More than 30 Chinese companies have cut ties with PwC under pressure from Beijing over the Evergrande scandal

PwC has seen a significant loss of major clients in China due to pressure from Beijing, which urged state-owned companies to cut ties over the auditor’s involvement with troubled property developer Evergrande.

In recent months, China’s Ministry of Finance has issued ‘window guidance’ (informal, verbal instructions) to some of the largest state-owned financial institutions, advising them to end their relationship with PwC, Reuters reports.

Recent company filings show that prominent clients such as Bank of China, China Life Insurance, PICC, China Taiping Insurance and China Cinda Asset Management have all parted ways with PwC. This trend has resulted in PwC losing more than thirty companies listed on the Chinese stock market by 2023 alone.

These departures have resulted in significant financial losses for PwC, amounting to hundreds of millions of dollars in lost fees. For example, the Bank of China paid PwC $28 million for audit services last year. In response, PwC China has taken cost-cutting measures, including reducing headcount and partner wages.

The Ministry of Finance, which owns significant shares in many of China’s largest financial institutions and oversees auditors, is believed to be driving these changes. However, PwC partners in China remain uncertain whether these customer losses are driven by regulators or by independent decisions by the companies. PwC China refrains from commenting on the situation.

PwC China, the group’s third-largest networking company with about 20,000 employees, is under scrutiny over its 14-year tenure as Evergrande’s auditor. Evergrande, once China’s largest real estate developer, defaulted on its debts of more than $300 billion in 2021, sparking widespread market panic and a series of defaults in the real estate sector.

Chinese regulators said this year that Evergrande had committed fraud, overstating its revenue by tens of billions of dollars between 2019 and 2020, and ordered the company’s liquidation.

In 2022, the Ministry of Finance advised Chinese companies to be “extremely cautious” about hiring accountants with recent fines or penalties. This directive is part of a broader strategy by Beijing to reduce dependence on the Big Four global accounting firms and promote local accountants from China or Hong Kong, with the aim of improving data security and reducing Western influence.