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(Ⅰ) Explanation of the Indicators of Marketization for Intermediary Organizations
To obtain the number of intermediary organizations and their structure within a country is very difficult for the following reasons: firstly, in modem society, the concept of intermediary organizations is so sweeping that it is hard to differ them from other organizations like nongovernmental organizations and mass organizations; secondly, intermediary organization are too diversified in forms; they dabble at politics, economy, society, culture, science and technology, education, and so on; thirdly, to catch up with tile constantly changing society and economy, intermediary organizations have to grow and change rapidly, thus making it impossible to explain and analyze the indicators in a fixed and standardized way. For this purpose, this chapter will try to define the scope of intermediary organizations as possible, and will illustrate the level of marketization of intermediary organizations in a qualitative way.
As regards the employed in intermediary organizations, most of them are freelance workers who bear relevant professional skills and knowledge to provide legal services for the society and obtain their remunerations thereof. In other word, they are independent, neither subordinated to any government or governmental authority.
1. Accounting Intermediary
All market economy nations think highly of the functions of the accounting intermediaries. This was determined by the duties that the accounting intermediaries are taken. Just like other countries do, China always regard accounting as an important means to tighten up economic administration, and has set up a national accounting system with new operational mode in conformity with the requirements of the market economy and international practices.
From the resuming of the profession of certified public accountant (CPA) and reestablishment of the CPA service market in 1980, China has achieved remarkable success. In 1991, the first national CPA examination was held; in 1994, the Law of the People's Republic of China on Certified Public Accountants was officially put into practice; the team of CPA grew stronger. By 2001, the Chinese Certified Public Accountants Association had absorbed 130,000 CPA members from over 4300 certified public accountants' firms, including over 50,000 practicing members and over 70,000 non-practicing members. The services provided by CPAs have covered auditing of financial statements (including annual check of industrial and commercial registration ), capital assessment, assets valuation, taxation agency, HR training, management consulting, annual check of foreign exchanges, acquisition and restructuring of enterprises.
In 1999, China amended the Accounting Law of the People's Republic of China again, highlighting the responsibilities of the persons-in-charge on the authenticity and integrity of the accounting work and accounting materials. The amendments intensified the accounting supervision system combining interior supervision, social supervision and state supervision as a whole, and put stricter punishments on acts in violation of accounting rules. Many overseas contemporaries consider these accounting reforms of China as the most typical example for the countries in economic transition and the developing countries.
The opening of the accounting market in China was accompanied by the accounting reforms and development. China has progressively opened its accounting market from 1980s by the following means: allowed foreign CPA firms to set their representative offices or member institutions in China and to apply for temporary practicing; allowed foreigners and residents from Hong Kong, Macao and Taiwan to take the national CPA examination, and entitled the qualified to apply for the membership of Chinese Certified Public Accountants Association. Thereby, many a multinational accounting company has set up their own member institutions in China and examinees from some 20 countries and regions have took the national CPA examinations. The five global accounting giants, namely, KPMG, Ernst & Young, Pricewaterhouse, Deloitte and Andersen, have launched their businesses in China.
2. Legal Intermediary
The services of legal intermediaries were resumed from 1970s. In 1979, to support the implementation of the Criminal Procedure Law, the lawyers' system was resumed and rebuilt, so with the notary system in 1980. Over twenty years of development, the legal intermediary service line of China has basically reached some scale. By the first half of 2002, China had had more than 48,000 legal intermediary service organizations, employing over 250,000 persons. These include over 9000 law firms and 120,000 lawyers, 3200 notary offices and some 20,000 notaries, 35,000 grassroots legal service institutions and 120,000 grassroots legal workers, and over 500 patent agencies and over 4000 patent workers. Various systems preliminarily erected, including professional access system, examination system, training system, working procedure system, practicing disciplinary system and punishing system. Meanwhile, China is still exploring the insurance system for practicing responsibilities and practicing venture funds system. From 1986, a strict national qualification examination system was carried out for the legal profession; later on, this system was promoted to other lines such as notary, patent agency, trademark agency, and corporate lawyers.
The legal intermediary service line presented a diversification pattern in terms of nature and forms. The pattern of monopoly by state-initiated organizations was dying out. At the same time, partnerships and corporate organizations sprang up bit by bit. No matter in which form, they were the same in terms of management and services. In the development of these self-disciplined industrial organizations, some industrial associations such as lawyers' associations, notaries' associations and patent workers' association were founded, and have begun to perform partial industrial administrative functions.
The coverage of lawyer profession was increasingly extended. At the first beginning when it was resumed, this line only provided criminal defense. But, now it has covered all aspects of politics, economy and social life, including all areas of the market economy, such as economy concerning foreign interests, finance, real estate, securities, and hi-tech industry. International cooperation was expanding. Till now, over 50 foreign law firms and 20 law firms from Hong Kong have set up their offices in the mainland. Additionally, this country has approved a dozen home law firms to establish branches in the US, Russia, Canada, Germany, Dutch, Australia, Japan and Singapore. Lawyers at home provided legal services for many foreign and overseas clients as well as for the Chinese clients. According to the imperfect statistics, when thousands of foreign-funded enterprises were initiated in China, over 80 percent had received legal services from Chinese lawyers. Overseas enterprises, including some from the top 500 multinational companies, employed Chinese lawyers as their attorneys or to provide legal services.
Now that legal intermediary services can make up the insufficiency of law awareness for the clients, speed up the spreading of the legal information and law awareness, the legal intermediary organizations have played an important role in intermediating the economic relations between different market entities, protecting the legal rights and interests of all the subjects in social life, maintaining fair transaction in the market, guaranteeing the implementation of the laws and regulations of the state, preventing the occurrence of and handling disputes, and maintaining social order.
3. Chambers of Commerce and Trade Associations
Intermediary organizations like chambers of commerce and trade associations bear some unique characteristics. As they are between social intermediary and market intermediary, in point of essence, they are self-disciplinary administrative organizations for enterprises within the trade as well as self-disciplined industrial administrators of intermediary organizations. Therefore, they are of great importance to preserve the market order, guarantee the quality of intermediary organizations and regularize their operations, control the number of intermediary organizations, and supervise the behaviors of the intermediary workers. At present, the trade associations and chambers of commerce are brought into the range of nongovernmental organizations. By the first half of 2002, over 230,000 nongovernmental organizations had been registered in China, including 134,000 mass organizations and over 100,000 nongovernmental non-corporate institutions. These organizations can be regarded as intermediary organizations in some way. Under this condition, they almost cover all areas, including social life, economy, culture, science and technology, education, law, etc.
Compared with other intermediary organizations, the chambers of commerce and trade associations of China are more tightly related to the government. This is caused by the following reasons: firstly, their functions were originally transferred from those of the government; secondly, they have some industrial administrative powers even undertake a few functions under the authorization of the government; thirdly, they are more evidently inclined to interests, which is the ultimate difference with other intermediary organizations. Notwithstanding, from an essential view, the chambers of commerce and the trade associations should be taken into intermediary organizations.
Through over twenty years' evolution, some nongovernmental or quasi-governmental chambers of commerce and trade associations have functioned favorably. For instance, the quasi-governmental associations of industry and commerce provide dual-way services to the government and enterprises, which indicate that they act as the intermediary between the micro and macro administration as they undertake some governmental functions and forward the opinions and recommendations of the enterprises; some non-governmental organizations, such as Chinese Association of Food Industry, Chinese Association of Packing Industry, Chinese Association of Non-Ferrous Metals Processing Industry, etc. , have launched many technical consulting, exchanges, trainings and development activities to provide high quality services for the enterprises in the corresponding industry that they serve.
The functions of the chambers of commerce and trade associations were being consolidated along with the transfer of the governmental functions. Above all, they gave full play to their dual functions of bridge and links between the enterprises and the government, production and consumption, by providing abundant dual-way services to both the government and their members. These can be seen from their behaviors. Firstly, participated in formulating industrial development plans and annual plans, and in advancing proposals to the government on important issues of industrial reforms and development to facilitate the government to made decisions. Secondly, coordinated the interior trade relations, worked out industrial regulations and rules, promoted industrial self-discipline and fair competition. Thirdly, organized commodity transaction activities, guided the circulation market onto a standard and orderly road, and promoted new marketing means and new commercial service lines. Fourthly, enacted and amended the standards for circulation enterprises and industries under the authorization of the state, and arranged the implementation work after approved by the competent governmental authorities. Fifthly, conducted industrial inspection and appraisal activities. Sixthly, undertook research administration, quality administration, quality recognition, and quality supervision within the trades, participated in the issuance of the production and operational licenses, and participated in enterprise qualification examination. Seventhly, responsible for counting circulation enterprises, collecting, analyzing and releasing market information, and establishing industrial information network. Eighthly, solicited international cooperation and exchange, assisted the members to explore the international market, introduced in cutting edge technologies, operational and management approaches and marketing strategies from other countries, as well as funds and projects. Thereby, the chambers of commerce and trade associations constructed a new mechanism for independently operating their businesses.
4. Insurance Intermediary
Although insurance intermediary has a history over a hundred years, it was just initiated in China after the reform and opening-up. Young as it is, it has experienced a rapid development in the following aspects:
The system for insurance intermediary was improved, the corresponding legal system was established mad the regulatory organizations came into being. With the promulgation of the Regulations of the People' s Republic of China on Contracts of Property Insurance by the State Council in 1983, the Interim Regulations on the Management of Insurance Enterprises in 1985, the Insurance Law by the National People' s Congress in 1995, and the Interim Rules on Insurance Management, the Rules on the Management of Insurance Agents (for Trial Implementation ), the Rules on the Management of Insurance Brokers (for Trial Implementation ) and the Interim Measures on the Management of Concurrent Insurance Agency, a legal framework was eventually constructed to which the insurance intermediary can resort.
The insurance intermediary system framework preliminarily took shape. Till now, China has had over 100,000 insurance agencies. More than 40 percent of the national premium incomes of property insurance came from the agents, while in life insurance the percentage reached 80 percent. The broker examination system has been established. The first insurance brokerage companies were registered in Beijing, Shanghai and Guangzhou in 1999. In March 2001, the first insurance evaluation company of China was established. From then on, a reliable independent evaluation system was established for the subjects of insurance. At the beginning of 2001, China Insurance Regulatory Commission approved once in all the establishment of 41 insurance intermediary organizations, thus making the total number of insurance intermediary organizations reach 56. In consideration of the existing 60,000 concurrent insurance agencies, the principal part of the insurance intermediary organizations of China has been preliminarily built up.
(Ⅱ) Coordination of Chinese Intermediary Organizations with Marketization of Economy
Generally, the development of intermediary organizations is in concert with the process of China's market-oriented reform and opening-up, which is demonstrated by the following aspects:
1. Intermediary Organizations Being the Outcome of the Market Economy. While reviewing the past twenty years of practices, we can see intermediary organization from nothing to something, from small to big. This process itself has revealed that intermediary organizations are developing in the process of marketization of economy. Market economy requires intermediary organizations whilst intermediary organizations provide better services for the development of market economy.
2. Intermediary Organizations Standardized Under the Framework of Market Economy. In respect of system selection, the progressive regularization and improvement of intermediary organizations in the past mainly results from the establishment of socialist market economy mechanism. All rules and regulations to underpin and improve the development of intermediary organizations were enacted and formulated under the framework of the socialist market economy mechanism, thus enabling the coordination between intermediary organizations and the market economy from legislation.
3. Intermediary Organizations Becoming Stronger in the Reform and Opening-up. Of all fields involved in the reform and opening-up, intermediary trade was opened up comparatively earlier. In the process of incubating and regularizing intermediary organizations, China has always attached much importance to absorbing and borrowing experiences from other countries. In recent years, more and more foreign intermediary organizations swarmed into China when seeing the remarkable achievements of the early birds.
(Ⅲ) Major Problems of Chinese Intermediary Organizations
Due to the rapid growth of intermediary organizations in China, the corresponding administrative legislation lags behind. Furthermore, as some functions that had been previously taken by some governmental authorities are gradually being transferred to intermediary organizations, some organizations are unable to adapt to their new roles at first. As a result, there are some problems in the intermediary line of China:
1. The Restriction Mechanism for Intermediary Organizations Still Has Room for Improvement. Some intermediary organizations lack adequate internal bylaws, producing false auditing and evaluating reports from time to time issued by some poor-disciplined workers. A few intermediary organizations axe not so independently. Some possess governmental background, and some others, though officially divorced from the governmental authorities, cannot adapt their practicing awareness and patterns to the development of China's market economy.
2. Scattered Practitioners, Small Scale of Intermediary Organizations and Low Quality of Services. As intermediary organizations have been standing for a short period since their resuming, they have a few employees, and insufficient assets, from RMB thousands to hundreds of thousand, maximum to a dozen million. Compared with the fellow traders in other countries with hundreds of million or billions of assets and being operated for decades or over a hundred years, they have a long way to go. Their business coverage is also limited. Normally they only run businesses in one region. There are few trans-regional intermediary organizations, let alone multinationals.
3. Various Qualification, Overlapping Services and Segmented Market. According to imperfect statistics, there are a dozen recognized intermediary practicing qualifications in China, including CPA, certified public assets appraiser, certified public taxation servant, certified public real estate appraiser, certified public land appraiser, project cost appraiser, price appraiser, lawyer, notary, patent agent, trademark agent, legal service worker, corporate lawyer, securities lawyer, corporate registration agent, land registration agent, etc. Provided these qualifications are assessed by different governmental authorities and trade associations, it may result in different qualification criteria and procedures, various verification criteria and industrial standards.
4. The Quality of Professionals in Intermediary Organizations Needs Improvement. Some practitioners are limited in knowledge, thus unable to provide the clients with satisfactory services. Furthermore, a few practitioners lack necessary professional ethics.
(China.org.cn November 7, 2003)
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