Degree Name

Doctor of Philosophy


School of Accounting, Economics and Finance


Purpose — This thesis explores the role of accounting in the process of financialisation in the Chinese context. In particular, it examines the use of accounting discourse by the China Iron and Steel Association (CISA) to resist the financialised price of iron ore during the 2009 and 2010 iron ore price negotiation. Contingent upon this thesis, financialisation is defined as the rising significance of the financial sector in the global iron ore market in general and the adoption of the index linked iron ore pricing mechanism of in particular. The investigation illustrates how the traditional annual negotiation based iron ore pricing mechanism that had been used for nearly four decades shifted towards the financialised index pricing model in 2010, and analyses why, as the largest iron ore importing and consuming market in the world, the Chinese iron and steel industry, and its associated use of accounting discourse, failed to resist the financialisation of iron ore price in its negotiation with the three major global iron ore suppliers (i.e. BHP Billiton, Rio Tinto, and Companhia Vale do Rio Doce—the Big Three hereafter).

Design/methodology/approach — The theory and methodology adopted in this thesis stem from Marx’s study of Political Economy. Drawing from Capital Volume III, a Marx-informed theoretical framework for financialisation is developed that examines the interaction among productive, commercial, and financial capital as a result of the conflict between the corresponding social relations and productive forces. Based on Marx’s work in The German Ideology, the methodological framework focuses on material production. More specifically, three levels of analyses are conducted to explore (1) the mode of production underneath the accounting discourse regarding iron ore price, (2) the interaction among the different modes of production identified, and (3) the potential of the discourse to change the status quo from a class perspective.

Method/data—The data collected and analysed in this thesis are from (1) iron ore price related news from Sina Finance (one of the most popular websites in Mainland China) during the 2009 and 2010 iron ore price negotiations, (2) official announcements and documents of the CISA, (3) annual reports from major Chinese steel plants and the Big Three, and (4) other types of publicly available information related to the Chinese iron and steel industry. Then these materials are sorted into three main groups according to the producers of the discourse (Marx & Engels, 1974, p.47): (1) the CISA and the major Chinese steel plants; (2) the small and medium enterprises in the Chinese iron and steel industry; and (3) the Big Three. Based on Marx’s methodological framework, the analysis begins with presenting the relevant accounting discourse produced by each group, then delving into the underlying mode of production for the discourse, exploring the interaction among the three groups via their social relations and the corresponding productive forces, and finally examining the nature of the CISA from a class perspective. After completing Marx’s analysis of the discourse, a comparative study is conducted that connects relevant accounting concepts and standards with the two pricing methods argued by each group and Marx’s concept of capital.

Findings —There are three reasons behind CISA’s failed attempt to resist financialisation. First, the financialisation of iron ore price is an inevitable trend as a result of and the solution to the intensified conflicts between the social relations among the three groups which have rendered the traditional annual pricing could no longer meet the increased demand for iron ore in the Chinese market. Second, the CISA did not recognise the interaction among productive, commercial, and financial capital. Thus, the association missed the opportunity of launching China’s own index price which might have otherwise taken the priority in iron ore pricing. Third, in opposing the financialised index price, the CISA did not take into account the interest of the working class which, according to Marx (Marx & Engels, 2008), would lead to the “fall (of the financial capitalist) and the victory of the proletariat” (ibid, p.51). Instead, the association was concerned with the interest of the central government. In relation to accounting, the research demonstrates that accounting is a malleable tool capable of accommodating various socio-political contexts and, correspondingly, supporting different arguments. However, a detailed reading of relevant accounting standards and the conceptual framework shows that the adoption of the financialised price of iron ore is not only the direct consequence of the shift in relevant pricing mechanisms but a result of the underlying social, economic, and political structure comprised of contradictions in social relations and productive forces from which neither the shift in iron ore pricing nor the evolution of accounting concepts and standards can escape.

Research contributions — The contributions of this study are three-fold. First, in relation to extant accounting literature, the research has studied financialisation in the Chinese iron and steel industry which passively participated in the process of the shift in iron ore pricing mechanism and accepted the resulting financialised index price. The analysis goes beyond the use of the same set of accounting discourse (i.e. transparency, fair price, representation of market, etc.) by the Big Three and the CISA to argue for and against, respectively, financialisation, to explore the interactive process among interested parties. Moreover, in response to Arnold’s (2009) call for the examination of “how financial reporting standards have shaped and been shaped by the financialisation of the economy” (p.806), the thesis has studied and applied relevant accounting concepts and standards in the context of the financialisation of iron ore price in China. Second, in relation to theory, the thesis has developed a theoretical framework for financialisation based on Marx’s analysis of capitalism (primarily from Capital Volume III) that explores the broad movement of productive, commercial, and financial capital as well as the corresponding social relations and productive forces. This demonstrates the feasibility and suitability of applying Marx’s classical theory in the contemporary case of financialisation. Third, in relation to methodology, the thesis proposes a Marx-informed discourse analysis drawing from The German Ideology. It leads the analysis of accounting discourse to modes of productions which constitute and condition the discourse (Marx & Engels, 1974). Thus, this research contributes a Marx-informed methodological approach to studies of Political Economy of Accounting in general and of accounting discourse in financialisation in particular.

Future research — Directions for future research are suggested in the following. First, while the period (from 2008 October to 2010 May) for which the thesis is concerned witnessed the soaring price of iron ore skyrocketed by nearly 200%, the price experienced dramatic decrease in the following three years (from 2012 to 2015). Thus, it is of particular interest to investigate factors behind the price drop, with particular reference to Marx’s (1959, p.203) view regarding the limits upon commercial and financial capital. Second, CISA’s dramatically changed attitude towards the financialisation of iron ore price merits further exploration. Although the association reiterated, throughout the two annual negotiations from 2008 to 2010, that iron ore index was speculative and could easily be manipulated (Li RX, 2010d, 2010e), it launched its own index price one year later (in 2011 October). Subsequently, also worth exploring is a comparative study between the Platts index (adopted by the Big Three) and CISA’s index in terms of data assessment and organisational structure. Fourth, given the contradiction between the discourse of certain officials at the CISA and their actual behaviour during the period examined, the identity and accountability of the CISA need to be investigated in a wider social and political context.

FoR codes (2008)

1501 ACCOUNTING, AUDITING AND ACCOUNTABILITY, 150101 Accounting Theory and Standards, 150103 Financial Accounting



Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.