Taking flight

In July 2010, Australian accounting and business advisory firm Hall Chadwick announced an alliance with China's eighth biggest domestically owned accounting firm, ShineWing Certified Public Accountants, creating Melbourne-based ShineWing Hall Chadwick.

It was a good fit for Hall Chadwick, which, as a member of AGNInternational, is part of an accounting network of 481 offices in 83 countries. Further, it was touted as a step towards building two-way trade between Australia and China.

But the announcement also confirmed ShineWing as the most unusual of China's top 10 accounting firms. It has no close internal ties to a western accounting giant, unlike PwC Zhong Tian or BDO Shu Lun Pan or, indeed, most of its other top rivals. Instead, it is expanding independently outside mainland China, with offices also in Japan, Singapore and Hong Kong.

In mid-2014, ShineWing Hall Chadwick is still a relatively small player in Australian accounting. But that may be about to change.

The rise of Zhang Ke

ShineWing was actually created out of Coopers & Lybrand China, a year after Coopers & Lybrand and Price Waterhouse merged to create the global behemoth PricewaterhouseCoopers in 1998. Following the merger, Coopers & Lybrand China managing partner Zhang Ke decided to break out and create his own firm – ShineWing. He took 60 of Coopers' local employees with him.

Today, according to China accounting expert Professor Paul Gillis, Zhang Ke is China's top private sector accountant, more powerful than any of the Big Four senior partners, and with strong connections to the central government.

In achieving this status, Zhang Ke employed a clear strategy: Chinese entities were expanding on to the world stage, so he wanted a firm that was Chinese-owned and Chinese run. He wanted an international partnership, along the lines of the globalised Coopers & Lybrand—but it would be a partnership on his terms. That extraordinary ambition has given ShineWing a head start on other Chinese accounting firms, which have only recently begun to expand outside China.

Flexible alliances

Zhang Ke's model keeps the overseas firms financially independent, despite a large investment from the Beijing headquarters. ShineWing does not reveal how much money it has put into its overseas operations, but the firm insists it has sufficient capital to fund the expansion.

In his book The Big Four And The Development Of The Accounting Profession in China, Gillis notes that ShineWing's strategy of opening foreign offices is unique in the Chinese market. Gillis, professor of practice and co-director of the IMBA program at Peking University’s Guanghua School of Management, describes ShineWing as fiercely independent. That independence makes it well suited to more flexible alliances. And that is what it has in Australia with Hall Chadwick.

Changing client base

Four years as a Chinese-Australian firm has not yet transformed ShineWing Hall Chadwick. Partner Matthew Schofield says the firm is growing but still forecasts revenues of just $5 million in 2014/15.

Its growth to date has mainly reflected the growth of its big clients, which include Yancoal, a subsidiary of China's Yanzhou Coal Mining Company. Yancoal is the biggest Chinese-controlled entity listed in Australia and is also the largest Chinese state-owned enterprise investor into Australia, with more than $6 billion worth of acquisitions over the past four years.

Other audit clients include state-controlled Guangdong Rising Assets Management, which recently made a $1.46 billion takeover offer for Brisbane-based copper and gold miner PanAust. The firm also worked on the $850 million Sichuan Tianqi Lithium acquisition of Talison Lithium Limited.

Right now, ShineWing Hall Chadwick has 25 employees and three partners in Melbourne. Its ambition is to have six partners next year, says Schofield, adding that it has also started changing its focus.

Schofield says the work for the past few years has been inbound, with ShineWing being the preferred auditor for Chinese companies investing in Australia. But now, he says, many Australian companies are approaching ShineWing to get into China.

“Australian companies now want us to hold their hand for China,” says Schofield. “A lot of agribusiness groups have approached us knowing it would open doors by connecting into our network.”

There is also interest from the finance and biotech sectors. Schofield says the firm is now well placed with Chinese investment growing in Australia, particularly in the resources, property, agriculture and financial services industries. And he tells Public Accountant it plans to be one of the top 10 accounting firms in Australia in five years' time. It is looking for acquisitions.

“It’s all about finding bolton opportunities to help us with agribusiness and biotech,” says Schofield. “It’s about ensuring we get professional accountants who are specialists in those areas.”

Schofield adds that ShineWing Hall Chadwick remains independent of its Beijing head office, but it gets a lot of support and staff from China when there are large acquisitions, particularly when it comes to translating issues of Australian Financial Reporting Standards back into the International and Chinese accounting standards.

Hall Chadwick National Association chairman David Fairfull says ShineWing's China base and clientele were not the only reasons for bringing the two firms together.

“It was a number of reasons across the board,” he says. “We met with them over there and a decision was made to involve them in the association.

“The members of the association are not about just clientele and what you can get out of it. It goes much further than that in terms of education, ability to swap staff between offices and all those things as if you were a top four firm. It's not just about zeroing in on Shine Wing's clients.”

Fairfull says there is a fair bit of interplay and support between the two firms. “We swap among our own association members and we all stick fairly closely together in helping each other out in whatever area it might be,” he says. “It’s not a ShineWing situation as such; it's a group situation that provides acrossthe-board abilities and services.”

The collaboration gives ShineWing Hall Chadwick greater access to Chinese investors coming into Australia. This allows it to be more competitive on cross-border business in the areas of audit, taxation, valuations and advice on IPOs. The key, he says, is ShineWing's relationships throughout SouthEast Asia – “we are able to use our associations with them to put clients that way”, says Fairfull.

What's next for ShineWing?

Zhang Ke's next target is South Korea and then possibly Taiwan. After that, he has his sights on the US and Europe – that would take some time, as both are enormous markets.

In the meantime, Chinese companies are expanding overseas, so a Chinese accounting firm in their respective markets would meet their needs. ShineWing has no option but to grow. ShineWing Hall Chadwick is part of a much broader story.