PwC mulls cutting down 50% staff in China amid regulatory scrutiny

PwC layoffs: PricewaterhouseCoopers (PwC) is considering reducing up to half its financial services auditing staff in China, according to two sources familiar with the situation, as a regulatory investigation and the loss of clients weigh on business prospects.

The decision follows increased scrutiny from Chinese regulators this year over PwC’s role as the auditor of the embattled property giant China Evergrande Group. The scrutiny has led to some clients parting ways with the firm.

PwC's financial services auditing division employs at least 2,000 people across mainland China, with major hubs in Beijing and Shanghai serving clients such as banks, insurers, and asset and wealth managers. The sources, who requested anonymity, also mentioned that the firm is considering laying off about 20 per cent of staff in other auditing teams and non-auditing business lines.

As of last September, PwC had 781 partners and nearly 19,000 employees in mainland China, according to its website. The firm’s services in China span consulting, tax services, and auditing. The planned cuts in the financial services auditing unit and other business lines are being reported for the first time by Reuters.

The layoffs began last week and are expected to be completed over time, the sources added. "In light of changes to the external environment, we are making some adjustments to better optimise our organisational structure to align with market demand," a PwC spokesperson said in an emailed statement.

Chinese authorities have been scrutinising PwC's involvement in Evergrande's accounting practices after the securities regulator accused the developer in March of a $78 billion fraud over two years through 2020. PwC had been Evergrande's auditor for nearly 14 years until it resigned in early 2023.

Bloomberg reported in May that PwC faces a record fine of at least 1 billion yuan ($138 million) and a potential suspension of operations at some of its mainland China offices due to shortcomings in its auditing of Evergrande.

Client departures

In recent months, a growing number of clients, mainly state-owned or state-backed enterprises and financial institutions, have been leaving PwC following the regulatory investigation. By March this year, PwC had about 400 Chinese clients listed domestically or in offshore markets such as Hong Kong or New York, including tech giants Alibaba and Tencent.

Reuters calculated that more than 30 listed Chinese firms, including state-owned China Life Insurance, China Cinda Asset Management Co Ltd, Bank of China, and PetroChina, have dropped PwC as their auditor in recent months.

Amid a bleak revenue outlook due to client departures, PwC has increased cost-cutting measures. This month, the firm asked its 1,000-strong financial services auditing team in Shanghai to take a career-break leave of about 15 days in July and August, during which staff can still receive a fifth of their income, one of the sources said.

PwC's onshore arm, PricewaterhouseCoopers Zhong Tian LLP, had revenues of 7.92 billion yuan ($1.1 billion) last year, making it China’s top-earning auditor, official figures show.

(With Reuters inputs)