PwC starts mass China layoffs after losing dozens of clients

PricewaterhouseCoopers LLP is cutting staff across its China operations, according to people familiar with the matter, after an exodus of corporate clients diminished the Big Four firm’s revenue prospects in the country.

At least 100 staffers from different teams at PwC China’s offices in Beijing, Shanghai and other locations are being let go, the people said, asking not to be identified discussing private matters. More than half of one team was laid off, according to one of the people. The final tally of firmwide cuts wasn’t immediately clear.

“In light of changes to the external environment, we are making some adjustments to better optimize our organizational structure to align with market demand,” a PwC spokesperson said in response to a query from Bloomberg News. The firm did not provide details on the number of staffers who were cut. 

“These adjustments are a difficult decision. We are actively communicating with our people and will ensure that the plan is in compliance with all relevant labor laws in China,” the spokesperson added. 

Prior to the latest round of layoffs, the threat of regulatory penalties and the loss of Chinese corporate clients had unnerved PwC China staffers and prompted some to seek opportunities elsewhere, Bloomberg reported last week. Partners at other major international and domestic accounting firms received dozens of job inquiries from their peers at PwC, people familiar with the matter had said.

More than 30 publicly listed companies based in mainland China, including state-owned giants PetroChina Co., China Life Insurance Co. and Bank of China Ltd., have dropped PwC as their auditor this year. Most of the changes happened after the firm came under scrutiny for its role in an alleged accounting fraud at property developer China Evergrande Group. 

Regulators have been examining PwC’s role in its accounting services for Evergrande, after the developer was accused of inflating its revenue by $78 billion from 2019 to 2020. The China Securities Regulatory Commission had vowed further probes into “intermediary agencies” involved in the case. 

Authorities are weighing a record fine of at least 1 billion yuan ($138 million) on PwC and could suspend some of its onshore operations, Bloomberg News reported in May.  

PwC’s onshore arm, PricewaterhouseCoopers Zhong Tian LLP, had 291 partners and more than 1,700 accountants in mainland China at the end of last year, according to regulatory filings. The firm was the top earner among accounting firms in mainland China in 2022, reporting 7.9 billion yuan of revenue that year, according to official data. It audited roughly 400 Chinese firms listed in Shanghai, Shenzhen, Hong Kong or New York. 

PwC earlier this month appointed Daniel Li, a Shanghai-based partner, as its new Asia Pacific and China chair. The firm said he is the first leader from mainland China to hold that position. 

Cleared in Hong Kong

Separately, Hong Kong’s audit regulator said it found no supporting evidence for some of the allegations made against PricewaterhouseCoopers in an anonymous whistleblower letter that circulated on social media in April.

The Accounting and Financial Reporting Council said that it found no support for the claims the firm had failed to establish effective quality controls, failed to adhere to professional standards in its client relationship with China Evergrande Group and failed to assign appropriate personnel to key positions, according to a statement Wednesday. 

The auditing watchdog said that it’s still carrying out a separate investigation into the audits carried out by PwC on Evergrande.

PwC said in April said the letter contained inaccuracies and that the firm had reported it to relevant authorities. 

Raymund Chao, the person of interest as claimed in the open letter to be responsible for PwC’s Evergrande involvement, retired at the end of June. 
He was succeeded by Daniel Li.