New accounting rules to boost China’s digital economy
China’s digital economy is expected to receive a boost next year when a new set of accounting rules come into force.
The new accounting rules will allow companies to include their data resources as either ‘intangible assets’ or ‘inventories’ in their financial statements.
Under the Interim Provisions on Accounting Treatment of Enterprise Data Resources, released by the Ministry of Finance, corporate data could be classified as intangible assets when these meet relevant requirements in accounting standards, while data held for sale in daily business activities could be recognised as inventories.
The new rules, which will take effect on January 1, are expected to have “a greater impact on companies that produce and purchase data, such as those in the computing and telecommunications industries”, according to research published by Beijing-based investment bank Citic Securities. That would include the country’s largest internet companies and telecoms network operators.
The report said the interim provisions are expected to help companies decide which data resources can be recognised as accounting assets and ascertain in which category they belong, according to a Finance Ministry statement.
The Ministry said the updated accounting rules are the latest initiative to help the development of the nation’s digital economy by applying commercial rules to information.
In March, Beijing unveiled plans for a proposed National Data Bureau, a new agency to be formed as part of a sweeping overhaul of government institutions under the State Council.
The Bureau will become China’s main economic planning agency, in charge of industrial policies. It will be responsible for, among other areas, “coordinating the integration, sharing, development, and utilization of data resources,” and “pushing forward the planning and building of a Digital China, a digital economy, and a digital society,” the State Council said.
In April 2020, the country’s policymakers certified data as a new production factor, putting it in the same category as land, capital and human labour.
This week Chinese Premier Li Qiang said during a State Council study session that the country would “strengthen, optimise and expand” its digital economy to empower high-quality development, according to a report by state media Xinhua News Agency.
Li indicated that the digital economy will enjoy broad development, thanks to China’s massive market, abundant data resources and rich application scenarios.
The value of China’s digital economy reached 50.2 trillion yuan (US$6.9 trillion) last year, which accounted for 41.5% of the nation’s economic output and ranked second globally behind the United States, according to a report in April by the China Academy of Information and Communications Technology.
Citic Securities report into the changes to the accounting rules said that, at present, data-related spending by enterprises are primarily categorised as costs or operational expenses, but such outlay can be capitalised to improve a company’s business performance after the rule takes effect.
Big Four accounting firm Deloitte added that the new rules will also increase the value of data resources held by enterprises, which would help these firms refine how they manage these assets and promote their application.
And according to official data from the China Academy of Information and Communications Technology, the size of China’s big data industry has grown rapidly over the past few years, reaching a value of 1.3 trillion yuan (£145bn) in 2021.
SMEs sector increase Q3 activity
China’s small and medium-sized enterprises recorded an increase in their activities in the third quarter of this year, according to recently published data.
The Small and Medium Enterprises Development Index, based on a survey of 3,000 SMEs from eight major industries, came in at 89.2 in Q3, edging up 0.2 from Q2, the China Association of Small and Medium Enterprises said.
It said: “The sub-indices for all eight major sectors remained lower than the boom-and-bust line of 100, but the transportation, postal and storage industry; the information transmission, computer service and software industry; and the accommodation and catering industry reversed the downward trend.”
The association said that data for the third quarter of this year “showed increasing positives”, but the foundation of recovery remained unstable.
It called for greater efforts in macroeconomic adjustment and control as well as countercyclical regulation to achieve solid economic growth.
