With the founding of the PRC in 1949 all resources and production in the country came under State ownership. This meant that the only form of economic entity was State-owned enterprise. The accounting rules and regulations, known as "fund accounting", characterized by their rigidity and uniformity, were used on the one hand primarily for establishing an information and reporting system for the implementation of State economic policies, and on the other hand for the maintenance of administrative control over assets of the State. To a great extent these accounting rules served as a tool to strengthen the financial discipline of enterprises and to also safeguard State property.
Since the promulgation of the Joint Venture Law in 1979 a separate set of accounting rules was formulated to govern the preparation of financial statements by enterprises. This was undoubtedly the first step away from the fund accounting concept.
Alongside economic reform and the open-door policy adopted since the beginning of the 1980s, foreign investors were allowed to set up enterprises and conduct business in China. A separate set of accounting regulations that is applicable to foreign investment enterprises only was developed and implemented. Although these regulations or principles are now much in line with the International Accounting Standards (IAS), the requirements are subservient and rather to the purpose of ascertaining the 'truthfulness and fairness' of the financial statements.
Concurrently China has undertaken a program to restructure the form and structure of state-owned enterprises by transforming them into enterprises which issue shares and have limited liability - joint stock limited companies. Most of these enterprises will eventually go public. A third set of accounting regulations, intended specifically for joint stock limited companies, was formulated in the early 1990s and revised in 1998.