PwC has put a halt to the construction of its elaborate training campus, poised to cultivate trust in leadership, in China. This comes in the midst of growing scrutiny as a result of the firm’s auditing of the now-bankrupt property company, Evergrande. The operation at “Reimagine Park” in Haitang Bay, located on China’s tropical Hainan island, began last year but was recently ceased, according to both an insider from the firm and workers at the site.
The company must now evaluate the strategic position of the project due to ramifications from financial penalties imposed on PwC Zhong Tian, also known as PwC China, by the Chinese government. PwC China was Evergrande’s go-to auditor and had deemed its accounts satisfactory, but this year, the Chinese authorities revealed that the developer’s mainland branch had exaggerated its revenues by nearly $80 billion (€72 billion) preceding its debt default in 2021.
PwC China was subsequently hit with a six-month suspension and a hefty fine of Rmb441mn (€55 million) last Friday. The authorities stated that the staff had overlooked and even tacitly approved fraud in the context of failed audits related to Evergrande’s financial records. The crisis has brought about a mass departure of clients, kicked off staff cuts and set in motion cost reduction as part of its attempt to lessen the financial blow.
“Reimagine Park,” nestled on a 16-acre site by the stunning Haitang Bay, a popular tourist spot in the southern city of Sanya in Hainan, was scheduled to be finished by the coming year. The designs illustrate a “net zero” establishment consisting of nine buildings, interconnected by progressive shuttles. In 2022, PwC China announced it would contribute more than Rmb1bn (€126 million) to the project and invited partners at the firm to personally invest in it. Whether PwC sought additional finance is yet to be clarified.
The implications of Apple’s tax ruling on Ireland’s interaction with other global corporations is a topic of interest. The institute was intended to cater to a wide range of Chinese students, professionals, and PwC staff. Upon a site visit by the Financial Times, they found three partially constructed buildings, indicating the construction had been interrupted.
A worker on the site shared that employees had left by the end of July and it was suspected the Evergrande crisis was to blame for the lack of funds to continue work. Confirmation about the halt in construction came from an employee who remained on the now practically vacant site.
Raymund Chao, the former chair of PwC China spoke about the vision for ‘Reimagine Park’ in a promotional video last year, expressing the aim to build trust amongst businesses, governments, and communities. He invited everyone to ‘jump into the future’ together.
Following an official announcement by the company in 2022, it came to light that ‘Reimagine Park’ was planned to be the home for the ‘PwC Asia Pacific Trust Leadership Institute’. PwC stated their partnership with Insead Business School, Thunderbird School of Global Management, and the Danish Design Centre was aimed at developing a fitting program for the institute. However, these institutions have withdrawn their involvement in the project.
There have been other misfortunes in Hainan further to the north. The city of Danzhou had witnessed Evergrande allocate billions to the ‘Ocean Flower Island’ venture. This was an artificial island project, planned for a shopping center, wedding venue, and luxury villas. However, Zhang Qi, the politician who permitted this massive work was found guilty of corruption. As 2022 rolled in, authorities commanded the demolition of part of the project owing to breaches of environmental and construction standards.
PwC China’s six-month suspension underlines the drastic downturn in the company’s fortunes which was previously characterized as the nation’s biggest accounting firm in terms of revenue, significantly due to its extensive collaborations with property developers.
Due to the harm to its reputation caused by Evergrande, PwC’s global chiefs appointed Hemione Hudson as the new head of the Chinese firm in the past week. In an internal communication, Hudson warned her team that implementing a thorough recovery plan in the coming times will be formidable. Despite the suspension due to end in the spring of 2025, PwC China has informed its patrons that it will continue to execute their annual audits. Hudson revealed to her team that the international leaders gave their word to sustain “concrete investments” in the Chinese venture. – Copyright The Financial Times Limited 2024.