Key takeaway: In the next decade, China’s asset valuation industry will surely shine even more brilliantly!

Original title: Ten Years of Steadfast Dedication, Moving Forward with Dreams—A Record of the China Association of Asset Appraisers’ 10-Year Journey of Exploration and Innovation

Since its re-establishment as an independent entity in 2004 by the China Association of Asset Appraisers according to a document issued by the Ministry of Finance, the Chinese asset appraisal industry has steadily moved forward over the past decade through exploration and innovation, achieving remarkable accomplishments.

Although compared to developed countries, China’s asset valuation industry is still relatively young, it is precisely because of its youth that it brims with vigor and vitality—and understands better the importance of development and innovation! The world has already begun to see a China that is different from the past. Over the past decade, China’s asset valuation industry has leveraged and bolstered the nation’s growing prestige, enabling it to soar onto the global stage! The journey of China’s asset valuation sector over these ten years would have been impossible without the strong support of the government. Regulatory bodies such as the Ministry of Finance have gradually shifted their role from “players” to “referees,” becoming more actively involved in formulating the industry’s overarching strategic framework while entrusting specific operational details to industry associations. These industry associations have lived up to expectations by proactively establishing a self-regulatory management mechanism that fosters two-way interaction between different levels of the industry. They have also innovatively explored market pathways tailored to China’s unique national conditions, enhanced international exchanges to boost their global influence, placed great emphasis on theoretical research and talent cultivation, and actively shouldered social responsibilities. Moreover, the tireless efforts of numerous theorists and practitioners dedicated to the field of asset valuation have not only enabled the industry to refine its own development but have also made its professional services one of the key driving forces behind the development of China’s socialist market economy.

Optimize the allocation of market resources and regulate economic order.

Since China established the socialist market economy system in 1993, the statement that the market plays a fundamental role in resource allocation has been widely adopted for more than a decade. In 2013, the Third Plenary Session of the 18th Central Committee adopted the "Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Deepening Reform," which emphasized that deepening reform must be driven by momentum. For the first time, the role of the market in resource allocation was upgraded from "fundamental" to "decisive," thereby highlighting the prominent status of the market economy. A market economy requires guiding economic resources toward directions that maximize value; thus, how we determine value becomes the cornerstone of efficient resource allocation. At the heart of asset valuation lies precisely the ability to make rational value judgments. To provide the market with increasingly specialized valuation services, the asset valuation industry has continuously refined itself. The Asset Valuation Standards serve as the technical foundation for delivering even more professional services and also constitute an important guarantee of the industry's credibility. In 2004, the China Association of Asset Appraisers issued the "Asset Valuation Standards—Basic Standards" and the "Code of Professional Ethics for Asset Valuation—Basic Standards," regulating the industry from both behavioral and ethical perspectives. Subsequently, a series of procedural standards, substantive standards, valuation guidelines, and guidance documents were successively released, comprehensively covering various major asset types and spanning the entire process of valuation practice.

In 2013, the State Council issued the “12th Five-Year Plan for the Development of the Service Industry,” explicitly including asset valuation within the business services sector of the productive service industry. This reflects the high importance and strong support that the Party and the state have consistently given to asset valuation, and further demonstrates that the efforts made by the asset valuation industry over the past decade have been duly recognized.

Support economic transformation and optimize industrial structure.

The Chinese asset valuation industry originated from the reform of state-owned enterprises and, from its very inception, seemed to be entrusted with the mission of facilitating China’s shift in economic development mode and optimizing its industrial structure. As China gradually transitions from being a global manufacturing hub to an intellectual center, innovative development will replace the traditional replication model and become the primary driving force behind economic transformation. While emphasizing the need to maintain steady and relatively rapid economic growth, China is placing even greater emphasis on enhancing the quality and efficiency of development, as well as accelerating the transformation of the development model and adjusting the economic structure. At this stage, enterprises will place increasing importance on intangible assets, while the state will pay more attention to service industries and sectors such as cultural creativity. Brands, patented technologies, intellectual property rights, and copyrights—all these elements serve as crucial pillars supporting economic transformation. In 2008, the China Association of Asset Appraisers issued the “Asset Valuation Standards—Intangible Assets,” the “Guiding Opinions on Patent Asset Valuation,” and the “Guiding Opinions on Copyright Asset Valuation,” providing standardized guidelines and direction for the valuation of intangible assets. In 2012, based on the nation’s brand strategy, the China Association of Asset Appraisers designated brands as a key research subject. It is not difficult to see that the Chinese asset valuation industry has firmly grasped the rhythm of economic transformation, attached great importance to the value discovery of intangible assets, continuously refined its valuation techniques for intangible assets, and further improved its valuation processes for these assets.

Enterprises are indispensable participants in the process of economic transformation, and listed companies—given their influence and advantages—can be regarded as the backbone of China’s economic upgrade. It is estimated that during the 2011-2012 fiscal year alone, asset valuation services supported 121 IPO companies, enabling them to raise 98.2 billion yuan from public investors. Throughout the company listing process, asset valuation undoubtedly serves as an important psychological safeguard for these companies.

Promote the development of the capital market and safeguard financial security.

In the late 1980s and early 1990s, China’s capital market began to take shape. As an important intermediary service sector in the capital market, asset valuation is mutually dependent on and grows synchronously with the capital market. In 2008, the U.S. subprime mortgage crisis triggered a global financial crisis, highlighting the necessity of strengthening the regulation of financial assets. The development of the capital market is underpinned by the real economy; if financial asset prices are excessively inflated, risks will inevitably arise, making it critically important to price financial assets reasonably. Through its specialized services, asset valuation can uncover the intrinsic value of financial assets and effectively prevent excessive bubble formation in the capital market. On January 1, 2008, the “Interim Measures for the Supervision and Administration of Asset Valuation of State-Owned Assets in Financial Enterprises” came into effect, enhancing the supervision and administration of asset valuation for state-owned assets in financial enterprises and standardizing their valuation practices.

The development of the capital market is inseparable from listed companies, and for listed companies to grow stronger and bigger, mergers and acquisitions (M&A) and restructuring are indispensable. In the global M&A market, China ranks second in terms of M&A deal value. In 2011, the China Association of Asset Appraisers and the Listed Companies Department of the China Securities Regulatory Commission jointly conducted a study titled “Valuation and Pricing of Listed Companies Engaged in M&A and Restructuring.”

In 2012, 627 main-board listed companies in China completed merger and acquisition (M&A) restructuring transactions. Among these companies, 84.2% underwent asset valuation. The total value of the assets that had been assessed reached 1,107.8 billion yuan, with a book value of net assets amounting to 314.8 billion yuan and a valuation of 611.7 billion yuan. In 2013, the China Association of Asset Appraisers organized experts to develop the "Expert Guidelines for Asset Valuation Practice—Disclosure Requirements for Valuation Reports on Major Asset Restructuring of Listed Companies," providing guidance for appraisers in carrying out specific valuation assignments.

Asset valuation is reshaping people’s traditional perceptions of capital markets. People’s understanding of financial asset prices is shifting gradually from emotional pricing toward rational assessment. When confronted with financial assets that are clearly overvalued, people tend to adopt a more rational approach, and capital markets are steadily moving toward a more orderly and healthy trajectory.

Protect the ecological environment and safeguard the public interest of the nation.

The report of the 17th National Congress of the Communist Party of China proposed “building an ecological civilization and basically establishing industrial structures, growth models, and consumption patterns that conserve energy resources and protect the ecological environment.” This fully reflects the high importance attached by the Party and the state to the ecological environment. In response, China’s asset valuation industry has actively engaged in the practice of assessing the value of ecological and environmental assets, proactively supporting the development of a low-carbon economy and contributing to the construction of an ecological civilization. It has also systematically studied the theoretical and practical aspects related to carbon asset valuation—such as carbon assets themselves, their measurement, trading mechanisms, and related trading markets. On December 5, 2013, the China Association of Asset Appraisers and the China Clean Development Mechanism Fund Management Center held a ceremony to sign a strategic cooperation agreement. On the same day, the book “A Preliminary Exploration of Theory and Practice in Carbon Asset Valuation” was officially published. Forest resources represent another crucial aspect of the nation’s ecological development.

In 2013, the China Association of Asset Appraisers issued the “Asset Valuation Standard—Forest Resource Assets,” which standardized the valuation of forest resource assets by asset appraisers.

Ten years of hard work—moving forward with our dreams! Although China’s asset valuation industry started relatively late, it has developed at an astonishing pace, a feat that would have been impossible without the dedication and efforts of every asset valuer. And this is just the beginning. In the next decade, China’s asset valuation industry will surely shine even more brilliantly!