The Asset Appraisal Law got the nod from China's top legislature on July 2, 10 years after it was first proposed. Being the first and the most controversial of its kind, the law attracted so much public interest that it went through four rounds of review at the national level. Although it won't come into force until December 1, there are a number of provisions that might reshape the valuation profession, making China one of the few countries that have a separate law governing the valuation industry.

First, it will usher in a new era of asset appraisal in which a common legislative framework regulates all asset appraisal professionals and management bodies of various asset types under one statute, ending the fragmented profession.

Second, professional bodies are encouraged to set up mechanisms of cooperative communication and to draft unified standards of common interests under the new framework. Currently, the regulatory valuation environment in China is directly governed by various ministries and local professional bodies, and there is no mechanism for coordination between them.

Third, the threshold will be lowered for those who want to engage in asset appraisal, so more professionals with special expertise can get involved. The law divides valuation practitioners into two categories, allowing both "appraisers," who have passed national exams, and "professionals," who have valuation knowledge and practical experience. But the difference between them still remains, with the former entitled to sign all kinds of valuation reports, while the latter can only sign valuation reports pertinent to non-mandatory appraisals.

Fourth, chances might emerge for foreign valuers to get involved in China's local valuation engagement. While foreign nationals can't become appraisers, they might become professionals in non-mandatory appraisal assignments. The law divides the appraisal assignments into two categories: mandatory and non-mandatory; the former often relates to State asset appraisal for public interests. But when the law is in full swing, foreigners might possibly sign non-mandatory valuation reports as professionals. 

Fifth, independence of appraisal practitioners and professional agencies could be better maintained. Government officials will no longer be allowed to work in professional agencies, and government management and oversight bodies are not allowed to interfere in the management of professional bodies, nor to procure valuation contracts for or on behalf of valuation firms. This way, rent-seeking and profit transfers will be outlawed and chances for capital or fund connections between government departments and valuation institutions could be eliminated.

Given the slow recovery of the world economy, China's valuation industry seems to be crisis proofing, with the number of appraisal institutions being increased from 10,000 to 14,000, appraisers from 100,000 to 130,000, and professionals from 300,000 to 600,000 from 2012 to now. But the law is only a beginning as challenges still remain. These include the harmonization of local valuation standards of various asset types, the convergence and adoption of international valuation standards, and the emergence of new technologies and new governance requirements. We have full confidence that China's valuation industry will take on a new look and play a bigger role both at home and abroad in today's world economy.

The author is professor and head of the Department of Finance in the School of Economics at Shenyang University and a member of the Professional Board of the International Valuation Standards Council. bizopinion@globaltimes.com.cn