Based on the current exchange rate of RMB 8.28 yuan to one U.S. dollar, China is now the sixth largest economy in the world. Based on purchasing-power parity, it is the third largest economy after the United States and Japan. All this has taken place during a relatively short time. In fact, one can argue that true economic reform in China only started in the early 1980s.' - [M.W. LUKE CHAN, WENDY ROTENBERG]
The Chinese economic environment had shown rapid progress during 1991-1997, it could be said that China experienced double digit GDP growth. However, from 1997 and so on there were economic crisis, yet, the Chinese GDP continued to grow at a rapid rate of 7.8%.
Transparency and good supremacy have been the foundation issues observed in the post-crisis years, both in the circumstance of the 1997 monetary difficulties and the recent series of commercial scandals. This suits the accounting and audit profession where efforts have largely focused on "harmonizing standards" within APEC and ASEAN as well as for greater transparency and disclosure.
The Chinese financial catastrophe showed that insufficient accounting practices and lack of transparency in financial information still prevail in the region. Usual accounting may no longer adequately reflect the necessary information from the position of regulatory and internal corporate control. Strengthening of accounting and auditing function to properly manage risks is one major task to make the private sector and government agencies competitive and free from corruption.
In an internationalized economy, up-to-date accounting and auditing knowledge and skills are the basic institutional infrastructure for private enterprises as well as government agencies to promote good corporate governance and sound public management. The need for transparent information has been heightened, particularly in the situation of managing risks involved. Main challenges for the DMCs are to develop transparent and sound accounting practices to properly manage and regulate the private sector including banks.
An overview of the economic framework in China:
The economic system of China is based on the Interbank Lending Market, the negotiable instruments market and the Treasury bond repurchase market.
A nationwide unified interbank lending computer network was put into operation on a trial basis on January 3, 1996. The interbank lending market was not integrated preceding this date. The establishment of unified interbank market helped in connecting all interbank markets through out the nation.
A negotiable instruments market consists of commercial papers as their main instrument. Commercial paper activity started in China in 1981. Since 1981, commercial paper market developed gradually. The acceptance, rediscount and discount process of commercial paper has become standardized.
Commercial bills are also another instrument used in China. It has increased drastically in the past few years. Also, the discount and rediscount maturities have increased rapidly providing the funding needs of the national industry development policies and credit policies to flow.
Repurchase Transactions - Open Market Operations:
The central bank got involved into the