Accounting professor Paul Gillis published on his weblog the annual top-10 accounting firms in China for 2015, based on audit revenue. PwC is still leading the pack, but might lose its no.1 position soon, and drop, like the other three foreign audit firms, losing ground to domestic competition, he predicts.
There was a shakeup in the Top 10 firms. PwC remains #1, but is likely to fall to #2 Ruihua in 2016. Ruihua is a member firm of both RSM and Crowe Horwath. Deloitte slipped from #2 to #4, falling behind both Ruihua and BDO. Grant Thornton replaced UHY Vocation in the #10 slot with remarkable growth of 32.5%.
The accounting market in China remains highly competitive. The Herfindahl Hirschman index of market concentration fell slightly from 446 to 444, well below the level of concentration in Western economies which tends to be above 1500.
The Big Four face a challenging market in China. Overseas IPOs of Chinese companies have slowed, and that was a market that the Big Four owned. The Big Four has not found the key to unlock the A share market, which is dominated by local firms. The biggest challenge for the Big Four comes in 2020, when the next big round of mandatory audit rotation for large state owned enterprises occurs. I think it is likely we will see some of the rapidly growing local firms winning audits of some of China’s flagship companies.
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