Appraisers and appraisal institutions undertaking statutory appraisal services shall meet certain requirements. This is not only supported by the practical experience of many countries but also represents an inevitable choice that aligns with the development of China’s capital market.

Statutory appraisal services require professional “gatekeeping.”  

The State Council’s decision to abolish the certification and licensing requirements for registered asset appraisers does not mean that the professional qualification of registered asset appraisers is being eliminated. Rather, it reflects a reform in the management approach to professional qualifications, granting greater regulatory authority to industry associations and further strengthening self-regulation within the profession. Individuals engaged in appraisal work must not only possess the necessary professional and technical skills but also join appraisal institutions and carry out their work in accordance with the various appraisal standards and requirements issued by the appraisal association—especially by strictly adhering to the Code of Ethics for Appraisers. Only in this way can they become qualified appraisers. Therefore, even though the entry requirement for practicing as an appraiser has been removed, appraisers and appraisal institutions remain an inseparable whole. Under the unified management of the appraisal association, this integrated entity will be able to meet the growing demand for appraisals in the context of the new economic normal.     

China’s statutory appraisal services are primarily composed of asset valuation services for state-owned enterprises. Given the enormous scale of state-owned enterprise assets and the substantial demand for such valuations, the asset valuation industry must possess professional qualifications.     

2015 In [year], the CPC Central Committee and the State Council issued the "Guiding Opinions on Deepening the Reform of State-Owned Enterprises," emphasizing the active promotion of cross-shareholding and mutual integration among state-owned capital, collective capital, and non-public capital. 2016 The annual Government Work Report has included state-owned enterprise reform as an important component of supply-side structural reform, and clearly stated that in the coming two years, we will advance reforms aimed at diversifying equity ownership, implement measures to empower corporate boards of directors, adopt market-oriented approaches for selecting managers, establish a professional manager system, promote mixed-ownership structures, and introduce employee stock ownership plans. 5 Pilot project. To be launched soon. 5 In the pilot programs, both mixed-ownership structures and employee stock ownership plans will involve asset valuation. Moreover, against the backdrop of bottlenecks in China’s economic development, the state has proposed the “Belt and Road” initiative to promote economic strategic cooperation among countries along the route. The implementation of the “Belt and Road” initiative has opened up new avenues for Chinese state-owned enterprises to invest overseas, while also generating demand for overseas asset valuation services.     

The nature of state-owned assets—relating to the public interest and involving complex valuation procedures—also requires that appraisers taking on such assignments possess a certain level of professional competence.     

In fact, due to the special nature of state-owned assets, statutory appraisal services for such assets are subject to even stricter regulation in aspects such as appraisal filing and appraisal review, and even specific requirements are imposed on appraisal methods and techniques. Therefore, compared with other asset appraisal matters, the appraisal of state-owned assets is considerably more complex.     

In summary, given the scale and procedural characteristics of state-owned asset valuation services, as well as the special nature of state-owned assets, statutory valuation activities should establish certain threshold requirements. Only professional appraisers and appraisal institutions that simultaneously possess professional competence, risk-bearing capacity, and ethical integrity should be permitted to undertake relevant valuation assignments. By setting such entry barriers, we can effectively mitigate the evaluation risks arising from insufficient appraiser capabilities and further prevent the loss of state-owned assets and harm to the public interest.     

What kind of appraiser is qualified to undertake statutory appraisal assignments?     

Even though statutory appraisal services have established certain thresholds, appraisers and appraisal agencies still need to meet specific requirements in order to undertake such statutory appraisal work.     

First, appraisers and appraisal agencies should possess a relatively comprehensive knowledge base and extensive work experience. This knowledge base not only includes expertise related to asset valuation but also encompasses an understanding of macroeconomic trends, familiarity with the conditions of various industries, and thorough knowledge of relevant laws and regulations. Moreover, ample practical experience enables appraisers and appraisal agencies to swiftly develop appropriate appraisal approaches and solutions when tackling different projects, and to proactively identify and address key challenges and difficulties specific to each project.     

Second, assessment agencies should have a relatively comprehensive talent structure. The objects of statutory appraisal services may take on various business forms. For example, in the case of power generation enterprises, the scope could encompass multiple subtypes such as thermal power, hydropower, wind power, and solar power. Moreover, these enterprises might also be involved in upstream sectors like power-generation equipment and the coal industry, as well as downstream sectors such as power transmission and distribution. Similarly, for a holding-company type enterprise, its subsidiaries under control may operate in several completely different industries. Therefore, only by having a talent structure that covers all professional fields and all levels of expertise can an assessment agency provide more comprehensive and thorough appraisal services for statutory appraisal assignments.     

Third, assessment institutions should have a comprehensive quality management and internal control system. Given the special nature and significance of statutorily mandated appraisal services, appraisers and assessment institutions providing services for such mandates must undergo rigorous internal quality management and internal control reviews to ensure that appraisal procedures are strictly followed, the quality of appraisal reports is guaranteed, and appraisal working papers are fully and properly archived.     

Fourth, appraisers and appraisal institutions should possess a certain degree of sustainability and risk-bearing capacity. On the one hand, if appraisers and appraisal institutions have limited project acceptance capabilities and poor operational sustainability, they may be unable to take on clients’ renewal business. On the other hand, if appraisers and appraisal institutions lack sufficient risk-bearing capacity, they may not have the financial means to provide compensation in the event of liability claims arising from appraisal disputes. Therefore, only when appraisers and appraisal institutions demonstrate a certain level of operational sustainability and risk-bearing capacity can they offer more consistent and reliable assurance for statutory appraisal services.     

The appraiser’s “high standards” already have a solid foundation.     

Since its inception, China’s asset valuation industry has gone through... 20 Over the years, the entire industry has accumulated extensive experience in asset valuation services. When undertaking statutory asset valuation assignments, appraisers and appraisal institutions should possess a certain level of professional competence and be able to rely on factual evidence.     

China’s asset valuation industry has a relatively systematic set of regulatory frameworks, and some laws also include requirements related to asset valuation. We can refer to the existing regulatory framework to determine the conditions that appraisers and appraisal institutions must meet when undertaking statutory appraisal assignments. For example, the “Interim Measures for the Administration of Enterprise State-owned Asset Appraisal” sets forth specific requirements regarding the qualifications of appraisal institutions commissioned by entities holding corporate property rights: These institutions must comply with relevant national laws, regulations, rules, and policy provisions on the appraisal of state-owned enterprise assets, strictly fulfill their statutory duties, and recently... 3 No record of illegal or non-compliant activities during the year; possesses qualification requirements suitable for the assessment object; has professional personnel and specialized expertise appropriate for the assessment object; maintains no financial interests with the enterprise’s management; and has not provided audit services for the same economic transaction.     

The international asset valuation industry is relatively mature and can provide some valuable lessons for China’s asset valuation sector. For example, the U.S. Congress has... 1989 In that year, the “Amendment to the Law on Reform, Recovery, and Enforcement of Financial Institutions” was adopted, adding a new Chapter XI specifically stipulating that any real estate appraisal business involving federal interests must be conducted by professionals holding the appropriate qualifications; such professionals, when engaging in appraisal activities, must be subject to supervision by the relevant government enforcement authorities and adhere to uniform professional standards; and appraisal reports must be issued in written form.     

The UK’s Companies Listing Regulations, Urban Management Law, Insurance Regulations, and Amendment to the Unified Tenancy Act ( 1967 ) and other laws have all set forth specific requirements for corresponding asset valuation services. Most states in Australia have enacted specialized legislation governing appraisers or appraisal practices.     

Russia 1998 In recent years, the Russian Federation has enacted the “Russian Federation Valuation Law,” establishing a management system that combines government oversight with self-regulation by professional organizations. This law sets forth the legal basis for regulating valuation activities in transactions involving valuation objects that fall under the jurisdiction of the Russian Federation, governments at various levels, natural persons, and legal entities. By contrast, Germany’s “Valuation Law” stipulates that the government takes the lead in overseeing the valuation industry. In practice, industry associations have primarily assumed the role of cooperating with government agencies and serving their members; thus, the self-regulatory mechanisms of industry associations have become a complementary tool for standardizing the conduct of valuation professionals.