After 30 years of orthodox socialism, in 1979 China opened the door to a market economy. The unleashed entrepreneurial spirit and rapid accumulation of savings and investment led to unparalleled economic growth. Remarkably, investment, companies and even stock exchanges proceeded without accounting standards as known in the rest of the world. It would be another quarter century before Chinese accounting standards incorporated the fundamental accounting principles needed for guidance in the context of a modern, flexible, and ever evolving, market economy. The article attributes the lag to a combination of government control over accounting standards and the legacy of socialist concepts that equated accounting with bookkeeping rather than the modern accounting goal of accurately valuing both receipts and outgoings and the value of entitlements and obligations to reveal to current and prospective owners, investors, and lenders the true worth of an enterprise.

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