accounting & business (chinese edition)_january 2012

HOW MUCH?HigHligHts from ACCAs sAlAry survey

TAX TREATIES Proving residenCy stAtus in Hong Kong

MANAGEMENT tHe Art of diPlomACyYOUNG And Ambitious

CPDget verifiable cpd units by reading technical articles

FLOW OF FUNDSCHinAs new resourCe tAx boosts revenues

GET CONNECTED ACCountAnCy networKs Are good for business

INTERVIEW gilbert loKe of AsiA ProPerties inCINFLATION tiPs for strAtegiC PlAnning

DIVERSITY imProving CorPorAte PerformAnCe

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tHe mAgAzine for business And finAnCe ProfessionAls accounting and business CHinA 01/2012

CN_cover.indd 1 02/12/2011 12:27

A&B JanFeb 2012 (BS payroll) ol_output.pdf 2011/12/1 2:09:30 PM

THINK AHEADInflation has yet to reach worrying levels, but companies should start thinking about their strategies in dealing with the risks. Page 20

REACHING OUTAs international accounting networks become increasingly popular, what can you do to ensure that joining one translates into success? Page 40

NEW YEAR NEW JOBCheck out thousands of jobs and expert careers advice at www.accacareers.com

TECHNICAL WEBINARS

Automating internal reporting processes www2.accaglobal.com/automate

Integrated reporting www2.accaglobal.com/integrated

In this issues interview, Gilbert Loke, CEO of alluvial mining company Asia Properties, describes how he sees pollution in China as a challenge that his company is hoping to address through turning municipal waste into clean fuel. Page 12

TAXING TIMESRevamping a countrys taxation regime is fraught with difficulty. Compliance can be cumbersome and tax changes are often deeply unpopular, particularly if the general public objects for fear they will bear the brunt of any tax increase. By the same token, an attempt to boost local government revenues and reduce the tax burden on businesses can have distinct benefits.

In late 2011 the Chinese government announced a pilot scheme to replace its turnover tax a tax on the gross revenue of a business with a value-added tax in the transport sector and some service sectors in Shanghai from January. The city is trialling VAT on service sector businesses to assess its impact and give tax authorities some experience in application before the tax replacement scheme is applied nationwide. If successful, it will reduce tax in these sectors and boost growth in the countrys service industries.

A similar tax trial took place in Xinjiang Uygur Autonomous Region, the north-western province rich in natural resources when a resources tax was levied on oil and gas companies. The new tax was rolled out nationwide on 1 November 2011 (see our cover feature on page 16).

The Resources Tax has been stunningly successful in filling the coffers of local governments, generating expected revenues of 5 billion yuan in Xinjiang for 2011. But while underfunded local governments are rejoicing, consumers are less rapt; any tax on energy is likely to filter down to end users, despite the governments claims that consumers will not see any difference in energy bills.

The sticking point will come with any attempt to extend the tax to coal, which produces about three-quarters of Chinas power. While generating further revenue, a tax on coal could boost inflation and herald power outages; now that would be unpopular.

Colette Steckel, [email protected]

3Editors choice

CN_B_Edletter.indd 3 02/12/2011 16:15

Audit period July 2009 to June 2010138,255

Editor-in-chief Chris [email protected] +44 (0)20 7059 5966

Asia editor Colette [email protected] +44 (0)20 7059 5965

International editor Lesley [email protected] +44 (0)20 7059 5896

Chief sub-editor Eva Peaty

Sub-editors Peter Kernan, Vivienne Riddoch

Design manager Jackie Dollar

Designers Robert Mills, Jane C Reid

Production manager Anthony Kay

Advertising Jennifer [email protected] +852 2965 1432

Head of publishing Adam Williams

Printing Times Printers

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Editorial board Kelly Chan, Ronny Chan, Rosanna Choi, Jimmy Chung, Andy Lam, Horace Ma, William Mak, Janet O, Roy Tsang, Fergus Wong, Davy Yun

ACCAPresident Dean Westcott FCCADeputy president Barry Cooper FCCAVice president Martin Turner FCCAChief executive Helen Brand

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Accounting and Business is published 10 times per year. All views expressed within the title are those of the contributors.

The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or advertisers, or accept responsibility for any statement that they may express in this publication.

Copyright ACCA 2012 Accounting and Business. No part of this publication may be reproduced, stored or distributed without the express written permission of ACCA.

Accounting and Business is published by Certifi ed Accountant (Publications) Ltd, a subsidiary of the Association of Chartered Certifi ed Accountants.

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Features12 Urban alchemistCFO Gilbert Loke FCCA describes how his company is tackling pollution by turning waste into energy

16 Paying the price As the Resources Tax goes nationwide, will consumers bear the brunt?

20 On guardWith the threat of infl ation looming large, preparation is everything

24 All together now Workplace diversity is key to business success

28 Front of houseInternal audit is coming out from behind the scenes

30 Click onAs a training tool, e-learning is set to expand even further

32 World viewThe benefi ts of adopting IFRS are increasingly being felt around the globe

VOLUME 15 ISSUE 1

ACCA Beijing+86 10 6518 [email protected]

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AB CHINA EDITIONCONTENTSJANUARY 2012

CN_Contents.indd 4 05/12/2011 17:15

BRIEFING06 News in pictures A different view of recent headlines

08 News in graphicsWe show a story as well as tell it using innovative graphs

10 News round-upA digest of all the latest news and developments

VIEWPOINT23 Errol Oh Financial standards must be fl exible

27 Cesar Bacani Ernst & Youngs regional restructuring means greater governance

Regulars

CPDAccounting and Business is a rich source of CPD. If you read it to keep yourself up to date, it will contribute to your non-verifi able CPD. If you read an article, learn something new and apply that learning in some way, it will contribute to your verifi able CPD. Each month, we also publish an article or two with related questions to answer. If they are relevant to your development needs, they can also contribute to your verifi able CPD. One hour of learning equates to one unit of CPD. For more, go to www.accaglobal.com/members/cpd

WorldwideThere are six different versions of Accounting and Business: China, Ireland, International, Malaysia, Singapore and UK. See them all at www.accaglobal.com/ab

TECHNICAL44 Update The latest from the standard-setters

46 Change for the better A wide range of reforms are helping Asia weather the storms of the fi nancial crisis

48 CPD: IAS 36 Understanding the implications of an amendment on the size of cash-generating units

52 Choices, choices What are the options for, and tax implications of, setting up a business?

54 Proving residency A look at certifi cate of residence status

ACCA NEWS60 Take fi ve Our handy hints will help you plan your CPD for the year ahead

61 Dean Westcott Embrace technology to control our destiny, urges the ACCA president

62 International Assembly Senior members gathered in London to discuss the challenges that lie ahead

64 News ACCA Hong Kongs new members celebrate; ACCA Beijing welcomes delegation from the Ministry of Finance, Career Day brings rewards; roundtable considers the future of the fi nance function

66 Its easy online! ACCA is launching a fully online student service for exam registration, entry, dockets and results

Your sector35 CORPORATE35 The view from Paul Law FCCA of Luk Fook Group, plus news in brief

36 Delivering the goods How to keep large-scale projects on time and on budget

39 PRACTICE39 The view from Manohar Benjamin Johnson of PwC Malaysia, plus news in brief

40 Network know-how Local fi rms should make the most of international accountancy networks

CAREERS56 The art of diplomacy Top tips on getting along with colleagues

57 Young and ambitious Xin Chen of Diageo

58 World view ACCAs fi rst global salary and career survey shows high levels of career satisfaction among members

CN_Contents.indd 5 05/12/2011 15:11

01 Dissident artist Ai Weiwei handed over a US$1.3m bond to the Chinese government in order to start an appeal against a US$2.4m tax bill

02 Hong Kong Disneyland opened Toy Story Land, part of a US$500m expansion project

03 Olympus went into meltdown after admitting losses going back more than 20 years

04 Shoppers queued overnight to buy Versace-branded clothes from H&M in Shanghai

News in pictures6

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05 Thai government flood relief workers wore distinctive orange waterproof leggings at a public ceremony highlighting the countrys worst flooding in more than 50 years. The government announced a 100 billion baht recovery plan

06 Singapores former minister mentor, Lee Kuan Yew, proposed a S$100m bilingualism fund to promote the teaching of English and mother-tongue languages to pre-schoolers

07 A Christmas tree made of pure gold, worth 1.5 billion yen, went on display at Tokyo jeweller Ginza Tanaka. The gold used in the 2.4 metre-high tree weighed 12kg

08 Palestinian students from Jericho recreated Pablo Picassos Dove of Peace at the foot of the Mount of Temptation. The UN initiative to promote world peace was directed by aerial artist John Quigley

7

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STAYING POWERThe top three countries in the 2011 AT Kearney Global Services Location Index India, China and Malaysia have held their positions since the inception of the index, thanks to their deep talent pools and cost advantages. Asia ranks highly throughout the top 10.

M&A MARKET BUOYANTFinancial services mergers and acquisitions (M&A) in Asia are expected to accelerate in late 2011 and 2012, according to a new report from PwC, Emerging Opportunities: Financial Services M&A in Asia 2011. A large majority of 375 Asia-based senior executives are extremely bullish about the prospects for M&A in their market, with respondents from Malaysia among the most confident.

KEY:CHINA: US$16,733M IN 78 DEALSAUSTRALIA: US$10,442M IN 104 DEALSJAPAN: US$8,207M IN 104 DEALSSOUTH KOREA: US$6,514M IN 29 DEALSHONG KONG: US$5,453M IN 39 DEALSINDIA: US$2,054M IN 88 DEALSTHAILAND: US$1,326M IN 17 DEALSMALAYSIA: US$912M IN 18 DEALSINDONESIA: US$799M IN 51 DEALSTAIWAN: US$716M IN 15 DEALSSINGAPORE: US$547M IN 16 DEALSPAKISTAN: US$279M IN 8 DEALS

RANK: 32SINGAPORE

RANK: 3MALAYSIA

RANK: 2CHINA

40%Percentage of Chinese millionaires considering emigrating to the US, according to Knight Frank.

US$3.5BNAmount planned to be raised by Chow Tai Fook, the worlds biggest jeweller, in a Hong Kong IPO.

30%The leap in Chinas gold imports from Hong Kong in September.

4.5 LITRESAnnual per capita wine consumption in Hong Kong, the highest in Asia.

Mon

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RANK: 1INDIA

EASY BUSINESSSingapore has topped the Doing Business survey for the second year in a row. Through indicators benchmarking 183 economies, the report from the World Bank and the International Finance Corporation tracks changes in the regulations applying to domestic companies in 11 areas in their life cycle.

ASIAN FS M&A BY DEAL VALUE IN 2010

News in graphics8

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8.5%The percentage fall globally for the total tax rate for small and medium-sized enterprises since 2006, according to PwCs Paying Taxes 2012.

1.84%The percentage of UK gross domestic product reliant on accounts receivable finance, according to GE Capital.

50%The level of luxury purchases by Chinese consumers taking place overseas, of which half take place in duty-free shops.

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Corporate tax 2011

Indirect tax 2011

Corporate tax 2010

Indirect tax 2010

HEAVY-HANDED TAXATION MAKES WAY FOR THE LIGHTER TOUCHAccording to KPMG Internationals annual Corporate and Indirect Tax Survey, corporate tax rates have been steadily falling for a decade, while goods and services tax (GST) and value added tax (VAT) systems have been introduced, rising to higher rates and applying to more items as indirect tax systems mature.

1 ASIA: DOWN FROM 24% 2 LATIN AMERICA: DOWN FROM 25.3%3 EUROPE: UP FROM 20%4 OCEANIA: DOWN FROM 24.2%5 NORTH AMERICA: DOWN FROM 23.7%6 AFRICA: SAME AS 2010

7 ASIA: UP FROM 11.6%8 LATIN AMERICA: DOWN FROM 13.9%9 EUROPE: SAME AS 201010 OCEANIA: UP FROM 12%11 NORTH AMERICA: SAME AS 201012 AFRICA: UP FROM 13.9%

KEY

GLOBAL FRAUDDespite a significant drop in fraud cases, global executives are reporting increased vulnerability to nearly all types of fraud, according to Krolls Global Fraud Report, conducted in conjunction with the Economist Intelligence Unit and surveying the sentiments of more than 1,200 senior executives worldwide.

1 Corruption and bribery 2 Money laundering 3 Internal financial fraud or theft4 Vendor, supplier or procurement fraud5 Regulatory or compliance breach

6 Theft of physical assets or stock 7 IP theft, piracy or counterfeiting8 Management conflict of interest9 Financial mismanagement10 Information theft, loss or attack

22.8%ASIA

1

2

25.1%LATIN

AMERICA

3

20.1%EUROPE

4

23.8%OCEANIA

5

22.8%NORTH AMERICA

6

28.3%AFRICA

7

11.7%ASIA

8

12.8%LATIN

AMERICA

10

12.5%OCEANIA

12

14.2%AFRICA

44%

41%40%

39%38%

25%

50%47%

46%

1 2 3 4 5 6 7 8 9 10

KEYXX% Incidences of fraudXX% Percentage who see themselves as highly or moderately vulnerable

42%20%

4%

10%11% 16%

19%19%21% 23%25%

11

5%NORTH AMERICA

9

19.7%EUROPE

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INT_B_graphics.indd 9 02/12/2011 15:13

CHINAS RICH KEEN TO RELOCATEAlmost half of Chinas super-rich are thinking of emigrating for a better lifestyle overseas, according to a survey by The Bank of China and Hurun Report. The survey found that 46% of 980 millionaires surveyed may move for social factors such as Chinas one-child policy, food safety, high living costs and a desire for better medical treatment. Most are also seeking a better education for their children.

SHANGHAI GEARS UPThe Shanghai Stock Exchange is basically ready to allow foreign listings, according to an official from the Chinese regulator. Bloomberg reported that while no timetable has been set, the bourse has finished work on the necessary technological and regulatory requirements. Until now, a possible Shanghai international board has been hampered by jurisdictional, accounting and regulatory obstacles.

TRADE NET WIDENSThe US and eight other Pacific nations agreed on the framework for a new

free-trade pact during the Asia-Pacific Economic Cooperation (APEC) forum in Honolulu. The new Trans-Pacific Partnership (TPP) is the result of two years of negotiation with Singapore, Chile, Australia, Peru, New Zealand, Malaysia, Brunei and Vietnam. The Wall Street Journal reported that Chinese president Hu Jintao says TPP could help forward Chinas trade goals in the region, while US president Barack Obama commented that the US is a Pacific power and we are here to stay.

ALL WORK, NO PLAYHong Kong office workers stay later than any of their peers and are more likely to bring work home with them. In a global study, over half (57%) of respondents surveyed in Hong Kong work nine or more hours per day, while around 40% regularly take work home to finish in the evening. Hans Leijten, regional vice president for East Asia at Regus, a provider of flexible workspaces, said the study found a clear blurring of the line between work and home. The long-term effects could

be damaging both to workers health and to overall productivity.

VISA-FREE ACCESS PROPOSEDChief executive Donald Tsang has asked the US to grant visa-free access to Hong Kong special administrative region passport holders. Rounding up his US trip in Hawaii in November, Tsang said he made the suggestion to US secretary of state Hillary Clinton, who reacted positively. No timetable has been agreed so far, however. He also talked about the possibility of abolishing double taxation for Hong Kong-US businesses.

VAT BEGINS ROLL OUTChinas Ministry of Finance has announced that the mainland will start replacing its turnover tax with a value-added tax (VAT) in the transport sector and some service sectors in Shanghai from January 2012. The announcement came after the State Council approved the pilot programme in a bid to push forward structural taxation reduction and boost growth in the countrys service industries.

HELP URGED FOR SMESThe Chinese government should cut tax and loosen regulation of its financial system to solve problems that small- and medium-sized enterprises (SMEs) are currently facing, according to delegates at the China Hi-tech Forum in Shenzhen in November. Hai Wen, an economics professor and vice-president of Peking University, said that the government needed to cut tax rather than resort to monetary tightening in order to curb inflation caused by rising cost. Too much tightening would make small enterprises unsustainable, he said.

CHINESE BROKERS EXPANDChinas largest securities brokers are eyeing overseas expansion and listing opportunities, according to KPMG China. The firms latest annual survey of 106 securities brokers notes that the sector has continued to grow in 2011 as recent regulations have enabled expansion out of traditional

IMF CALLS FOR REFORMThe Chinese financial system is robust overall, but faces a steady build-up in vulnerabilities, the International Monetary Fund (IMF) has found. In its first formal review of the mainlands financial system, carried out jointly with the World Bank, the IMF cited bad loans, booming private lending and sharp falls in property prices among the risk factors. Jonathan Fiechter, deputy director of the IMFs monetary and capital markets department, said that further reforms are needed to support financial stability and encourage strong and balanced growth. Chinas banks and financial sector are healthy, but there are vulnerabilities that should be addressed by the authorities. While the existing structure fosters high savings and high levels of liquidity, it also creates the risk of capital misallocation and the formation of bubbles, especially in real estate.

According to the IMF, Chinas financial structure could create bubbles in sectors such as real estate

10 News round-up

CN_B_newsroundup.indd 10 02/12/2011 12:25

P20

President Hu Jintao (centre) at the APEC CEO summit, held in Honolulu in November

revenue streams into new ones, such as margin financing, short selling and asset management. Increasingly, securities brokers are looking to Hong Kong to diversify their financing channels and lay a foundation for future international business.

HK CONFIDENCE HOLDS STEADYBusiness optimism in Hong Kong has been only mildly dented by global troubles, falling just 4% in the latest International Business Report (IBR) released by Grant Thornton Jingdu Tianhua. While the net global business optimism has collapsed from +31% to +3% the worst since 2009 Hong Kong registered a much milder decline in the last quarter compared to most key international finance centres and developed economies.

TOP FIRM EYES AUSTRALIAChinas biggest domestic accounting firm, ShineWing, is building a global group and heading to Australia, newspaper The Australian reported. It quoted Zhang Ke, the firms founder and chairman and vice president of the Chinese Institute of Certified Public Accountants, as launching his national association there with well-established Australian accountants Hall Chadwick, creating ShineWing Hall Chadwick.

CHINESE ECONOMY SLOWSA government think tank predicts the Chinese economy to grow 8.5% in 2012, down from an expected growth rate of 9.2% in 2011. Investment in China is expected to grow 20% next year, said Lu Zhongyuan, deputy director of the Development Research Center of the State Council. Domestic consumption is forecast to accelerate in 2012 with an improved employment situation, and exports are expected to slow, he said. Investment, consumption and exports are seen as the primary factors in economic growth. Next years annual consumer price index (CPI) is expected to be 4.5%. Slowing growth is reasonable and acceptable as China shifts towards more sustainable development, Lu said.

WOMENS POWER GROWSChinese women are gaining importance in the boardroom, according to a global report by Deloitte, citing the Program for the Development of Chinese Women, a government initiative to boost the role of women in the economy and promote female education. Currently, women only account for 8% of the total number of directors of the top 100 domestic companies in China. Over the long term, we can expect a continuous increase in the number of female executives in China, said Danny Lau, Asia Pacific managing partner of enterprise risk services at Deloitte.

HEDGING THEIR BETSErnst & Young sees significant opportunities in the development of hedge funds in Asia Pacific. Hong Kong and Singapore are sophisticated hedge fund markets and will continue to perform, while there are significant opportunities in emerging markets such as Taiwan and Korea, said Roy Stockell, head of asset management, Asia Pacific at Ernst & Young. It is clear that the regulators want more transparency and more independence around the governance of the managers, he said, adding that hedge funds will begin to resemble their colleagues in the traditional space in terms of governance, transparency and risk management.

CEOS DRIVE CHANGETwo-thirds of CEOs surveyed by PwC believe that leaders of the 21 Asia-Pacific Economic Cooperation (APEC) economies should play a key role in eliminating trade barriers within the region. In addition, 63% of the 320-plus Asia-Pacific CEOs surveyed said that establishing free trade among their nations is critical to the success of their companies.Doing business in domestic Asian markets is quickly becoming the main

avenue for growth in the APEC economies, said Dennis Nally, chairman of PwC International, ahead of the APEC CEO summit held in Honolulu in November. Free trade among all the nations in the region will reduce their reliance on low-cost manufacturing for export to more mature economies. To drive growth, CEOs want to expand in Asias fast-growing consumer markets and to extend their presence in the evolving markets for services. More business leaders (44%) are making their largest investment over the next three to five years in China over any other APEC economy. Nearly a third of planned investments are targeted at expanding capabilities in services by investing in managerial, research and development and financial operations in China.

11AnalysisFIVE TIPS TO PLANNING FOR INFLATIONInflation is heating up enough for some finance experts to warn that companies should start taking it into account in their strategic planning, which is causing economists and consultants to dust off old books for guidance.

CN_B_newsroundup.indd 11 02/12/2011 12:26

12 CFO interview

CN_F_Loke.indd 12 02/12/2011 12:27

Gilbert Loke always knew a degree in accounting would take him places. What he couldnt imagine, as a young

man studying at university in London, would be just how far.

By his own description, Malaysian-born Loke wears a few hats. Among them, hes a fellow member of ACCA, owns his own accountancy firm Falcon Certified Public Accountants, with offices in Hong Kong and Shenzhen on the Chinese mainland and holds two CFO positions in a US company expanding into Asia.

His newest hat fits him well. It enables Loke to have a positive influence on an issue close to his heart

the problem of pollution in China.Loke was appointed CFO of Asia

Properties Inc (API) in May 2011, a junior mining and exploration company focused on the alluvial gold mining and resources sector.

We invest in exploration mining claims as well as existing mines as opportunities present themselves, he explains. More mines are on the radar, to meet Chinas insatiable demand for commodities.

But as the company explores potential gold mines in Canada and the Philippines, it is in the throes of diversifying, and it is the new directions that excite Loke the most.

Property development, for example. As API prepares to embark on its first

property venture, a greenfield resort project in Thailand, Loke thinks it natural that, as a miner, the company would look to abandoned mines as the sites for its property development. Why not, he shrugs, seeing this as the ultimate way to recycle land others may consider worthless.

From tin mine to cityIts not as if it hasnt been done before. Loke points to the remarkable transformation of the worlds largest tin mine, located just outside Kuala Lumpur, into one of the most popular attractions in Malaysia.

The land had been mined for over 100 years, but when its underground

bounty was spent, the owners simply walked away, leaving a gaping hole in the landscape 2km long, 1km wide and 200 metres deep. It was an unwelcome eyesore so close to a major capital city. But as the crevice began to fill with rainwater, a visionary developer saw its potential. He built the now-famous Mines Resort City, an ambitious complex comprising an 18-hole golf course, six-star hotel and spa, a massive shopping mall, theme park, apartments and business park, all designed around two great lakes. Mines Resort City is home to the seven wonders of Malaysia including Palace of the Golden Horses, billed as Asias most extraordinary hotel and Malaysia International Exhibition &

URBAN ALCHEMISTGilbert Loke FCCA, CFO of alluvial mining company Asia Properties Inc, has his sights set on turning municipal waste into fuel something arguably more precious than gold

WE FULLY EXPECT TO GO TO LISTING. OUR AIM ISTO COLLECT 1,000 TONNES OF GARBAGE PER DAY THE EQUIVALENT WASTE OF ONE SMALL CITY

The CV2011

Appointed CFO of Asia Properties Inc and its biofuel investment arm, Sino Bioenergy.

2010Established Falcon Certified Public Accountants.

2007Moved to Hong Kong to develop CCH Sawadai Group. Joined CPP Global as financial controller.

1998Joins Hymajor Auto Supplies in Malaysia as finance and business development director.

1990Moved to Hong Kong to join Loke Hoi Lam & Co, CPA.

1981Started accounting training at Hacker Young, Chartered Accountants, London

13

CN_F_Loke.indd 13 02/12/2011 12:27

Convention Centre, the venue chosen for many of Malaysias leading events.

Loke would love to see API get its hands on such a rough diamond. He says the company is on the lookout for opportunities, and hopes its first project could start within a year.

Even closer to fruition is his goal to promote the use of biofuel in China.

The Sino Bioenergy business model is based on solving two urban problems at once, by turning municipal waste into clean fuel. Loke calls the product the company is refining reusable energy.

Its hard to imagine that the small, brown pellets Loke holds in the palm of his hand once occupied the earth as a pile of worthless garbage, but such is the power of environmental technologies. Theres no smell, and even though it burns well, this fuel is pollution-free, Loke says. The fuel is bacteria-free, burns more efficiently than coal, and also is cheaper than coal. The aim is to sell it to power plants. And theres more to the products potential it can also be used as compost for farms.

Sino Bioenergy has refined the technology, established a production plant, and is in negotiation with several

The tipsSomewhere in his busy working schedule, Loke finds time to give back to the profession that has served him so well. A fellow member of ACCA, he lectures on business analysis (Paper 3) in Hong Kong, and teaches part-time at Hong Kong Universitys School of Professional and Continuing Education.

Seeing students pass their exam and get a job is satisfying, Loke says of his continued ACCA involvement. He adds that his own ACCA Qualification helped me to get into the profession in the UK, and enabled me to come to Hong Kong.

ACCA is a portable qualification, international, and well-recognised by the Hong Kong government. Its the reason I got my first job in Hong Kong without it, I would have had to go through the whole [training]process again.

Looking back over a 30-year career, this multi-skilled CFO has no regrets about his choice of profession. He agrees that now is a very good time to have an accounting degree, with the range of opportunities opening up in companies of all sizes, especially in Hong Kong and China.

His advice to young accounting professionals? With ACCA you can go anywhere just look at where it has taken me.

The basicsAPIAsia Properties Inc (API) was established in 1998 as a junior mining and exploration company focused on the alluvial gold mining and resources sector.

It has since diversified into resort property development and, via biofuel investment arm Sino Bioenergy, is developing clean energy solutions for China. API is a Nevada corporation and trades on the OTCQB under the symbol ASPZ.

Like many, Loke worries about the coal-burning smog that chokes the air in Chinese cities, and the mountains of urban waste generated each day in the worlds most populous nation. Sino Bioenergy, another arm of API, of which Loke is also CFO, addresses these problems through its investment in bioenergy.

ACCA IS THE REASONI GOT MY FIRST JOB INHONG KONG WITHOUTIT, I WOULD HAVE HADTO GO THROUGH THEWHOLE PROCESS AGAIN

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CN_F_Loke.indd 14 02/12/2011 12:28

Chinese municipal governments to harvest their cities waste. All thats needed is an investor to take the product to market, Loke says.

Therein lies possibly the greatest challenge of his career so far. As CFO, it is Lokes role to sell what he calls the big vision to the people with money. And were not just talking mum and dad investors, but serious, joint-venture capital.

Oh yes, its a very big challenge: were a young company, developing new technology which hasnt had exposure before, he says.

Road to fundingLokes strategy has been to start with roadshows, which have been held so far in the UK, Malaysia and Philippines. We have to look abroad for finance, he says. We dont want a Chinese partner, as they would want control. What we

need is a hands-off overseas investor: one big partner who will just leave the whole thing to us.

How much is he talking about? Initially, around US$20m, Loke responds, adding that its not easy it takes a lot to convince people.

Nevertheless, there has been interest, which Loke is stoking. There are people [interested in investing], but the terms are not right. We have to look at finance where the terms and conditions are just right.

Meanwhile, the company has proceeded with developing its prototypes, having patents approved, and lining up government contracts.

It is also moving forward with exploration of other environmental applications such as creating a liquid version so that households across China, which currently rely on bottled liquefied petroleum gas for cooking,

can use cleaner fuel at home.Loke shares the companys

ambitious plans. We have land and a factory in China, and are now raising finance for the plant and equipment, he says. The potential is big we fully expect to go to listing. Our aim is to collect 1,000 tonnes of garbage per day the equivalent waste of one small city and thereby make a contribution to society.

Loke also plans to talk to the Hong Kong government, which also faces a massive waste problem, and will use Hong Kong as the ventures fundraising platform. He is determined to accomplish his goals and vision for this project, to help solve a national garbage problem and contribute to cleaner air. One of my personal mottos is to aim high, he says.

Peta Tomlinson, journalist

15

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The new Resources Tax, recently expanded across China after more than a year of trials, aims to help municipal

governments benefit from a boom in the price of natural resources.

The Chinese government says that large national oil companies will be hardest hit and insists that the wider economy wont be affected.

But while executives in companies in a range of sectors outside power production, from retail to manufacturing and distribution, say the new tax has not impacted them, analysts say that higher costs will, sooner or later, filter down to consumers from the affected corporations.

They will pass through the cost to the consumers who buy these resources, says Helen Lau, an analyst at UOB Kay Hian in Hong Kong.

More than just a tax on oil and gas, the levy has been expanded to include iron ore, coking coal and rare earth ore. Coal, widely used among the general public, is not included. In all cases, the tax is based on sales, changing the traditional approach of taxing resources based on volume of production.

China is looking to translate higher resource prices into more revenue for underfunded local governments, which account for about 80% of all government spending, but receive less than half of the funding.

When the tax was first piloted in the resource-rich Xinjiang Uygur Autonomous Region in June 2010,

revenue grew exponentially (see box, overleaf). In December 2010, the trial was extended to 11 provinces and the new tax was rolled out nationwide on 1 November.

It is a local tax collected by local governments. They are the main beneficiaries, says Christopher Xing, a partner at KPMG in Hong Kong. This could become a significant source of revenue, he adds.

Retail price protectionThe Chinese government, which is fighting a battle against inflation, says the new tax will not impact downstream businesses or consumer prices. In a joint statement, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) said the tax will hit oil and gas producers such as PetroChina, China National Petroleum Corp and Baotou Steel Rare Earths. Analysts quickly slashed earnings forecasts for most of these companies. The tax has also replaced the royalties that foreign-invested onshore and offshore oil and gas fields paid. That means the new tax will also affect companies like Shell, Chevron, BP and smaller independent companies, although to a lesser extent.

The changes to the tax system were first discussed in 2007 but were delayed to avoid inflationary pressures. Similar concerns again led to delays in 2008, when energy producers were hit by the global financial crisis.

The State Council, Chinas cabinet, announced the implementation of the new tax on oil and gas in early October. On 24 October, the MOF and the SAT announced rare earth ores and coking coal, used in steel production, would

FUELLING COSTS

[THE HIGHER PRICES]WILL ULTIMATELY BEREFLECTED IN THESUPPLY CHAIN ANDBE BORNE BY THECONSUMER

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CN_F_resourcetax.indd 16 02/12/2011 12:28

also be included. The MOF then set the rate for oil and gas at 5% of sales and a start date of 31 October. The MOF also set standard rates per tonne on sales of coking coal and rare earths.

Under the old system, created when prices for resources were much lower, producers had to pay a set fee for every ton of oil or metric tonne of gas. The system made it hard for tax collectors to benefit from the rapid rises in the prices of these commodities, but kept taxes relatively low. The new tax, based on sales volume and with revenues going to local governments, marks a significant change.

Decree No. 66, issued jointly by the MOF and SAT, revises the Implementation Rules for the Provisional Regulations of the PRC on Resource Tax, issued in 1993. The new rules, the Resource Tax Provisional Regulations, bring in six key changes, says KPMG.

Six main changesThe first sets a 5% provisional tax rate on oil and gas resources. The second includes provisional tax rates on coking coal at 8 yuan per tonne, 60 yuan per tonne on light rare earth ores like bastnaesite and monazite

Chinas new Resources Tax does not currently extend to coal, but analysts are speculating if it will in the future.

Coal-fired plants produce about three-quarters of Chinas power. Most lose money because what they pay for the coal is much higher than what they can charge for the electricity they produce.

The biggest consumer of coals is the power plants, says Helen Lau, an analyst at UOB Kay Hian.

Spot coal at the ports is now worth about 850 yuan/tonne. Anything much higher than 300 yuan/tonne the price of contract coal set by the government and plants lose money, says Lau. The government sets electricity prices regardless of the price of coal, so plants cannot raise their prices.

The higher the price of coal, the more money plants lose. And, because they dont want to lose money, they produce less. The result is power shortages.

In theory, coal producers should fulfill their contracts and sell the coal at the contract price set by the government, but this price is so much lower that mines either break the contracts or refuse to sell at that price, says Lau.

Expanding the tax to coal would require the government to raise prices not only for contract coal, but for electricity across the country, which would create not-insignificant inflationary pressures, says Lau.

*COAL: NEXT ON THE GOVERNMENTS LIST?Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not currently extend to coal, but analysts are Chinas new Resources Tax does not 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Coal-fired plants produce about three-quarters of Chinas power. Most lose money because what they pay for the coal is much higher than what they can





Coal-fired plants produce about three-quarters of Chinas power. Most lose Coal-fired plants produce about three-quarters of Chinas power. Most lose money because what they pay for the coal is much higher than what they can







Coal-fired plants produce about three-quarters of Chinas power. Most lose money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can













































Coal-fired plants produce about three-quarters of Chinas power. Most lose money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can

The biggest consumer of coals is the power plants, says Helen Lau, an

money because what they pay for the coal is much higher than what they can


money because what they pay for the coal is much higher than what they can money because what they pay for the coal is much higher than what they can














































money because what they pay for the coal is much higher than what they can charge for the electricity they produce.


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money because what they pay for the coal is much higher than what they can charge for the electricity they produce.money because what they pay for the coal is much higher than what they can charge for the electricity they produce.charge for the electricity they produce.
























money because what they pay for the coal is much higher than what they can charge for the electricity they produce.money because what they pay for the coal is much higher than what they can charge for the electricity they produce.money because what they pay for the coal is much higher than what they can charge for the electricity they produce.charge for the electricity they produce.















The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an analyst at UOB Kay Hian.








The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an analyst at UOB Kay Hian.










The biggest consumer of coals is the power plants, says Helen Lau, an The biggest consumer of coals is the power plants, says Helen Lau, an analyst at UOB Kay Hian.




Spot coal at the ports is now worth about 850 yuan/tonne. Anything much higher than 300 yuan/tonne the price of contract coal set by the government







Spot coal at the ports is now worth about 850 yuan/tonne. Anything much Spot coal at the ports is now worth about 850 yuan/tonne. Anything much higher than 300 yuan/tonne the price of contract coal set by the government












Spot coal at the ports is now worth about 850 yuan/tonne. Anything much Spot coal at the ports is now worth about 850 yuan/tonne. Anything much Spot coal at the ports is now worth about 850 yuan/tonne. Anything much higher than 300 yuan/tonne the price of contract coal set by the government

































analyst at UOB Kay Hian.Spot coal at the ports is now worth about 850 yuan/tonne. Anything much

higher than 300 yuan/tonne the price of contract coal set by the government Spot coal at the ports is now worth about 850 yuan/tonne. Anything much


analyst at UOB Kay Hian.Spot coal at the ports is now worth about 850 yuan/tonne. Anything much Spot coal at the ports is now worth about 850 yuan/tonne. Anything much



higher than 300 yuan/tonne the price of contract coal set by the government




analyst at UOB Kay Hian.Spot coal at the ports is now worth about 850 yuan/tonne. Anything much Spot coal at the ports is now worth about 850 yuan/tonne. Anything much



analyst at UOB Kay Hian.Spot coal at the po

accounting & business (chinese edition)_january 2012

Documents

new tax

resources tax

tax burden

valueadded tax

turnover tax

tax changes

tax authorities

tax increase