The convergence of Chinese accounting standards with International Financial Reporting Standards (IFRS): effects on economic growth

Abstract

The aim of this thesis is to describe and analyze the process of the convergence of Chinese accounting standards with International Financial Reporting Standards (IFRS) and its positive effects on the economic growth of China. In order to support this theory, the level of inward foreign direct investment (FDI) from 1997 to 2017 is evaluated. The first chapter serves as a general introduction on the Chinese economic growth from the economic reforms of 1979, aimed at transforming China from an isolated economy to a market-oriented system, until today. The agricultural and the industrial sector and the effects of the “open door policy” on foreign trade and foreign investment are discussed. The second chapter is a historical overview of the process of convergence of Chinese accounting standards with IFRS, divided into three phases: the introduction of the first reform in 1992, the harmonization phase with the 1998 and 2001 reforms and the convergence phase in 2006. The third chapter is a review of the main studies conducted on the relationship between the convergence with IFRS and FDI, between FDI and economic growth and between convergence with IFRS and economic growth both in developed and developing countries, including China. The fourth and final chapter firstly focuses on the definition of FDI in general and then, more specifically, on the main characteristics of FDI in China (sources, determinants and sectoral distribution). It secondly continues with the discussion of the impact of FDI on economic growth, by taking into account three main research areas: export promotion, income distribution and urbanization. Data collected show how economy grew faster in the period after the convergence, when the level of FDI was increasing at faster pace.