PwC Appoints New China Chairman to Steer Firm Through Evergrande Storm

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Daniel Li. Photo: PricewaterhouseCoopers

PricewaterhouseCoopers (PwC) has tapped veteran partner Daniel Li to be its China and Asia-Pacific chairman, as PwC China’s future in the country remains in doubt due to its auditing work for a subsidiary of fallen real estate giant China Evergrande Group.

Li succeeded Raymund Chao, who retired after holding the position for nine years. Li is the first person from the Chinese mainland to head one of the “Big Four” accounting firms in the region, according to PwC.

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Daniel Li has been appointed as the new PwC China and Asia-Pacific chairman amidst concerns over the firm's role in auditing Evergrande's subsidiary, Hengda Real Estate.
Hengda inflated its revenues and profits significantly in 2019 and 2020, leading to a $577 million fine and a lifetime market ban for Evergrande's founder.
PwC China faces potential penalties, contract terminations from major clients, and ongoing lawsuits as the fallout from Evergrande’s financial misreporting unfolds.

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Who’s Who

PwC China: PwC China, now chaired by veteran partner Daniel Li, faces significant challenges due to its auditing work for Hengda Real Estate Group Co. Ltd., a subsidiary of the fallen Evergrande Group. The China Securities Regulatory Commission found Hengda inflated its revenues and profits in 2019 and 2020, despite PwC China’s clean audit. This has damaged PwC’s reputation, and potential penalties are expected. Some major clients, including state-owned enterprises, have terminated their contracts with PwC China.

Hengda Real Estate Group Co. Ltd.: Hengda Real Estate Group Co. Ltd., a major domestic subsidiary of China Evergrande Group, faced a $577 million fine from the China Securities Regulatory Commission (CSRC) for fraudulent bond issuance and breaking disclosure rules. It inflated its revenue by 214 billion yuan in 2019 and 350 billion yuan in 2020, accounting for significant portions of its overall revenue in those years, also inflating profits by large margins.

PetroChina Co. Ltd.: PetroChina Co. Ltd., a state-owned company and major financial institution, was among PwC China’s top revenue contributors. Amid speculation over potential penalties against PwC China due to its association with Evergrande, PetroChina and other companies have rushed to terminate their contracts with the auditor or scrap plans to hire it.

China Railway Group Ltd.: China Railway Group Ltd. is one of the state-owned companies that terminated its contract with PwC China amid growing speculation over potential penalties against the auditor. Its departure, along with other major financial institutions and state-owned enterprises, is significant as these entities were among PwC China's top revenue contributors.

The People’s Insurance Co. (Group) of China Ltd.: The People’s Insurance Co. (Group) of China Ltd. is one of PwC China's top revenue contributors. In light of the growing speculative penalties against PwC China for its auditing work related to Evergrande, The People’s Insurance Co. (Group) of China Ltd., along with other state-owned companies and major financial institutions, has rushed to terminate its contract with the auditor or scrap hiring plans.

China Merchants Bank Co. Ltd.: China Merchants Bank Co. Ltd. is among the major financial institutions that have terminated their contracts with PwC China amid speculation of potential penalties against the auditor. The bank is notable for being one of PwC China's top revenue contributors.

China Evergrande Group: China Evergrande Group is a fallen real estate giant facing significant financial troubles. Its major domestic subsidiary, Hengda Real Estate Group Co. Ltd., exaggerated revenues and profits in 2019 and 2020, leading to a $577 million fine from the China Securities Regulatory Commission (CSRC). Evergrande's founder, Hui Ka Yan, was banned for life from the securities market. In January, a Hong Kong court ordered Evergrande to be liquidated due to failing to restructure its 2.4 trillion yuan liabilities.

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What Happened When

2015：: Daniel Li became a senior partner at PwC China.

2019：: Hengda Real Estate Group Co. Ltd. inflated its revenue by 214 billion yuan and its profits by 63%.

2020：: Hengda Real Estate Group Co. Ltd. inflated its revenue by 350 billion yuan and its profits by 87%.

As of June 2023：: Evergrande carried 2.4 trillion yuan of total liabilities.

January 2024：: A court in Hong Kong ordered Evergrande to be liquidated.

May 2024：: The China Securities Regulatory Commission (CSRC) levied a $577 million fine on Hengda for fraudulent bond issuance and breaking information disclosure rules, and banned Evergrande’s founder Hui Ka Yan from participating in the securities market for life.