A socialist market economy with Chinese characteristics: The accounting annual report of China Mobile

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A socialist market economy with Chinese characteristics: The accounting annual report of China Mobile Xun Gong, Corinne Cortese

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School of Accounting, Economics and Finance, University of Wollongong, Australia

AR TI CLE I NF O

AB S T R A CT

Keywords: Annual report China Socialism Market economy Critical discourse analysis

Since the economic opening reform in the 1970s, China has undergone significant ideological change that has shifted the country’s focus from a planned economy to a market economy. The co-existence of a market economy with a socialist political regime offers a unique opportunity to explore the role of accounting in contemporary China. Using critical discourse analysis, we have analysed the production, distribution, and consumption of a leading Chinese SOE’s annual report that has a dual readership (i.e. Chinese and Western). We demonstrate that accounting reflects and helps naturalise the competing ideologies of a global market economy with strong government control.

“We in Mainland China insist on socialism, not the evil path of capitalism. The distinction between socialism and capitalism is common prosperity, not polarization (in income distribution). The wealth that we create first belongs to the state, and second the people. It does not give rise to a new capitalist class. The proportion that the state takes is also used in the interest of the people, for instance on national defence, but more on developing economy, education and science, and improving people’s life and their intellectual and cultural level” (Deng, 1993; p.123). 1. Introduction The socially reflective and constitutive nature of accounting (Hines, 1988) has given way to an understanding of accounting as a mediator of social conflicts between divergent interests among different classes (Arnold & Hammond, 1994; Chua, 1986), which serves as “a cohesive and influential mechanism for economic and social management” (Burchell, Clubb, Hopwood, Hughes, & Naphapiet, 1980; p.6). While such a role of accounting has been studied in a wide range of Western contexts (Bryer, 2000a, 2000b, 2005; Cooper, 1995; Chwastiak, 1999; Funnell, 1998; Lehman & Tinker, 1987; Spence, 2007), its implication in contemporary China has received insufficient attention in critical accounting literature with a few exceptions (e.g. Ding & Graham, 2007; Xu, Cortese, & Zhang, 2014; Yee, 2009; Zhang, Andrew, & Rudkin, 2012). Considering the unique socio-political context of China where a socialist political regime coexists with a market economy, the paper aims to explore if and how accounting plays a dual role in serving both the socialist ideology and an increasingly globalised market economy in the country. At the same time, we also investigate the extent to which accounting practices and disclosures reflect China’s political context as a socialist market economy with Chinese characteristics. Since the late 1970s when Deng Xiaoping regained1 power in the Chinese communist government, a series of substantive reforms

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Corresponding author. E-mail address: [email protected] (C. Cortese). 1 Deng Xiaoping was purged within the CPC three times (in 1934, 1967, and 1976) before he regained the power in 1978 (Shambaugh, 1993). http://dx.doi.org/10.1016/j.accfor.2017.04.002 Received 24 August 2016; Received in revised form 3 January 2017; Accepted 21 April 2017 0155-9982/ © 2017 Elsevier Ltd. All rights reserved.

Please cite this article as: Gong, X., Accounting Forum (2017), http://dx.doi.org/10.1016/j.accfor.2017.04.002

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have changed the country’s socio-political environment dramatically. However, despite China gradually opening its door to the rest of the world and the Chinese economy increasingly becoming integrated into the global market, the Communist Party of China (CPC) claims the nation as socialist in nature, or, in the words of the party leaders, “socialism with Chinese characteristics” (Deng, 1993; p.62; Jiang, 2006b; p.1). In relation to accounting, the previous Soviet Union model was replaced with a Western style accounting system (Ezzamel, Xiao, & Pan, 2007), and this was followed by the country’s adoption of the International Financial Reporting Standards (IFRS) in 2007. However, unlike most other countries which have adopted IFRS, the accounting profession in China remains under the control of the government (Yee, 2009). Political factors are also influential in the functioning of the Chinese capital market which traditional accounting reports fail to represent (Liu, Tang, & Tian, 2013). This unique context raises questions as to what extent accounting is understood, interpreted, and used in contemporary China. While the extant accounting literature focusing on China primarily apply the concepts established in Western accounting systems and/or adopt the theoretical perspectives from the West (e.g. Xu et al., 2014; Yee, 2009; Zhang et al., 2012), our study locates accounting in the ideological context of the CPC as the ruling political regime, and focuses on the specific discursive environment in which accounting information is produced, distributed, and consumed by the Chinese as well as Western audience. We have selected a leading state-owned enterprise (SOE)—China Mobile as the focus of the investigation, which represents the uniqueness of China’s contemporary socio-political and economic context. As one of China’s largest SOEs, China Mobile has maintained its dominance in the telecommunication sector of Mainland China and has become the largest telecommunication firm in the world since 2004 (China Mobile Limited, 2004). The fact that the firm has also been listed on the Hong Kong Stock Exchange (HKSE) and the New York Stock Exchange (NYSE) since 1997 gives a twofold readership from East and West. We have chosen China Mobile’s 2010 Annual Report and analysed the associated discursive practice. This is primarily because the 2010 Annual Report is the first report that China Mobile published after the firm set up two different online environments in which the report is made available to Mainland Chinese viewers and Overseas investors (via www.10086.cn and www.chinamobileltd.com respectively) (Gu, 2010). China Mobile also recognises its websites as a formal channel to “account to shareholders for the performance and operations of the (c)ompany… (and) to further increase (its) transparency” (China Mobile Limited, 2010; p.39). This offers us the opportunity to investigate and compare the distribution and consumption of the report from Chinese and non-Chinese perspectives. We argue that the particular annual report would, to a great extent, reflect a dual ideological role from, politically, a socialist regime perspective and, economically, a capitalist market economy perspective. To conduct this examination, we have used a critical discourse analysis (CDA) based on Fairclough’s (1993) methodological framework with a particular emphasis on discursive practice. This is referred to by Fairclough (1993) as the process by which discourse is produced, distributed and consumed. By paying specific attention to the production, distribution and consumption process of China Mobile’s annual report, we have located the competing messages of the socialist ideology and the free market economy that China Mobile exhibits, and, more importantly, the way in which these messages are mediated, naturalised, constituted, and sustained. The remainder of the paper is structured as follows. Section two reviews the extant literature on the studies of the accounting annual report. While discussing relevant accounting studies in the Chinese context, section three introduces both the historical development and the contemporary environment of China’s socio-political background. Then, the framework of CDA is discussed in the fourth section, followed by the specific analysis of China Mobile’s 2010 annual report in section five. Arguments and conclusions are drawn in the final section. 2. The role of the annual report Along with the evolution of financial reporting, accounting representations are produced in the form of narratives, graphs, and pictures within annual reports, which ultimately “frame and frequently eclipse the technical accounting content” (Davison, 2010; pp.166–7). From a functionalist view, the purpose of an annual report is, through categorising, recording, summarising and communicating corporate economic events and actions, to permit informed judgements and decisions by information users. Coupled with modern corporations’ increasing social significance, however, communicating their financial information is no longer enough for various interest groups which not only “encompass(es) investors, lenders, and creditors, but extend to environmental and consumer groups, employees, and the public at large” (Courtis, 1997; p.269). Corporate annual reports have also evolved into “flamboyant documents which mobilise, in increasingly creative ways, text and visual images alongside the accounting data of old” (Hopwood, 1996; p.55). As such, from a critical perspective, the socially constitutive role of accounting then must be made reflective in the annual report. In this sense, corporate annual reports not only convey the economic information but also represent and construct intangible commercial value (Davison, 2010; Steenkamp & Hooks, 2011), organisational philosophy (Anderson & Imperia, 1992; Newsom, 1988), corporate legitimacy (Brown & Deegan, 1998; Campbell, 2000; Deegan, Rankin, & Tobin, 2002), macroeconomic environment (McKinstry, 1996), and ideological value (Chwastiak & Young, 2003; Hui & Rudkin, 2010; Macintosh, 1990; Neimark, 1992; Tinker & Neimark, 1987). While much of the accounting research literature has concentrated on the quantitative data and the written discourse within annual reports, the visual images that appear in annual reports have begun to receive attention from critical studies in recent decades (e.g. Davison, 2002, 2008, 2010, 2011a, 2011b; Davison & Warren, 2009; Graves, Flesher, & Jordan, 1996; Justesen & Mouritsen, 2009; Preston, Wright, & Young, 1996). From this brief review of previous research, the following four key viewpoints are relevant. First, there are both quantitative and qualitative methods adopted in the study of annual reports. The quantitative investigation primarily draws on the manifest coding of content analysis (see Anderson & Imperia, 1992; Benschop & Meihuizen, 2002; Bernardi, Bean, % Weippert, 2002; Bernardi, Bean, & Weippert, 2005; Bujaki & McConomy, 2010a, 2010b; Courtis, 1997; Dimnik & Felton, 2006; Ewing, Pitt, & Murgolo-Poore, 2

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2001; Kuiper, 1988; Steenkamp & Hooks, 2011) and a few using the experimental method (see Cho, Phillips, Hageman, & Patten, 2009). Second, the qualitative work, on the other hand, consists of those applying art theories (see Davison, 2002, 2008, 2010, 2011b; Justesen & Mouritsen, 2009; Matilal & Hopfl, 2009), and those drawing from sociology of knowledge (Baldvinsdottir, Bruns, Norreklit, & Scapens, 2009; Campbell, Mcphail, & Slack, 2009; Davison, 2004, 2011a, 2011b; Graves et al., 1996; Hui & Rudkin, 2010; Macintosh, 1990; Preston et al., 1996; Preston & Young, 2000). Third, while a multitude of research has been undertaken, only a few studies relate the use and meanings of visual discourse to history, power and politics (Hui & Rudkin, 2010; McKinstry, 1996; Tinker & Neimark, 1987). Finally, even fewer studies examine the associated channel through which annual reports are distributed and consumed. To fill the void in extant literature, this paper focuses on the discursive environment of annual reports in mediating and sustaining the competing messages from a socialist political regime on the one hand and a free market economy on the other in the Chinese context. 3. Ideological context in China and the role of accounting The term ideology can be defined in a variety of ways (Thompson, 1990). In the present study, and for several reasons, we adopt Eagleton’s (1991) broad notion of ideology as a “discursive field in which self-promoting social powers conflict and collide over questions central to the production of social power as a whole” (p.29). First, unlike the general notion of ideology which “serves to sustain relations of domination” (Thompson, 1984, cited in Eagleton, 1991, p.5), Eagleton’s (1991) concept allows us to adopt a relatively neutral stance without presupposing the dominant positions of either the socialist political regime or a free market economy. This is consistent with our exploration of the CPC’s ideological development since China’s opening reform which began with Deng Xiaoping’s removal of Hua Guofeng (Chairman Mao’s chosen successor) in 1978 and marked the party’s shift from the orthodox planned-economy to a more market-oriented economy (Zhao, 1993). Second, such a notion of ideology also echoes the aim of our paper which is to explore the extent to which accounting disclosure reflects China’s socialist regime and its increasingly globalised market context. Third, Eagleton’s (1991) work has been used frequently in the critical accounting literature (e.g. Arnold, 1998; Cooper, 1995, 1997, 2005; Ezzamel et al., 2007; Ferguson, Collison, Power, & Stevenson, 2005; Preston et al., 1996). Among these studies, of particular relevance to our paper is the work of Ding and Graham (2007) which also adopts Eagleton’s (1991) definition of ideology. Before discussing the relevant literature on the ideological significance of accounting in China, we first introduce the ideological context of China below. Since 1 October 1949, the central government in the People’s Republic of China (PRC) has played a dominant role in social, political and economic life in the country. Following the opening reform by Deng Xiaoping in 1978, China has been one of the world’s greatest economic success stories as a result of its transition from Maoism to Dengism, and from the former centrally-planned economy to the ‘socialist market economy’. It has been estimated that over the past three decades, the pace of China’s annual economic growth has averaged 9% (Ma, Tian, & Andrew, 2016). Unlike the revolutionary ‘big bang’ reforms implemented in other formerly centrally-planned economies (e.g. Poland, Czechoslovakia, Russia, see McMillan & Naughton, 1992) which also undertook political reforms, the CPC has maintained its political leadership, thereby claiming a socialist character to its market economy (Harvie, 1999). Nevertheless, as Ding and Graham (2007) suggest, the opening reform posed a threat to the socialist ideological integrity in the country. Therefore, in an attempt to reconcile the free market mechanism with China’s socialist context, Deng laid the ideological groundwork to ensure that the market economy was merely a tool for economic development and that the Chinese government was firmly consistent with a Marxist agenda and the communist political regime. In his interview Socialism can also have Market Economy, Deng commented that “we do not of course pursue capitalism. Nor do we intend to maintain a poor socialism. We aim for a more developed socialism capable of developing productive forces and making the country richer and stronger. We believe that a socialist system is superior to the capitalist one” (Deng, 1983; p.231). In relation to free market economy, Deng (1983) explained that “while we primarily focus on the planned economy, we also accept the market economy. But this is a socialist market economy… Learning some positive aspects from capitalism including management and operation methods does not mean to implement capitalism. It is just that socialism uses this method to develop the productive force of the society. Treating this as the method does not affect the entire socialism, and will not restore capitalism” (p.236). In other words, while welcoming the free market economy, Deng still regarded the planned economy as the main component of China’s national economy. In addition, Deng also pointed out that “from the political perspective, our state apparatus is socialism in nature and capable of protecting the socialist system… Once things deviate from the socialist direction, the state apparatus will intervene and correct them” (Deng, 1993; pp.135–9). Deng (1993) also considered this as the application of Marxism in the Chinese context. Following his South China tour in 1992, the subsequent Fourteenth National Congress of the CPC formally accepted Deng’s theory, which has now been referred to as “developing socialism with Chinese characteristics” (Ministry of Commerce People’s Republic of China, 2011). Deng’s successor, Jiang Zemin, officially added his theory into the CPC party constitution and the PRC constitution in 1997 and 1999 respectively. Jiang further explained the three main features of China’s socialist market economy: “First, concerning the ownership structure, it keeps the public sector in the dominant position, supplements it with a private sector that includes individually owned enterprises and other sectors… Second, concerning distribution, it retains distribution according 3

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to work in the dominant position, supplements it with other modes, permits and encourages some localities and individuals to prosper first, gradually achieves prosperity for all and prevents polarization. Third, concerning economic operating mechanisms, it achieve the long-term, organic integration of the planned economy and market economy; makes full use of the advantages of both” (Jiang, 2006a; p.203) (emphasis added). As noted, Deng’s theory of building a socialist market economy with Chinese characteristics provides a unique context in which accounting (and, by extension, annual reporting) operates. This is because, as shown in the extant literature, the profession carries competing ideological roles in different economic systems. Ezzamel et al.’s (2007) longitudinal study of the accounting practice in China demonstrates that, under the planned economy (from the establishment of PRC to the late 1970s), the capitalist model of debitcredit accounting was then defined by most Chinese academics as an exploitative tool to inflict poverty and suppression on the proletarian working class (see Yan, 1951; Ge & Lin, 1993). Instead, Gu argued that socialist accounting should serve the centrallyplanned economy and be reflective of public ownership and state funds (1982, cited in Zhang, Andrew, & Collier, 2007). Consequently, the Chinese government changed the traditional Western accounting equation (i.e. Assets − Liabilities = Equities) to the Soviet Union model (i.e. Sources of Funds = Applications of Funds) (Xu et al., 2014). Viewed in this way, accounting took the role of a mediator prioritising the social conflicts under the Maoist ideology as state interests comes first, (state owned) enterprise interests second and individual interests last (Ezzamel et al., 2007). Xu et al. (2014) examined China’s accounting practice from 1949 to 1957, a specific period in which China achieved impressive economic development while maintaining minimal conflicts within the CPC (Fairbank & Feuerwerker, 1986). Similar to Ezzamel et al. (2007), they also illustrate how accounting in China, alongside the ideological battle between intellectuals, was directed towards the working class interest in support of the central planned economy. On the other hand, in advanced capitalist countries, accounting took on a different role, as particularly explicated in the literature of critical accounting. For instance, Bryer (2000a, 2000b) presents the history of the bourgeois revolution that shifted England from feudalism to capitalism, where the capitalist mode of accounting served as an inevitable product of, and solution to, class conflicts between the long established feudal merchants and the newly emerged middle class investors. Under modern capitalism, therefore, accounting is socially and ideologically framed, constrained, and intended to sustain and perpetuate the capitalist ideology (Dillard, 1991). Taking the accounting profession as a whole, Hanlon (1996) argues that accounting professionals, as a service class, serve as a control mechanism to assist capitalists in controlling productive forces worldwide, and in allocating “surplus value to those geographical regions and/or economic sectors that give the highest return of capital” (p.343). Arnold and Cooper’s (1999) class analysis illustrates the role of accounting valuation in executing the neo-liberal transformation of asset ownership from public to private hands, and from the less and under-developed to the developed countries. Social struggles where capital was favoured and labour marginalised were thus masked by the seemingly technical and neutral accounting techniques, and the redistribution of wealth and raw exploitation achieved. Similarly, Chwastiak (1999) considers that accounting, under the pressure of capitalism, has been directed to the “predetermined ends–wealth production for the capitalist class” (p.427). With particular relevance to the current paper, Chwastiak and Young (2003) also choose annual reports as the focus of their investigation. They demonstrated how the negative impact of modern corporations on the society at large is silenced in corporate annual reports. In this sense, accounting numbers help corporations to reduce human value and the environment to abstract costs shown in financial statements. While these studies contribute to our understanding of accounting in a planned economy and capitalist societies, insufficient attention has been paid to the unique context of China that combines the two (Jiang, 2006a; p.203). If accounting is a malleable tool that can be used by different parties to achieve competing ideological purposes (Arnold & Hammond, 1994; Ordelheide, 2004), then the question is whether the Chinese government uses accounting to serve both the socialist political regime and the capitalist market economy at the same time. At the political level, this is somewhat acknowledged by Deng (1983): “we do have some economic policies, and corporate management in particular, which were greatly influenced by the Soviet Union. In this regard, our socialist system should learn from capitalist countries in terms of operation and management methods, and their way of developing science” (p.235). In this respect, however, much of the extant accounting literature concerning China stays at the technical level which largely focuses on the country’s adoption of the Western accounting standards (e.g. Adhikari & Wang, 1995; Peng & Bewley, 2010; Peng & Smith, 2010; Winkle, Huss, & Chen, 1994; You & Luo, 2009), with a few notable exceptions (e.g. Ezzamel et al., 2007; Xu et al., 2014; Yee, 2009; Zhang et al., 2012). Specifically germane to our paper is the work of Ding and Graham (2007) that investigates the role of accounting when the Chinese government announced the plan to reduce the shares of listed SOEs in 2001. They illustrate how the language of accounting is used to rationalise competing interests by different parties. However, unlike Arnold and Hammond (1994) who argue that accounting serves for different ideologies in political struggles, Ding and Graham (2007) conclude that, even in the context of China’s economic reform, “accounting was biased, both practically and ideologically, in favour of capital… excluding potential middle ground in the social conflict” (pp.576–7). In other words, accounting is not a two-edged sword, but rather operates largely in the interest of capital. Their disagreement with Arnold and Hammond (1994) is based on the view that the social accounting system, which, according to latter (1994), served to “improve the working conditions of black South Africans” (Arnold & Hammond, 1994; p.111), was relatively embryonic and had not been institutionalised at the time, and thus was not a “good demonstration of how accounting is biased to serve dominant interests” (Ding & Graham, 2007; p.577). In this sense, our study challenges Ding and Graham’s (2007) view. This is because, compared to the South African social accounting system, the socialist ideology is well founded and has been institutionally entrenched in PRC since 1949. The ideological discourse of Deng and Jiang discussed above also suggests that, despite the country’s adoption of accounting technologies from the West, they are merely the method with an ultimate goal of developing the socialist state. Thus, our question regarding the simultaneous ideological role of 4

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accounting in support the CPC regime and the market economy at this point still remains. 4. Background of China Mobile We have chosen one of China’s largest SOEs, China Mobile, as the focus of our analysis for two reasons. First, in the lens of a market economy, the company is listed on the HKSE and the NYSE, which gives its annual report a twofold readership from East and West. Second, from a political point of view, the firm’s transition from an operating arm of the former Ministry of Post and Telecommunication (MPT) implies a certain level of political connection with the Chinese government. While enjoying the political patronage of the CPC at the same time as accommodating global neo-liberalisation, China Mobile has now become the world’s largest mobile phone operator with a customer base of 826 million as of the end of 2015 (China Mobile Limited, 2015a). In this section we provide the historical background of the firm to further justify our interest in them for the current study as well as to serve as part of the socio-political context in China. Founded in Hong Kong (HK) in 1997, China Mobile Limited is listed on the HKSE and the NYSE, and was admitted as the constituent stock of the Hang Seng Index in HKSE in 1998. At the time, the firm was part of and named as China Telecom Limited (China Telecom hereafter) which then had absolute monopoly in the telecommunication industry of Mainland China. In 1999 the Ministry of Information Industry (MII) divided China Telecom into four different organisations including China Network Communication Corporation Limited, China Jitong Network Communication Corporation Limited, China Satellite Communication Company, and China Mobile Communication Corporation Limited to promote market competition (Yu, Berg, & Guo, 2004). The wireless division of China Telecom was spun off to become China Mobile, and the company’s name was thereafter changed to China Mobile Limited. Today, the company has become one of the largest Chinese state-owned enterprises and plays a monopolistic role in providing telecommunication services to the general public in Mainland China. For the financial year of 2015, the company reported total revenue of US$ 103,173 million and net profit of US$16,756 million (China Mobile Limited, 2015b). Similar to other Chinese SOEs, the top management within China Mobile is comprised of two structures, namely, the managerial team, and the CPC Committee (Qu, 2003). While the management team oversees the company’s general operating issues, the CPC Committee leads the organisation’s political directions. Thus, not only are these directors responsible for business operations, but they are also required to address the direction of the CPC through state agencies such as the Department of Organisation which makes personnel decisions. Although heavily criticised by many scholars and commentators (e.g. Clarke, 2003; Gao, 2009), the dual leadership system continues to operate in SOEs (Fu & Mou, 2010). As Deng’s successor, Jiang considered the reform and development of SOEs as “not only a significant economic issue, but also a vital political matter” (Jiang, 2006a; p.71) and China Mobile is no exception. In 2010, for instance, the then chairman of the company, Wang Jianzhou, also served the Secretary of the firm’s CPC Committee,2 equivalent to the political position at deputy ministerial level, whereas other executive directors were members of the committee. The same problem as with the governing structure of the MII that has been elucidated in the above section emerges again. That is, the attitude of management towards market competition and foreign investment inevitably conflicts with, and is dominated by, the political correctness which emphasises state (or rather the party) interest. One extreme example of this is the extraordinary case in 2004 that the central government swapped the CEOs of China Mobile, China Telecom and China Unicom overnight without any notice (Dyer & McGregor, 2008). In addition to the CPC’s political intervention in management positions, China Mobile’s financial structure is also limited by bureaucratic control. This is partly reflected in Deng’s (1983) comment on overseas capital: “Foreign investment comes from capitalist economy, and has its place in China. However, its room is limited and thus cannot change China’s social system” (pp.235–6). In the case of China Mobile, despite that the group’s branch China Mobile Limited is listed on the Hong Kong and New York stock markets since 1997, the Mainland parent entity (i.e. China Mobile Communications Corporation, CMCC hereafter) still holds 100% of the China Mobile (Hong Kong) Group Limited, which in turn, owns 74.21% of China Mobile Limited as of December 2010 (China Mobile Limited, 2010). That is, its Mainland group still indirectly holds 74.21% of the listed subsidiary, as shown in Fig. 1. The listed company (i.e. China Mobile Limited) then owns 100% shares in the subsidiaries around Mainland China (China Mobile Limited, 2010). Indeed, as argued by Clarke (2003), having SOEs’ subsidiaries listed on overseas stock exchanges in no way contributes to market privatisation, instead, simply corporatisation. Corporatisation, in this sense, only helps the CPC government to increase the value of state assets which then ensures the communist regime’s political control at the expense of non-controlling interests, including foreign investors. To sum up, the firm’s internal governing arrangements and its financial structure reveals the heavy-handed bureaucratic control and party dominance both politically and financially. Fig. 1 illustrates these relationships. 5. Method CDA is an interdisciplinary approach that views language as a form of social practice and focuses on the ways social and political 2 Since the annual report studied in this research is China Mobile’s 2010 report, the analysis here is concerned with the management composition in 2010. In fact, it was not until June 2011 when Xi Guohua was appointed as vice president by the Department of Organisation and the State-owned Assets Supervision and Administration Commission, that Wang’s position as the committee secretary was taken over by Xi. Interestingly, Xi also serves as the vice minister at the MII concurrently, again indicating the state dominance over China Mobile.

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Fig. 1. Internal structure of China Mobile.

domination are reproduced by text (Fairclough & Clive, 1995). It is “fundamentally concerned with analysing opaque as well as transparent structural relationships of dominance, discrimination, power and control as manifested in language” (Wodak, 2001; p.2). Hence it requires detailed analyses of both the discursive event per se as well as the underlying social context (Fairclough & Wodak, 1997; Meyer, 2001; van Dijk, 2001), making explicit the implicit and dialectical relations between public discourse and social practice (Cortese, Irvine, & Kaidonis, 2010). However, unlike traditional linguistic studies, CDA does not posit the relationship between text and context to be simply deterministic in analysing discourses (Leitch & Palmer, 2010; Meyer, 2001; Wodak, 2001). That is, discourses are not to be investigated in isolation from the context, nor can they be entirely reflected by the context. Instead, CDA considers discourse as a site of struggle, analysing the mediating effect of discourse in favour of domination and at the expense of social alienation (Wodak, 2001). Taking into consideration that discourses are both reflective and constitutive of social hierarchy and power, and following Wodak (2001), the analysis of discourse in this study thus requires …a theorisation and description of both the social processes and structures which give rise to the production of a text, and of the social structures and processes within which individuals or groups as social historical subjects create meanings in their interaction with texts (Wodak, 2001; p.2–3) (emphases added). Viewed in this way, our analysis of China Mobile’s annual report concentrates on the particular process by which the report is produced, distributed, and understood by its intended audience in a broad socio-political context, rather than on the specific visual content of the report. In Fairclough’s (1993) term, this refers to discourse practice which focuses on the “process of text production, distribution, and consumption” (p.78) and thus explores the “connections between the nature of the discourse processes in particular instances, and the nature of the social practices they are a part of” (p.80). In the case of China Mobile, there exists an apparent paradox in the image of the firm. On the one hand, the state-owned parent entity (i.e. CMCC) owns the absolute control over the Hong Kong subsidiary (i.e. China Mobile Limited), where strategic and personnel decisions are made by the CPC committee and the Department of Organisation (as shown in Fig. 1; Ferguson, Lam, & Lee, 6

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2002; Loo, 2004; Yeo, 2008). On the other hand, its subsidiary is listed on the HKSE and the NYSE since it was founded in 1997 as a gesture of the CPC government to foster market competition and welcome foreign investment (Zhang, 2002; Yeo, 2008). At a broader level, the paradox is rooted in and informed by the Socialism with Chinese Characteristics discussed earlier. In this sense, the discourse practice analysis is well suited to investigate the role of accounting (and accounting annual report), as it is this practice which “constitutes, naturalizes, sustains and changes significations of the world from diverse positions in power relations” (Fairclough, 1993; p.67) and thus shows “how meanings are created and controlled” (Cortese et al., 2010; p.79). Therefore, through this analysis we can understand how the meaning of Socialist market economy helps shape and is shaped by the annual report of China Mobile. In particular, since discourse practice concerns the production, distribution and consumption of discourse, our analysis investigates (1) the specific standards and regulations regarding the production of the text (that is, the annual report and particularly the visual discourse within the report), (2) the stock exchange (HKSE and NYSE) and the company’s website through which the annual report is distributed, and (3) the two different readerships (i.e. Chinese/Foreign) by which the annual report is consumed. Here, also of relevance is the concept of intertextuality (Fairclough, 1993) concerning the environment in which the report is distributed and consumed. This justifies our choice of the firm’s 2010 annual report, since it is in 2010 that China Mobile first launched its Mainland China website (www.10086.cn) and at the same time maintained its Hong Kong subsidiary’s site (www.chinamobileltd.com) as the distribution channel of the report (Gu, 2010).

6. Discourse practice analysis 6.1. Production of the annual report Since 1997, when China Mobile Limited (formerly named as China Telecom Limited) was listed on the NYSE and the HKSE, the company’s annual report has been produced in accordance within the applicable regulatory frameworks and has been made publicly available. In particular, the 2010 annual report for China Mobile Limited was developed and produced under the two sets of financial reporting regulations from the HKSE and the NYSE respectively, and audited by KPMG. On the one hand, in the context of the HKSE, the financial statements within the annual report are prepared according to IFRS since the Hong Kong Financial Reporting Standards (HKFRSs) were converged fully with the IFRS in 2005 (Chen, Guan, & Ke, 2010). On the other hand, while the company does not use the Generally Accepted Accounting Principles (GAAP) for the NYSE, the Stock Exchange Commission (SEC) requires a reconciliation (that is, Form 20-F) of the financial statements prepared under IFRS to the US GAAP for better comparability (Haverty, 2006). Thus, each of the company’s annual reports is accompanied with the respective Form

Fig. 2. Financial reporting page of China Mobile Limited (the listed subsidiary). Source: (China Mobile Limited, official website) (emphasis added).

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Fig. 3. Financial reporting page of CMCC (Mainland parent entity). Source: (China Mobile Communications Corporation, official website) (English translation added3).

20-F. In addition to the different accounting standards, the financial reporting practice of the company also adheres to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Hong Kong Listing Rules hereafter), the Sarbanes-Oxley Act, the U.S. Securities Exchange Act, and the NYSE Listed Company Manual (China Mobile Limited, 2010). Similar to the accounting standards’ reconciliation, inconsistent practices resulting from the difference between the Hong Kong and the American regulation are addressed in the annual report as well (e.g. China Mobile Limited, 2010; pp.45–46). Apart from the preparation of the financial statements and the auditor’s report based on the respective standards and regulations mentioned above, the annual report also contains other information, as per the Hong Kong Listing Rules, such as the corporate governance report, biographies of senior management, chairman’s statement, report of directors, and business and financial review (see Hong Kong Listing Rules Appendices 14 and 16). While adhering to the statutory requirements, the presence of such information is also considered by the accounting profession as good practice (CPA Australia, 2014; The Group of 100 & Ernst Young, 2008). In this sense, judging from the format and structure of the annual report per se, the document is not materially different from those prepared by other publicly listed companies. However, as the subject of the discourse analysis in this paper, the annual report is examined not as a product, but a process of social interaction “which people actively produce and make sense of on the basis of shared common sense procedure” (Fairclough, 1993; p.72). During such discursive process, neither the Hong Kong regulator nor the US authorities have any control over the specific distribution and consumption patterns of the annual report. Thus, the largely unregulated distribution and consumption process leaves much space for the accounting disclosure “to be politically or ideologically ‘invested”' (Fairclough, 1993; p.67). To this end, it is to the distribution of the annual report that we now turn.

3 To enable readers understand the meanings of the Chinese texts in CMCC’s website, the authors have translated relevant headings and words from Chinese to English for Figs. 3–5.

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6.2. Distribution of the annual report Since the company’s shares are publicly traded on the HKSE and the NYSE, the China Mobile annual report is distributed by mail to the registered shareholders who come from Hong Kong and America (China Mobile Limited, 2011). In addition, the electronic version (i.e. PDF) of the report is also available on the website of China Mobile. These two channels of distribution are investigated respectively below. Firstly, as discussed, China Mobile Limited owns 100% shares in its provincial and municipal branches in Mainland China, and also serves as the foreign subsidiary of its government-controlled parent entity China Mobile Communications Corporation (CMCC). In other words, the real operation of the company still remains largely within Mainland China. However, the fact that China Mobile Limited is listed on the HKSE as a “Red-Chip” firm legally forbids Mainland Chinese investors from purchasing its shares. According to Ferguson et al. (2002), “Red-Chip” firms such as China Mobile simply regard the HKSE as nothing more than a foreign capital formation centre. Therefore, it appears that the non-financial stakeholders from Mainland China are not the direct target audience to which the annual report is distributed. In a similar vein, it is also unlikely that the firm’s shares traded on the NYSE would be readily available for purchase by Mainland Chinese investors due to institutional complexity. Thus, the central concern of the annual report issued in the US may only be to inform China Mobile’s financial stakeholders overseas, whereas its Mainland non-financial stakeholders are neglected. Secondly, the company also provides the electronic version online that is available to everyone. In particular, two independent websites are available for viewing and downloading the annual reports: the first (see Fig. 2) is for the subsidiary (China Mobile Limited) listed in HKSE and NYSE (www.chinamobileltd.com), and the second (see Fig. 3) is the parent entity (i.e. CMCC) in Mainland China (www.10086.cn). Then the question surfaces: what distinction is made by having the two different websites distributing the same version of the annual report? A closer examination upon both of these websites renders the answer clear. That is, the two sites differ significantly in terms of design and content. While the listed subsidiary’s website, China Mobile Limited, straightforwardly exhibits information comprising primarily the financial news and data, the parent company’s website, CMCC, contains far more comprehensive messages regarding the brand information, product introduction, online store, recent promotions, customer service, and so forth. Furthermore, it is of particular interest to note other differences exhibited on the web pages (of the parent entity and the subsidiary) from which the annual reports can be downloaded. In the context of China Mobile Limited (see Fig. 2), the report is uploaded on the Investor Relation page where other types of financial information are also provided including Operation Data, IR Calendar,4 Stock Information, Interim & Annual Report and so forth. That is, the annual report’s distribution channel via the Hong Kong subsidiary consists mostly of the firm’s financial information. In contrast, the mainland parent entity (i.e. CMCC) delivers the annual report in a different environment, through CMCC’s About China Mobile2 (the original Chinese is ) web page (see Fig. 3) under the navigation bar of Investor Guidance ( ). Unlike its Hong Kong counterpart, CMCC here provides rather limited financial information, with the link to view the annual report being the only type of economic information. Other hyperlinks presented on the same webpage are relatively more general, such as Media Focus ( ), Group Announcement ( ), Recruitment Information ( ), and Corporate Culture ( ). Interesting still, under the navigation bar of Corporate Culture (see Fig. 4), is a subsection called as the “Party-masses Relations” (also known as the cooperation and relationship between the party and the public, or “ ” in Chinese) (outlined in note 4.1). By literally putting ‘party’ in front of ‘masses’, more emphasis appears to be placed on the interest of the party (as the stateholder of China Mobile) rather than the interest of the public (the non-financial stakeholders), as though the party is guiding the public, and the public is following the party. Overall, in addition to the general information such as the financial figures, the online site of the statecontrolled parent entity also contains a political section (the “Party-masses Relations”), which is omitted in the website of its subsidiary. This leads to a further question: given that financial data is the major concern of the report for overseas investors, how will the different distribution channels of the annual report affect the process of its consumption? According to Fairclough (1993), it is critical to make sense of different placements of texts, in this case the locations of the reports on the respective company websites, since the interpretation process of the text (i.e. the annual report) cannot occur without reference to other discourses attached to it. This is what Fairclough (1993) considers as intertextuality. For him, text is “inherently intertextual, constituted by elements of other texts” (p.102). Therefore, in exploring how the annual report can be consumed, content around the two financial reporting pages will be taken into consideration, as they also construct and will be reconstructed by the annual reports. The following section is directed toward this end.

6.3. Consumption of the annual report As the distribution channel of the report varies according to different geographical and online environments, so is the corresponding consumption pattern of the document which is subject to several different connotations. By placing the two different images of China Mobile depicted above in the socio-political context of China and the organisational setting of the firm (see Fig. 1) in particular, we can further perceive two broader pictures with competing meanings delivered through the firm’s annual report.

4

The term “IR” here stands for investor relations.

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Fig. 4. Corporate culture page of CMCC under ‘About China Mobile’. Source: (China Mobile Communications Corporation, official website) (English translation added).

6.4. Global & shareholder interest & professional On the one hand, China Mobile is seen, from a non-Chinese perspective, as a globalised corporation emphasising shareholder value with professional management, which corresponds to China’s commitment to a market economy. This is conveyed via two types of discourse practice. The first concerns the distribution of the traditional hard copy annual reports. That is, the printed version of the annual report is delivered through the postal services to registered shareholders who have purchased the company’s shares on the HKSE and the NYSE. Due to legal restrictions (as in the case of HKSE) and institutional complexity (as in the case of NYSE), the Mainland China investors largely fall outside the category of the firm’s financial stakeholders. It would then seem that these shareholders are most likely from overseas, and so consume the annual report of China Mobile from a typically non-Chinese perspective. Thereby, a global image of the company is established. Moreover, those overseas investors who are qualified to receive the report would regard it as another financial document sent out by China Mobile in compliance with legal regulations, and consume the discourse therein from non-Chinese perspectives. In this respect, the consideration of the shareholders’ interest has thereby been expressed through both the distribution channel per se and the consuming pattern by the (mostly overseas) shareholders. The second element of the report distribution process concerns the different online contexts and may result in more connotations. Since texts (in this case the annual report pages) are “shaped by prior texts that they are ‘responding’ to, and by subsequent texts that they ‘anticipate”' (Fairclough, 1993; p.101), the specific items (i.e. the navigation bars and hyperlinks) presented on the financial reporting pages will be considered. As demonstrated earlier, the (overseas) shareholders are highly likely to view the electronic report through the website of the Hong Kong subsidiary, as its Mainland counterpart linguistically prevents foreign readers from browsing this version. Also, the online intertextual environment (Fig. 2) of China Mobile Limited contains nothing more than the firm’s business operations and financial figures and news. Thus, for the non-Mainland audience who read the report on the webpage of China Mobile Limited, a sense of shareholder interest is connoted. Moreover, China Mobile Limited’s website connotes a sense of the global since it virtually provides the language options including English, Traditional Chinese and Simplified Chinese. Consequently, for those report readers who do not come from Mainland China, the online site of China Mobile Limited offers them, with the intertextual environment, a sense of global reach to the annual report. 10

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Fig. 5. Introduction to management page of CMCC under ‘About China Mobile’. Source: (China Mobile Communications Corporation, official website) (English translation added).

Also available on the Hong Kong subsidiary’s website is the profile of the firm’s senior management (Fig. 6)5 where the political identities of directors are concealed but where the photographs and other biographical information of the directors (which are identical to those contained in the firm’s annual report) are provided and worthy of further notice. For instance, the presence of the two female directors’ photographs6 appears to advertise China Mobile’s commitment to the value of diversity: (a) the visual images of female employees mirror a more diversified range of stakeholders to which the organisation is held responsible (Canabou & Overholt, 2001), and; (b), the female presence of directors contributes to a diverse composition of board members which prompts critical thinking and hence increases firm value (Bernardi et al., 2005). Also, the power and authority assigned to the female directors are further reinforced through the formal attire shown in the photos, undermining the traditionally inferior role played by women and thus connoting a modernised and progressive organisation (Davison, 2010). Another sense of diversity is conveyed through the inclusion of the three independent non-executive directors,7 which is considered as critical for corporate transparency, accountability and credibility (Cortese & Bowrey, 2008). Apart from diversity, a commonality that can be found is education background and other titles contained in the directors’ biographic profile (Fig. 6). That is, the mention of Doctorate, GBS (Gold Bauhinia Star), OBE (Order of the British Empire), and JP (Justice of Peace) connotes a professional and reliable team of directors in particular and further internationalises the education and qualifications of the company management in general. 6.5. National & stateholder interest & party elite On the other hand, the telecom giant can be perceived, by audiences in Mainland China, as a national enterprise carrying the interest of the state and run by party elites. This is sustained by, and in turn sustains, Deng’s and Jiang’s emphasis on public ownership (Deng, 1983; Jiang, 2006a). The corresponding discourse practice concerns the distribution of the annual report on the Mainland parent entity’s website. For those readers coming from Mainland China who are highly unlikely to be the shareholders of the firm, the only distribution channel of the reports seems to be viewing them online. In particular, CMCC’s website will be chosen for (a) it is commonly known by the Mainland customers as the homepage for China Mobile and (b) the HK subsidiary’s site will linguistically redirect the audience to its Mainland counterpart. Then, the intertextual online environment of the Mainland parent entity connotes a sense of national identity by incorporating the news and announcements of China Mobile’s Mainland branches at the provincial level (as shown in note 4.1 from Fig. 4). Furthermore, the corporate culture page of CMCC’s website shows the Traditional Chinese calligraphy (in note 4.2) also suggests the firm’s national identity. It is not only the visual format of the calligraphy, but also the philosophical meaning of the phrase ( , “responsibility makes perfection” in English) which originates from the two classical Confucian texts—The Book of History and The Great Learning,8 again exuding a sense of national and cultural identity of the firm. Also, unlike its HK subsidiary’s website that connotes the shareholder interest and professional management, the CMCC’s intertextual environment conveys a strong sense of the state, via incorporating the ‘party-masses cooperation’ as part of the corporate culture (in note 4.3 from Fig. 4) and revealing the directors’ political identities as the CPC members on CMCC’s Introduction to Management page (Fig. 5). In particular, unlike the directors’ introduction page of China Mobile Limited (Fig. 6) where the political identities of the same directors are concealed, its Mainland counterpart discloses only the directors’ name, management position and 5 Due to the original size and the clarity of the image, we have only chosen part of the webpage as Fig. 6. The original image can be delivered in private upon readers’ request. 6 For the same reason outlined in footnote 6, there is only one director’s profile in Fig. 6. Readers are welcome to request the original image from the authors. In addition, the identical biographies of other directors can also be found in China Mobile Limited’s 2010 annual report. 7 As shown in Fig. 6, they are Dr. LO Ka Shui, Mr. Frank WONG Kwong Shing, and Dr. Moses CHENG Mo Chi. 8 comes from The Book of History, comes from The Great Learning.

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Fig. 6. Directors & Senior Management page of CMCC under ‘About China Mobile’. Source: (China Mobile Limited, official website).

party titles, suggesting a class of unified party elites running the firm for the CPC government while concealing the individualised profile that has otherwise been shown by the HK subsidiary. Overall, while the intertextual environment for the annual report on the Hong Kong subsidiary’s website helps to perceive the report as a financial file open to, and available for consumption by, audience and investors from overseas, its counterpart from the parent entity (CMCC) seems to consider the annual report as a government document, or arguably some form of political propaganda, featuring the national identity, and the strong political (party) domination, to be consumed by the Mainland audience. In this section, we have conducted the discourse practice analysis as part of Fairclough’s (1993) CDA framework. In particular, we begin with exploring the production of the annual report, and subsequently investigate the largely unregulated discursive process of distributing and consuming annual reports. The two channels for distributing the reports are considered, namely, the postal services, and the financial reporting pages provided by the subsidiary and the parent entity respectively. Specifically, because of the different web pages of the two entities in which the annual report is uploaded, the concept of intertextuality (Fairclough, 1993) is introduced to consider how the different online textual environments shape the consumption of the report by different people. Subsequently, a close examination of the intertextual environment is carried out in the consumption process where two types of connotations are identified. While the web page of the Hong Kong subsidiary helps construct the report as purely financial to global audiences, the Mainland parent entity’s online site adds the national identity and the political domination to the annual report. 7. Conclusion To appreciate the role of accounting in modern societies, we must study the underlying context in which accounting operates. While the extant literature has explored accounting in a wide range of contexts (Arnold & Cooper, 1999; Bryer, 2000a, 2000b; Carmona & Ezzamel, 2007; Funnell, 1998; Hanlon, 1996; Spence, 2007; Tinker, 1980), the socio-political environment of contemporary China has not been well researched with a few exceptions (Ding & Graham, 2007; Ezzamel et al., 2007; Zhang et al., 2012). Also, despite the growing body of critical studies examining the quantitative and qualitative content of annual reports and the corresponding underlying context, insufficient attention has been paid to the specific ways in which annual reports are distributed to, and consumed by, the general public, a discursive channel by which meanings are created and controlled (Cortese et al., 2010; Fairclough, 1993; Wodak, 2001). To address these gaps, this paper has investigated the role of accounting in socialism with Chinese characteristics, a unique context where a socialist political regime accommodates the free market economy. Through the discourse practice of China Mobile’s 2010 annual report, we have made the connection between the text (i.e. annual report) and the underlying socio-political environment, and demonstrated how the competing ideological messages have shaped and been shaped by the discourse of annual report. While reinforcing the socially constructive role of accounting, our study also offers new insight on how accounting disclosure serves different competing ideologies simultaneously. Unlike previous studies in the view that accounting can be employed by one particular ideology (i.e. capitalism), we have found that China Mobile’s accounting report in socialist China connotes two competing ideologies simultaneously. In this aspect, we suggest that our finding is somewhat different from that of Ding and Graham (2007). In their study, accounting is “practically and ideologically in favour of capital” (p.576). That is, the CPC government simply acted as a majority shareholder from an accounting perspective. However, our analysis of China Mobile’s annual report shows a slightly different picture: while the firm is perceived by the non-Chinese perspective as a globalised corporation with professional management emphasising shareholder value, it is also seen by the Mainland Chinese as a national enterprise run by a group of party elites on behalf of the stateholder. In other words, apart from the interest of the capital (whether it be to Western capital or State capital), a critical analysis of the discursive environment of China Mobile’s annual report reflects a strong level of government control at the same time. One explanation for our departure from Ding and Graham (2007) is that, while disagreeing in their study with Arnold and Hammond (1994) who argue that accounting can be used by different ideologies at the same time, they (2007) point out that the noncapitalist perspective explored in Arnold and Hammond’ (1994) study is “not only embryonic but well outside the mainstream of Western accounting” (Ding & Graham, 2007; p.576). This is part of the reason that Ding and Graham (2007) conclude that accounting is not a two-edge sword capable of being used by competing ideologies. However, unlike Arnold and Hammond (1994) who focus on 12

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the socially responsible investments that “were not entrenched in the institutions of capitalism” (Ding & Graham, 2007; p.576), what we have studied in the current paper is one of China’s largest SOEs, an operating arm of a former government department. Here, at least politically, the strategic and personnel decisions of the firm have long been influenced by, and deeply embedded in, the CPC’s ideology that has shaped and continues to shape the country’s social, political, and economic development today. In this regard, therefore, we argue that accounting in China is constructed by and is reflective of the CPC’s socialist regime. Further, even viewed from the perspective of a market economy, whether the Western accounting concepts and practice have permeated the Chinese socialist economy remains questionable, despite the country’s adoption of the International Financial Reporting Standards (IFRS) in 2007. This is because the Chinese government maintains that, at the ideological level, the CPC firmly follows the path of socialism, and considers the market economy, and other advanced operation techniques (such as IFRS) only as methods that help develop the socialist economy with Chinese characteristics (Deng, 1983, 1993). This also justifies our finding that the two competing messages are reflected by the discursive environment of China Mobile’s annual report which connotes the image of a global enterprise through the compliance with IFRS and by making the report visible on the firm’s Hong Kong subsidiary’s website, and reveals the political side by making the report invisible from the Mainland website and the firm’s political connection visible therein. In this sense, accounting practice is a two-edged sword. But accounting is not a neutral technical tool, as our study shows that it is shaped by and at the same time also sustains the unique socialist market economy with Chinese characteristics which in itself is an ideology exclusive to contemporary China. This may be another explanation for our departure from Ding and Graham (2007). That is, while they indicate that accounting in China is ideologically directed towards the interest of the market and capital based on their use of “Western theoretical tools into a socialist setting” (p.578), we argue that, by exploring the CPC’s ideological development in section three, the distribution and consumption of China Mobile’s annual report both satisfies the information demand for overseas investors and naturalises the domination of the CPC for domestic viewers. In other words, if China has developed its own ideology which in turn has informed its accounting practice (Yee, 2009) that incorporates, but is not confined to, Western accounting frameworks, neither the use of IFRS nor the traditional Western accounting literature is sufficient to explore the multi-faceted nature of accounting and the ideological context of contemporary China. In this aspect, further research is needed to study accounting beyond the technicalities and concepts derived from Western frameworks, with greater emphasis on the historical and ideological development of ‘socialism with Chinese characteristics’. Finally, as the current paper has only analysed the discursive process of one annual report, it is limited in further explaining the changed practices of China Mobile’s accounting disclosure. What are the changes, in terms of both the content and the discursive environment, made between the firm’s present year’s annual report and its predecessors? 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