies that were listed on the STAR board. Recently we assisted Geely Auto, the first vehicle stock listed on the STAR board. It set a record speed—28 days from registration to the final listing—and our partners worked closely and collaboratively with the client and other service providers to close this success story.

People have been talking about a shift of foreign business activity away from China. To what extent do you see this in terms of your clients and other business activities?

I personally think that we should not see it as foreign enterprises withdrawing from the market. There are many factors behind the phenomenon, including the transformation of the economy. From the early labor-intensive industries to “Made in China” in recent years, the status of Chinese brands in the international market has significantly improved.

Meanwhile, in fields such as artificial intelligence, fintech, internet retail and industries that require advanced R&D and technology, Chinese companies are now well-positioned to become the best in their respective industries.

The commercial activities of foreign companies in China are more in a phase of strategic adjustment. They need to match the appropriate management strategy based on the needs of the enterprise itself and the industry it sits in.

The Dual Circulation policy is the hot topic of the moment. What kind of impact could it have on the business of foreign companies in the China market?

I believe the Dual Circulation policy is aimed at leveraging the enormous potential of the Chinese market. We must focus more of our efforts on the domestic market and to make good use of domestic trade to improve the Dual Circulation. It is through this that the domestic and international markets can cooperate better to promote a greater level of opening up.

With the bar limiting the access of foreign investments being further lifted, there are opportunities for China to optimize the business environment further and protect the legal rights of foreign enterprises.

By leveraging the geographical strength foreign enterprises have internationally, they can make perfect use of the Dual Circulation Policy to become the critical player connecting domestic circulation with international circulation.

In terms of your specific business, do you see Chinese auditing and compliance firms developing?

There will be growing needs from enterprises for professional services for sure. Moreover, accounting firms are also broadening their services portfolio to cater to growing demands.

The application of new technology and the complexity of financial operations makes high-level and standard accounting services a necessity, which is beneficial to the development of professional service organizations.

To what extent are local firms able and likely to compete with major international firms, such as and including, Grant Thornton?

The core of a professional service is people, because it is people who provide services. They know the local market environment well, and the legal and regulatory environment, related policies and industry updates. They even know the nuances and cultural aspects of clients.

Local firms and international firms each have their own competitive advantages, and clients will make their choice based on their stage of development. In a market like China, I think both parties can find suitable matches.

With four decades of intense local experience, Grant Thornton China serves many SOEs—state-owned enterprises—and listed enterprises. Moreover, Grant Thornton China leverages our international network to assist companies going abroad as well as foreign companies planning to invest in China.

People talk about a lack of transparency in corporate matters in China. How difficult is the work of auditing and compliance here compared to other jurisdictions?

Most Chinese companies today place great importance on internal compliance/corporate governance and transparency without external regulatory pressure. This change will help them to seek healthy and long-term growth.

The more we underline the importance of compliance, the more sound our cooperation with our clients is.