New Features of China’s National Accounts XU Xianchun National Bureau of Statistics of China

1. New Features of China’s National Accounts XU Xianchun National Bureau of Statistics of China (12 October, 2006)

2. Contents • I. GDP Estimation in China after the 2004 Economic Census • II. Problems existed in China’s National Accounts • III. Blueprint for further Development of China’s National Accounts

3. I. GDP Estimation in China after the 2004 Economic Census (I) GDP Estimation in the year of Economic Census (II) Historical GDP revision

4. (I) GDP Estimation in the year of Economic Census • Improve the coverage of production estimation • Further breakdown of classification • Additional source data • Method revision for GDP estimation in 2004 • Updating treatment on specific issues • 2004 GDP change from the revision

5. GDP Estimation in the year of Economic Census • 1. Improve the coverage of production estimation • (1) Better coverage by using data from the Economic Census • Service enterprises not available in regular statistics • Administrative or institutional units not available in regular statistics • Non-registered individual business operators (40.1%) • Secondary activities which is different from the primary activities of enterprises • (2) Better coverage by using data from households budget survey • Housing services of (rents on) owner-occupied dwellings • Domestic services: tutors, nannies, etc.

6. 2. Further breakdown of classification • Industrial classification • Before the first Economic Census: 26 • In the first Economic Census year: 94 • (2) Expenditure classification • Before the first Economic Census: • Household consumption: rural and urban • Import and Export: goods and services • In the first Economic Census year: • Household consumption: rural 11 and urban 12 • Import and Export: goods 3 and services 8 • (3) Institutional sector classification • Before the first Economic Census: 5 • In the first Economic Census year: 11

7. 3. Additional source data • Financial statements of enterprises • a. Financial data available in regular statistics • Industrial enterprises above designated level • Construction enterprises with qualification of any level granted by the government (grading system) • Wholesale and retail trade, restaurants above designated level • b. Financial data non-available in regular statistics • Industrial, construction, trade, restaurant enterprises under cut-off level • Some service enterprises, including business services, renting services, computer services, information transmission services, households services, etc. • c. Specific questionnaires on financial and operational situations were designed to collect the missing data in item b

8. (2) Financial Statements of administrative and institutional units • a. Regular data sources • Government budgetary statistics plus administrative records from relevant institutions • Problems: Not detailed enough or incomplete • b. Specific questionnaires on financial situations of the above institutions are designed to collect the corresponding missing data

9. (3) Data on individual business operators • a. Regular data source: Administrative records from the Industrial and Commercial Management authorities • Problems: Considerable individual business operators did not register with government (40.1%) • b. Specific questionnaires are designed to collect the corresponding missing information

10. (4) Data on secondary activities of enterprises • a. Non-available in regular statistics • b. Specific questionnaires are designed for the first Economic Census

11. 4. Method revision for GDP estimation in 2004 • Changes of data sources results in changes of methods. • Replacing extrapolations based on relevant indicators by direct data from the census • Estimating GDP by three approach independently

12. 5. Updating treatment on specific issues • (1) Treatment on financial intermediate services • Before the economic census, net interests payable of production units are treated as intermediate input of industries. The deposit-interests of households is added to the value-added of financial industry • b. In the year of economic census, the output of financial intermediate services (FISIM) is allocated across industries and final consumption components. Deposit-interests of households is no-longer treated as part of the value added of financial industry

13. (2) Capitalisation of software expenditures • Before economic census, the treatment of software expenditure is not clearly specified as fixed capital formation or as intermediate input • b. In the year of economic census, software expenditures are clearly specified as fixed capital formation

14. (3) Revision on estimation of depreciation of owner-occupied dwellings • Before economic census, the stock of owner-occupied dwellings is valued at historical cost; the depreciation rate for rural households is 2%, while that for urban households is 4% • b. In the year of economic census, the stock of owner-occupied dwellings is valued at current construction cost; the depreciation rate for rural households is 3%, while that for urban households is 2%

15. 6. Change of GDP compare to the traditional method • Aggregates: the level of GDP has increased from 13,688 billion Yuan to 15,988 billion Yuan. The increment is 2,300 billion Yuan that accounts 16.8% of the pre-revised GDP • (2) Composition: The percentage of the tertiary industry over GPD has increased 8.8%, form 31.9% to 40.7%

16. (II) Historical GDP revision • 1. The coverage • (1) GDP by production approach • (2) GDP by expenditure approach • 2. Time series • (1) Production approach • Revision due to census: 1993—2003 • Revision due to other reasons: 1953—2003 • (2) Expenditure approach: 1978—2003

17. 3. Impact on GDP due to historical revision • Aggregates: annual average change of level is 742 billion Yuan, annual average change of growth rate is 8.3%. Of which, level changed in 2003 is 1,843 billion Yuan, while growth rate change is 15.7% • (2) Composition: the percentage of the tertiary industry over GDP averagely increased 4.5% per year. Of which, it increased 8.1% in 2003 from 33.4% to 41.5% • (3) Growth rate: annual average change of growth rate is 0.5 percentage

18. Year GDP Level GDP growth rate Percentage of tertiary industry over GDP Increment Relative change Revised Original Differences Revised Original Differences 1993 700 2.0 14.0 13.5 0.5 33.9 32.7 1.2 1995 2316 4.0 10.9 10.5 0.4 33.0 30.7 2.3 1999 7610 9.3 7.6 7.1 0.5 38.0 32.9 5.1 2000 9746 10.9 8.4 8.0 0.5 39.3 33.4 5.9 2001 12340 12.7 8.3 7.5 0.8 40.7 34.1 6.6 2002 15160 14.4 9.1 8.3 0.7 41.7 34.3 7.4 2003 18433 15.7 10.0 9.5 0.5 41.5 33.4 8.1 Table 1：Historical Revision of China’s GDP

19. II. Problems existed in China’s National Accounts • (I) GDP estimation • 1. Services statistics on regular basis • No regular surveys for some service enterprises and individual business operators, especially short of information on new emerging activities including data transmission, computer services, renting, business services, property management etc. • (2) Administrative records from corresponding management authorities are confined to units under its supervision. And the information are mainly in physical term rather than monetary term, which can not satisfy the needs of deriving value-added of service industries

20. 2. Volume measures • No SPPIs • No trade price indices for services

21. 3. Quarterly GDP estimation • Current quarterly GDP is derived by production approach, no quarterly GDP by expenditure approach has been formally conducted for the moment • (2) Current quarterly GDP is on cumulative basis rather than on discrete bases.

22. 4. Regional GDP estimation Considerable gap between national estimation and the sum of regional estimation • Since 1992, national growth rates of GDP based on regional data are always higher than that calculated directly by NBS; • Since 1996, the level of GDP from the aggregation of regional data is always higher than that estimated directly by NBS

23. (II) Other Problems • Input-Output: • Direct decomposition method rather than commodity flow method • Flow of Funds & Balance Sheet • Too broad classification in terms of institutional sectors and transaction items • Considerable gaps of data requirement

24. III. Blueprint for further Development of China’s National Accounts • (I) GDP estimation • 1. Services statistics on regular basis • Establish regular sample survey for industries of computer services, software, renting activity, business services, households services etc. and for individual business operators • Improve administrative records by cooperation with corresponding authorities • 2. Volume measures • SPPIs are in the process of research

25. 3. Quarterly GDP estimation • Formally establish quarterly GDP estimation by expenditure approach • Gradually establish quarterly GDP estimation on discrete basis by improving basic statistics on investment and prices • 4. Regional GDP estimation • Directly estimated by NBS or by some of the provinces selected by NBS

26. (II) Institutional sector accounts • Further breakdown of institutional sectors • Non-financial corporations—industries, other NFCs • Financial institutions—banks, securities, insurance, other FIs • Government—central, local • Households—rural households, urban households

27. 2. More detailed indicators • More specific details for property incomes, and for taxes on production and imports • 3. Improving compilation method for institutional account

28. Thank you for your attention!