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5. Financial Transparency
5.1 Market Stability
5.2 Independent Asset Valuers
5.3 Data Standards
In-Country Assessment Information

There are many professional valuation institutions in each larger city. They are in principle independent of, or separate from, the government but some still have explicit or implicit government connections. There is a set of valuation criteria and standards that valuation institutions have to comply with: “Standard of the People’s Republic of China for Valuating Real Estates” in effect since June 1, 1999. It is similar to the international standards.

Small businesses can obtain relatively fair valuations for property they want to buy or sell. There are also established baseline values relating to properties in different locations. However, whoever pays the valuation fee has a say in the determination of the final value of the property. A valuation institution will discuss with the payer the final value it assesses and often determine the value in favor of the fee payer.

 

Goal – A well developed and transparent financial system that includes strong supporting institutions and highly trained and ethical professionals that contribute to effective financial intermediation and deep and broad access to capital and financial services

5.1 Market Stability

Core Question: Are market risks sufficiently transparent and diversified so that efficient capital allocation can occur? Yes – Strong, China’s strong growth has continued and the government constantly monitors and regulates macroeconomic performance.

Financial Reporting
5.1.1 What is the strength of the country’s auditing and reporting standards? Strong – 61st out of 142 ; Score 4.78 out of 7. Strong for listed companies, however, cheating and falsifying financial reports are common for non-listed companies.

Financial Services
5.1.2 Does the financial sector provide a wide variety of financial services to businesses? Strong – 60th out of 142; Score 4.74 out of 7

Source: The Global Competitiveness Report 2011-2012, World Economic Forum

www.weforum.org/issues/global-competitiveness;

Assessment by Unirule Institute of Economics

Insolvency Process
Strong – Ranking – 75th out of 183 Trend ↓

5.1.3 What is the average time to complete bankruptcy proceedings? 1.7 years

5.1.4 What is the cost of bankruptcy proceedings as a percentage of the estate? 22%

5.1.5 What is the recovery rate of bankruptcy proceedings? 36.1 cents on the dollar

Source: Doing Business 2012 – Closing a Business www.doingbusiness.org/data/exploreeconomies/china

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5.2 Independent Asset Valuers

 

Core Question: Do trained, independent and ethical asset valuers exist for all types of assets? Yes – Strong, numerous large native and international valuation firms are active, but few independent appraisers support land owners in government takings.Survey Questions
Standards
SQ 17: How easy is it to find a valuer who implements International Valuation Standards? Strong – Valuation Standards Committee is included in the Ministry of Finance and has a member on the IVSC Board of Trustees.

Training
SQ 18: What is the level of training of valuers? Very Strong – Licensing exam is very difficult and many valuers hold internationally recognized qualifications.

Civil Society Resource: International Valuation Standards Council www.ivsc.org and China Institute of Real Estate Appraisers and Agents www.cirea.org.cn/

Ethics
SQ 19: Are opinions offered by valuers free of influence from parties to the transaction? Yes – Strong, effective valuation associations are active for all types of assets. In land taking cases, valuers are often recruited by local the government. The valuation result is in favor of the local government but it is kept within the limit allowed by their profession.

Civil Society Resource: China Appraisal Society www.cas.org.cn/

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5.3 Data Standards

 

Core Question: Is accurate property information available electronically in formats that are consistent with international standards? Yes – Strong, rapid improvements have occurred over the last several years.Survey Questions
Sales & Operating Data
SQ 20: A multiple listing service is an electronic exchange system where brokers and agents can widely share contracted real estate listings of properties that are for sale. Do multiple listing type services exist? No – Weak, dedicated Internet sites are starting to emerge, but a standardized listings service is not available.

Source: http://soufun.com/; www.ehousechina.com/

SQ 21: Do resources exist for obtaining building income and expense estimates? No – Weak Civil Society Resource: Shanghai Weston Real Estate Management Institute www.westonedu.com/

Interchange Formats
SQ 22: Do electronic data interchange formats conform to international standards (ebXML – electronic business using extensive markup language)? Yes – Strong, ebXML was introduced as a standard in 2003 and real estate data firms are developing.

Civil Society Resource: Open Standards Consortium for Real Estate International www.oscre.org

Technical Standards
SQ 23: Do building codes and office building measurement standards (ANSI/BOMA Z65.1) conform to international standards? Yes – Very Strong

Civil Society Resource: Chinese Office Building Owners and Managers Association – http://bj.house.sina.com.cn/biz/boma/index.html (not available)

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In-Country Assessment

 

Valuation Profession
FQ19: How many independent valuers exist in the market? Can small businesses obtain fair valuations for property they want to buy or sell?There are many professional valuation companies in Beijing and Nanchang. The competition among them is quite fierce. They are in principle independent of the government, but some still have explicit or implicit close connections to government officials (they were initially associated with and later separated from the government). Small businesses can obtain relatively fair valuations for property they want to buy or sell.

FQ20: What are the valuation standards and do they conform to international and regional standards?

There is a set of valuation standards which the valuation institutions have to comply with or they will lose their license. There is also a set of baseline values relating to properties in different locations. Based on these values, the appraisers assess the market values of properties. However, the client has a say in the determination of the final value of the property. The respective valuation institution will discuss the final value with the client and determine the value in favor of the fee payer. So the values the appraiser stated are not too far away from what the client thinks it should be.

FQ21: What valuation methods and techniques are used in the market?

The values of some properties can be sometimes quite subjective, depending on how the payer or evaluator expects its use and appreciation in future. The valuation institutions, if their evaluation tasks are assigned by the government, refuse to add this part in their valuation of properties in land taking cases.

Data Availability
FQ22: How available is information for commercial properties that are for sale or that have been sold?

Small companies can find information relating to the purchase and rental of commercial properties from newspapers, journals, and websites. Professional journals and websites are very important for purchase and rental of sector-specific properties. Relating to the purchase of land use rights, one can check the price on a special government website devoted to the system of land tender, auction, and listing. There are also many special applets on land and housing information that can be installed in smart phones.