Accounting Method for China’s Quarterly GDP
by Expenditure Approach
I.
Introduction
China’s quarterly GDP accounting by expenditure approach started in 2000. First,
it was conducted at the national level, both in current prices and in constant prices.
Based on the trial accounting experiences for the recent years, Dept. of National
Accounts of NBS has improved the accounting method for China’s quarterly GDP by
expenditure approach, so that it is basically identical with 1993 SNA in the aspects of
accounting scope, accounting principle, item classification and indicator concept.
Since there is not enough fundamental information by quarter, China’s quarterly
GDP accounting by expenditure approach is the quarterly accumulated accounting.
That is, the accounting period is referred to the period from the beginning of the year
to the end of the quarter, which are referred to the followings respectively: the first
quarter, accumulation from the first quarter to the second, accumulation from the first
quarter to the third, accumulation from the first quarter to the fourth. Increment of the
accumulation does not correspond the number that happens in the current quarter
exactly, which also includes the adjustment for the previous quarter.
There are three levels of classification for China’s quarterly GDP accounting by
expenditure approach. The first level of classification refers to final consumption
expenditures, gross capital formation, net exports of goods and services. The second
level of classification refers to household consumption expenditures, government
consumption expenditures, gross fixed capital formation, increase in inventory,
exports and imports of goods and services. The third level of classification divides the
household final consumption expenditures into the rural and the urban household
consumption expenditures.
China’s quarterly GDP accounting by expenditure approach in constant prices is
based on the year of 2000, with a base year shift each 5 years.
Data for China’s quarterly GDP accounting by expenditure approach mainly
comes from two channels. One is the statistical survey information, including the
overall survey and the sample survey information; the other is the accounting
information.
Process of China’s quarterly GDP accounting by expenditure approach is in three
steps: initial accounting, initial check and final verification. The initial accounting is
conducted 15 days after each quarter, which relies on the following information:
monthly and quarterly statistical information from departments concerned of NBS,
import and export statistical information from the Customs, implementation condition
information of financial budget expenditures, price index information of Chinese
foreign trade, etc. The initial check is carried out 45 days after each quarter, which
revises the data of initial accounting based on the further collected relevant
information. The final verification accords with the statistical yearbooks and the detail
information of final accounts of financial expenditures, and utilizes the final
verification data of the annual GDP by expenditure approach for the benchmarking
adjustment to the quarterly GDP from the initial check through the year, thus forming
the final verification data of China’s quarterly GDP by expenditure approach.
II. Accounting Method for China’s Quarterly GDP by Expenditure
Approach in Current Prices
Due to lack of fundamental information, China’s quarterly GDP accounting by
expenditure approach in current prices is mainly calculated based on the related
indicators.
1. Household Consumption Expenditures
Household consumption expenditures refer to the expenditures of resident
households on the final consumption of goods and services during a certain period of
time. It includes: purchased goods and services, goods and services obtained in the
form of payment in kind and in the form of transfer in kind, self-produced goods, the
owner-occupied housing services, financial intermediate services and insurance
services.
Household consumption expenditures of the initial accounting is calculated from
the total retail sale of consumer goods, since the relationship between the total retail
sale of consumer goods and the household consumption expenditures is relatively
close and steady. First, we calculate the proportion that the total retail sale of
consumer goods is in the household consumption expenditures of the previous year.
Then, we use the proportion to calculate the quarterly household consumption
expenditures.
For household consumption expenditures of the initial check, we calculate the
rural and the urban household consumption expenditures respectively, making use of
the rural and the urban household survey materials. For the rural household
consumption expenditures, as there is only the cash consumption expenditures from
the quarterly survey of rural household consumption expenditures, we first calculate
the proportion that the cash expenditures of rural household consumption is in the
rural household consumption expenditures which meet of the accounting requirements
of the previous year, then we calculate the rural household consumption expenditures
of the current quarter that meet the accounting requirements based on the
above-mentioned proportion. We calculate the quarterly urban household
consumption expenditures of the current year according to: urban household
consumption expenditures that meet the requirements of the quarterly household
survey, and the proportion that the urban household consumption expenditures
meeting the requirements of the household survey in the previous year is in the urban
household consumption expenditures meeting the accounting requirements of the
previous year.
2.Government Consumption Expenditures
Government consumption expenditures refer to the expenditures on the
consumption of the public services provided by the government to the whole country
and the net expenditures on the goods and services provided by the government to the
households free of charge or at low prices. It includes two parts: day-to-day
professional expenditures, and CFC of the administrative and the non-profit
institutional units.
Quarterly government consumption expenditures is calculated according to the
quarterly expenditure data of financial budget. First, we calculate the day-to-day
professional expenditure of the quarterly expenditures of financial budget, that is, the
balance which is equal to the administrative and the institutional expenditures
concerned of financial budget minus the expenditures transferred and minus the
irregular expenditures such as capital construction expenditure, etc. The concrete ratio
is calculated in line with the information from the detail list of the final accounts of
financial budget expenditures. Then, according to the proportion that the day-to-day
professional expenditures of the budget is in the government consumption
expenditures of the same period of the previous year, we calculate the quarterly
government consumption expenditures of this year.
For government consumption expenditures of the initial check, since we don’t
have the new information, we don’t revise the initial accounting data and use it as the
data of the initial check. We revise it at the step of the final verification.
3. Gross Fixed Capital Formation
Gross fixed capital formation refers to the value of fixed assets acquired minus
those disposed of by all resident units during a given period. The fixed assets acquired
include those purchased, transferred-in and self-produced, and the disposed of refer to
those sold and transferred-out. It can be categorized into gross tangible capital
formation and gross intangible capital formation. The gross tangible capital formation
includes the value of the construction projects, installation projects completed and the
equipment, apparatus and instruments purchased (minus those disposed of), the value
added from the sale of commercial house, the value of land improved, the value of
newly increased draught animals, breeding stock, animals for milk, wool and for
recreational purpose, and the newly increased forest with economic value during a
given period. The gross intangible capital formation includes the prospecting of
minerals, the acquisition of computer software, recreation, literature and art originals
minus the disposal of them.
For the initial accounting and the initial check of the gross fixed capital
formation, we first calculate the total investment in fixed assets in the whole country
of the regular statistics requirements according to the quarterly statistical information
of fixed assets. For those not included in the regular statistics requirements, we
calculate them as follows:
① For the fixed assets formed by the investment in fixed assets of a small
amount that is less than 0.5 million yuan, we calculate them by the related quarterly
information.
② For the increased fixed assets of the trial-produce of new products, we
calculate them according to the expenses in the trial manufacture of new products on
the basis of the expenditure information of the financial budget.
③ For the value added from the sale of commercial house after its being built,
we calculate it by using the value added from the sale of that in the same period of the
previous year, times the development speed, i.e. the ratio the floor space of
commercial house sold in the current period divided by that in the same period of the
previous year.
④ Due to difficulty in information collection, for increment of intangible fixed
assets, our current accounts only includes the current fixed assets formed by
prospecting of minerals and the market-purchased computer software. For fixed assets
formed by prospecting of minerals, we calculate it according to the cost of geologic
prospecting from the implementation information of the financial budget expenditures.
For value of the purchased computer software, we calculate it on the basis of the
computer software value in the same period of the previous year and its development
speed of sales volume, using trend extrapolation method.
⑤ Value for purchasing the old buildings and the old equipments, and rate for
land requisition, land purchasing and the related migration compensation are all
counted into the total investment in fixed assets already. However, they don’t add to
the fixed assets of the whole country. When we calculate the gross fixed capital
formation, we should exclude them from the total investment in fixed assets. While in
the quarterly accounting process, due to lack of the basic information, we use the
values of these costs during the same period of the previous year and the development
speed of these costs during each quarter of the current year, to calculate the values of
these costs during each quarter of the current year through trend extrapolation
method.
Quarterly gross fixed capital formation of the initial accounting and of the initial
check, is equal to the balance of the gross fixed capital formation from the regular
statistics plus the Item ① to Item ④ while minus the Item ⑤.
4. Increase in Inventory
Increase in inventory refers to the market value of the physical change in
inventory of resident units during the accounting period, i.e. the difference equal to
the value at the end of the period minus that at the beginning and minus the current
gains due to the change in prices. The inventory includes the raw materials, fuels and
reserve materials purchased by the resident units as well as finished products,
semi-finished products, work-in-progress, etc. produced by the resident units.
Due to limits of the basic information, the initial accounting and the initial check
of quarterly increase in inventory only calculate changes of the industrial finished
products in stock and changes of the commodities of wholesale, retail trade in stock.
For increase in inventory of industry, first, we calculate increase in inventory of
industrial enterprises above designated size1 according to the monthly information of
main economic indicators of industrial enterprises. Then, making use of the
proportion that the value added of industrial enterprises above designated size is in the
1
Industrial Enterprises above Designated Size refers to all state-owned industrial enterprises and the
non-state-owned industrial enterprises whose annual value of sales from products is bigger than 5 million yuan.
gross value added of all industrial enterprises, we calculate the increase in inventory
of all industrial enterprises.
For increase in inventory of wholesale and retail trade, we first calculate the
increase in inventory of enterprises above designated size in wholesale and retail
trade 2 , according to total sum of the stock at the end of the period from the
information of gross commodity sales of wholesale and retail trade. Then, according
to the proportion that total value of sales from commodity above the designated size is
in the gross value of sales from commodity by all the wholesale and retail trade, we
calculate the increase in inventory of all the wholesale and retail trade.
5. Net Exports
Net exports refer to the difference of the exports of goods and services minus the
imports of goods and services. The exports include the value of various goods and
services sold or gradually transferred by the resident units to the non-resident units.
The imports include the value of various goods and services purchased or gratuitously
acquired by the resident units from the non-resident units. The value of export and
import of goods are calculated at FOB. The value of export and import of services are
calculated at market prices of transaction.
Data of net exports of goods and services can be obtained from Balance of
Payments directly. However, the time of quarterly balance of payments published is
lagged behind, which does not meet demands of the initial accounting and of the
initial check of quarterly GDP accounting by expenditure approach. Therefore, we
calculate quarterly net exports of the initial accounting and of the initial check by
using the statistical data from the Customs, together with the data concerned from
Balance of Payments of the same quarter of the previous year. The concrete
calculating method is as follows:
First, according to data of the same period of the previous year, we calculate the
exchange coefficients between the data of commodities’ exports and imports from the
Customs’ statistics and those of goods’ exports and imports from the Balance of
Payments.
The exchange coefficient of goods imported mainly reflects the difference
between its value of FOB and that of c.i.f. The exchange coefficient of goods
exported mainly reflects the error generated by technical treatment.
Secondly, using the exchange coefficients from Step 1, we convert the data of
goods’ exports and goods’ imports from the Customs’ statistics calculated in RMB
into those identical with the Balance of Payments, thus we get the gross exported and
the gross imported of goods and the net exports of goods meeting the requirements of
Balance of Payments.
Thirdly, we determine the proportion of goods exported or imported in the export
of goods and services or in the import of goods and services during the accounting
period. According to the changing trend of the proportion of goods exported or
2
Enterprises above Designated Size in Wholesale and Retail Trade: For the wholesale, it refers to the
enterprises with 20 and above shop employees and the annual sales volume of 20 million yuan and above. For
retail trade, it refers to the enterprises with 60 and above shop employees and the annual sales
volume of 5 million yuan and above.
imported in the export of goods and services or in the import of goods and services in
each quarter of the previous year, and the changing conditions of this proportion of
each quarter in current year, we make adjustments on the proportion of the same
period in the previous year, and the adjusted is used as the proportion for the
accounting period.
Fourthly, using the proportion of goods exported in the export of goods and
services and that of goods imported in the import of goods and services, we calculate
the export volume and the import volume of goods and services respectively, and get
the net exports of goods and services.
For the final verification of quarterly net exports, we directly adopt the data of
imports and exports from Balance of Payments.
We do benchmarking adjustments to the annual final verification data and get the
final verification data of China’s quarterly GDP by expenditure approach. The
purpose of benchmarking is to revise for the initial value of the quarterly data, so that
they can adapt to the new annual data. The adjustment method uses the pro rata
distribution method for reference. However, since we have not carried out the
accounting work by quarter, we have not done the adjustments as required by the
international standards entirely, nor do we consider the step problem generated by pro
rata distribution method. Our concrete practice is: Taking the year of 2005 as an
example, we make benchmarking adjustments on the quarterly data of 2005 according
to composition of the annual GDP by expenditure approach in 2005, that is, we
distribute annual data of the final verification to each quarter according to the
proportions that the quarterly (accumulated) values of indicators are in the annual data
of 2005 before the final verification. In mathematical terms, there is:
 I q , 05 

X q , 05 = A05  
  I q , 05 
 q

X q ,05 refers to the absolute magnitude of the estimated value in Quarter q in
2005 after the adjustment.
I q ,05 refers to the absolute magnitude in Quarter q in 2005 before the
adjustment.
A05 refers to the absolute magnitude of the annual data of the final verification
in 2005.
Letter q=quarter 1, quarter 1 to 2, quarter 1to 3.
III. Accounting Method for China’s Quarterly GDP by Expenditure
Approach in Constant Prices
For quarterly GDP by expenditure approach in constant prices, we all adopt the
“flop-out” method, deflating components of the quarterly GDP by expenditure
approach in current prices using the corresponding price indices respectively.
1. Household Consumption Expenditures in Constant Prices
Data of the initial accounting and of the initial check of household consumption
expenditures include those of the rural household consumption expenditures and those
of the urban household consumption expenditures. We calculate the urban and the
rural household consumption expenditures in constant prices according to the urban
and the rural household consumption price indices respectively, using the “flop-out”
method.
2. Government Consumption Expenditures in Constant Prices
First, using the proportion that the day-to-day professional expenditures and the
CFC is in the annual government consumption expenditures of the previous year as
the weight, we conduct weighted average work for the household consumption price
indices and the investment price indices of the fixed assets, in order to get the
government consumption price index. Then, we get the government consumption
expenditures in constant prices from the government consumption expenditures in
current prices divided by the government consumption price index.
3. Fixed Capital Formation in Constant Prices
For initial accounting of fixed capital formation in constant prices, we use the
investment price index of fixed assets to deflate the gross fixed capital formation.
For initial check of fixed capital formation in constant prices, we use different
price indices to deflate the corresponding items respectively. The concrete situation is
as follows: For the total investment in fixed assets in the whole country, investment in
fixed assets below 0.5 million yuan, fixed assets increased by trial manufacture of the
new products and formed by the prospecting of minerals, we use the price index of
investment in fixed assets to deflate them. For the value added from sales of
commercial houses, we use the sale price index of commercial houses. For the value
of computer software, we deflate it by the price index of household services. For
value of the purchased old equipment, we use the purchasing price index of
equipment, tools and instruments. For value of purchasing old buildings, land and the
other rates, we use the price index of the other rates.
4. Increase in Inventory in Constant Prices
For increase in industrial inventory, we use the ex-factory price index of
industrial products to deflate it. For increase in inventory of wholesale and retail trade,
we use the retail price index.
5. Net Exports in Constant Prices
Gross imports and gross exports of goods in constant prices are calculated by
using the import price index of goods and the export price index of goods respectively.
We get the net exports of goods in constant prices from gross exports of goods in
constant prices minus the gross imports of goods in constant prices. According to the
quarterly price indices of the imported and the exported commodities compiled by
Customs Bureau, we calculate their simple arithmetic average number, on which we
determine the price indices of the imported and of the exported goods.
For the imported and the exported services in constant prices, since there have
not been the corresponding price indices at present, we calculate them referring to the
import and the export price indices of goods and the price indices of the service items.
IV. Major Issues in China’s Quarterly GDP Accounting by
Expenditure Approach
1. The scope of China’s quarterly GDP accounting by expenditure
approach is not overall due to the insufficiency of basic information,
while the requirements of the basic information is not identical, thus the
accounting quality is affected.
Quarterly GDP accounting by expenditure approach needs a great quantity of
basic information. However, there exist a considerable number of insufficiencies. For
example, information for measuring the imputed consumption expenditures of
household owner-occupied housing services, consumption of financial services and
consumption of insurance services are all insufficient, they can only be calculated by
the related indicators. The financial expenditure information counting the quarterly
government consumption expenditures only reflects the financially budgeted
expenditures, not including the expenditures of the other items, which covers less
scope than of the practical, therefore the foundation for calculating the government
consumption expenditures is insufficient. In the meantime, current classification of
the financial expenditure accounts is confounding, with expenditure of the same
function scattering in different kinds of accounts, that it is difficult for us to adjust the
financial expenditure data of administrative and institutional costs to be the
information necessary for national accounts, as is not beneficial to calculate the
government consumption expenditures. Problems for accounting the fixed capital
formation include that formation basis for calculating the investment in fixed assets
below 0.5 million yuan, value added from sales of the commercial houses, value of
the purchased old buildings, value of the old equipment, and the rates related to land
are all insufficient. The basic information for calculating increase in inventory is also
deficient.
The report requirements of the current basic information for accounting the
quarterly GDP by expenditure approach have not been identical yet. For instance,
statistics of investment in fixed assets and statistics of BOP are accumulative from the
beginning of the year, and there have not been the data of them by quarter. Affected
by this situation, China’s GDP accounting by expenditure approach could not be
conducted by quarter at present.
2. Classification of Expenditure Items Is Too Crude.
From point of view of classification, there exist obvious gap between the practice
of China’s quarterly GDP accounting by expenditure approach and the demands by
the international standard. For quarterly household consumption expenditures, our
classification includes just two parts: the urban and the rural household consumption
expenditures. For government consumption expenditures, there is only one kind of
classification, i.e. the government consumption expenditures, and there has not been
more detailed classification for it according to the 1993 SNA. For classification of
fixed capital formation, affected by the statistical ways of investment in fixed assets in
our country, classification identical with the type of assets of the international
standard has not been carried out yet. For net exports, we only specify them as goods
or services, without any more detailed classification.
3. Lack of the Price Indices Supporting Quarterly GDP Accounting
by Expenditure Approach
When accounting China’s quarterly GDP by expenditure approach in constant
prices, there lacks the price indices supporting the classification of expenditure items
very much. When calculating the household consumption expenditures in constant
prices, we are lack of some price indices of service items in household consumption
expenditures. For example, among the deflators of household consumption
expenditures, there lack the indices that reflect the consumption for financial and
insurance services by households, the indices that reflect the changes of the price of
the self-produced, self-occupied and the owner-occupied housing. Thus accuracy of
the deflator of household consumption expenditures is affected, so is the GDP deflator
by expenditures consequently. For the deflator of government consumption
expenditures, we just get it by method of weighted mean through the price index of
household consumption and that of investment in fixed assets, which could not reflect
the overall conditions of the change of prices of government consumption
expenditures. For instance, the change of prices of wage-equivalent expenditure in the
government consumption expenditures could not be reflected, however, change of this
part is relatively large. Now price indices of the imported and of the exported services
have not been compiled in China.
As the above-mentioned, in order to improve China’s quarterly GDP accounting
by expenditure approach and its quality so that it can reflect the actual economic
growth, it is necessary for us to supplement the insufficiencies of the basic
information, to improve the current statistical survey system, to improve and perfect
the statistical means and system, to establish the fundamental framework of the price
index system and to set up a set of collecting system of statistical information
supporting quarterly GDP accounting by expenditure approach.
Reference:
Accounting Method for Quarterly GDP by Expenditure Approach (Trial Scheme)
Zhang, Dongyou & Zheng, Xuegong