Article Link: https://www.bbc.com/news/articles/cje2ejnwwx9o
On September 13th British Accounting powerhouse, Pricewaterhousecoopers, or PWC, was notified that their Chinese branch was being banned for 6 months. This is because of their auditing of the Chinese real estate giant Evergrande which collapsed in January. This company, the largest company in China by far, fell apart under a mountain of debt. They covered this up for over 2 years and falsified over $20B in profits. PWC is being fined for over $62M following their coverup of this fraud. In addition to the fine, China has also confiscated the revenue that PWC made during their tenure with Evergrande. PWC has come out and admitted that their actions were “well below standards expected at the firm.”. PWC have also sacked 6 partners ,and is in the process of working through the lower levels in order to find who was responsible for the fraud. In the fallout of this event, PWC China has lost more then 50 clients which is over 2/3s of their entire revenue.
I believe that this article is important as it demonstrates that the economic situation in China is much more volatile then previously thought. The power vacuum left by the collapse of Evergrande – which had built property in over 280 cities – will be fulfilled by many smaller companies which will bring a healthy amount of competition to the Chinese real estate market. However, the negative impacts for China will probably be much more relevant, the collapse of one of its largest companies with a total asset price more then some countries might lead to a greater collapse among the Chinese stock market. PWC will take a major hit with their Asian branch making over 15% of their total revenue.
The major stakeholders in this case should respond with a heavy degree of caution. Chinese officials have already responded to this whole fiasco with fines and confiscations: $78bn from the owner of Evergrande and major executives, as well as confiscating PWC revenue and fining PWC $62m as well as banning them for 6 months. PWC has also responded in a similar manner, sacking partners, and pausing operations. This comes in a slew of controversies against PWC, from covering up Russian Oligarchs and helping Russian Companies evade sanctions from western nations.
This ties into what were learning in class by relating to multinational corporations, as well as international economics. PwC being an international corporation has a lot of weight on the global stage and how they do, could definitely affect other nations economies.