A comparative study of accounting adaptation: China and Japan during the nineteenth century

Accounting Historians Journal, The, Dec 2002 by Auyeung, Pak K

Abstract: This study attempts to examine why western accounting was adopted in one Asian country, Japan, and not in another, China, when modern accounting methods were brought to the East during the mid-19th century. The explanation offered is socio-cultural. China was characterized by centralized political power, a society resistant to change, an anti-merchant policy and narrow-based learning. In contrast, Japan had dispersed structures of political power, a society receptive to change, a pro-merchant policy and broad-based learning. In China, the emphasis was to preserve harmony and integration in accord with mainstream Chinese ideology which had created a highly stable and tradition-oriented society. Chinese enterprises that operated within this institutional framework were unlikely to adopt western-style double-entry bookkeeping. In Japan there was no specifically institutionalized anti-capitalist doctrine to prevent the rise of industrialism and the adoption of modern accounting.

INTRODUCTION

Accounting development is highly dependent on environmental circumstances and conditions. The main purpose of this paper is to examine why two countries reacted differently to common external influences. A comparative study is presented of the effects of political and socio-cultural structures on accounting development in China and Japan. The specific question addressed in this paper is why was western accounting adopted in Japan but not in China during the mid-19th century - a time when modern accounting methods were brought to the East?

According to Baladouni "the origin, content, or mode of being of accounting was found to be based on cultural and social forces" [Baladouni, 1979, pp. 326-327]. Culture is a complex phenomenon and can be viewed from different perspectives. One view is: "The genuine culture ... is the expression of a richly varied and yet somehow unified and consistent attitude towards life" [Sapir, 1960, p. 90]. Parsons constantly identified culture with values. He defined the cultural system as a "normative pattern-structure of values" [Parsons, 1951, p. 37], "culture provides the standards (value orientations) that are applied in evaluative processes" [ibid., 1953, p. 16]. The term `cultural framework', when applied to accounting, designates the particular set of institutions in a society which, while remaining an integral part of the larger culture, represents those aspects of general social life which are most influential in shaping the course of accounting activity [Baladouni, 1979].

Changes in the cultural framework imply alterations to a particular institution or set of institutions which have consequences for the general orientation of accounting. Hatfield [1950] attempted to explain accounting development by analyzing accounting issues in terms of their cultural and social content. Other work following this approach include Scott's [1931 The Cultural Significance of Accounts, Deinzer's [1965] Development of Accounting Thought, and Chatfield's [1973] A History of Accounting Thought. This research tradition has also been applied by researchers of Asian accounting history. For example, Fujita [ 1991] used a sociological framework to show how Japanese accounting principles developed in their unique social environment. Someya [1996] demonstrated that accounting is a function of the environment in which it operates, while Auyeung [2000] highlighted the importance of socio-cultural influence on accounting developments of China during the 19th and early 20th centuries.

The differential responses of China and Japan to the influence of 'western' accounting provides an important historical illustration of the fact that the mere existence of 'advanced' accounting knowledge is not a sufficient condition for its implementation, particularly if the social environment required for the widespread application of this knowledge is lacking. There existed considerable social and cultural interaction between China and Japan from the 7th century and many Chinese cultural features were transferred and instituted in Japan by the imperial government [Fairbank et al., 1973; Nakamura, 1997]. In spite of this cultural link, the two countries embarked on very different paths during the mid-19th century when the West [in the form of the British, French, and Dutch] extended its political, economic, and social influence to the Far East. Japan experienced accounting modernization, while China encountered accounting stagnation [Someya, 1989; Gardella, 1995; Auyeung, 2000]. The primary reason for the different responses to western infiltration in the two countries lay in their separate complex political and sociological frameworks. Behind an outward similarity, Chinese and Japanese societies differed significantly. This study seeks to identify and discuss the structures of these two societies that encouraged one to pursue a path of capitalistic development and receptivity to 'modern' accounting while the other was resistant.

Previous Literature: There have been several previous historical studies of Chinese accounting systems. These have primarily adopted a technical perspective. Of particular significance was Fu's [1968] dissertation which investigated the Western Zhou Dynasty's (1122-771 B.C.) accounting system. Guo's [ 1982, 1986, 1988] books have also extended our knowledge of Chinese accounting from the earliest times to the 20th century. Hsu's disser-tation [1988a] described the accounting systems of Chinese merchants in Nagasaki, while Zhao's book [ 1992] and Lu's thesis [1999] represent a continuation of Guo's research. Auyeung's thesis [2000] examined the influence of.environmental changes on accounting development in China. Book-length studies of Japanese accounting history have been written by Ogura [ 1962], Aoki [1976], Kawahara [1977], Hisano [1987], Fujita [1991], Chiba [1992] and Someya [1996]. Articles describing Chinese and Japanese accounting systems include contributions by Otte [1928], Huang [1934], Ding [1935], Shimme [1937], Nishikawa [1956], Ogura [1960], Fujita [1966], Fu [1969, 1971], Ba [1976], Cheng [1980], Taketera [1980], Gardella [1982, 1992, 1995], Taketera and Nisikawa [1984], Zhao [1987], Chiba [1987], Hsu [1988b, 1991], Someya [1989], Fu [1989], Cooke [1991], Lin [1992], Chen [1993], Zhong [1993], Aiken and Lu [1993a, 1993b, 1993c, 1998], McKinnon [1994], Sasaki [1995], Chen [1998], Ryoji [2000], Camfferman and Cooke [2001] and Yamaguchi [2001].