Accounting Methods of China’s Annual
Expenditure-Based GDP
WU You
Department of National Accounts, NBS
Department of National Accounts of National Bureau of Statistics developed
expenditure-based GDP estimates on trial basis in 1989, and added expenditure-based
GDP estimates to annual report in January 1990 for the first time. “Program of
Explanatory Notes on Gross Domestic Product Indicators and Accounting Methods”
was issued in all regions in October 1993. And annual expenditure-based GDP
estimates system was established formally, which was carried out nationally and
regionally. In 1995, National Bureau of Statistics firstly published national
expenditure-based GDP figures for 1978-1994 and figures of 30 provinces,
municipalities and autonomous region’s figures for 1993 in "China Statistical
Yearbook”. According to 1993 SNA, Department of National Accounts of National
Bureau of Statistics has improved and revised the expenditure-based GDP accounting
system for many times since 2000. At present, the state and regions have formally
established the annual expenditure-based GDP accounting system, and are studying
and establishing discrete expenditure-based GDP accounting system.
I. The frame and classification of expenditure-based GDP accounting
Annual GDP by expenditure approach consists of three parts: final consumption
expenditure, gross capital formation and net export of goods and services. The frame
for computation is:
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GDP
Final
Gross Capital
Net Export of
Consumption
Formation
Goods and
Expenditure
Services
Household
Government
Gross Fixed
Changes in
Export of
Import of
Consumption
Consumption
Capital
Inventories
Goods and
Goods and
Expenditure
Expenditure
Formation
Services
Services
The classification of expenditure-based GDP accounting:
First-class
Second-class
Third-class
classification
classification
classification
Household Consumption
Expenditure(Rural and Urban
Household)
Food
Clothing
Residence
Household Appliances and Services
Health Care and Medical Services
Transport and Telecommunications
Education, Culture and Recreation
and Services
Financial Service
Insurance Service
Owner-occupied dwelling Service
Consumption Expenditure in kind
Other Goods and Services
Government Consumption
Expenditure
Gross Fixed Capital Formation
Current Operating Expenditure
Depreciation of Fixed Assets
Residential Construction
Non-Residential Construction
Machinery and Equipment
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Land reclamation expenditures
Mineral exploration costs
Software
Others
II. Household Consumption Expenditure
Household Consumption Expenditure can be divided into Rural Household
Expenditure
and
Urban
Household
Expenditure.
Household
Consumption
Expenditure includes (a) expenditure on goods and services directly with money, (b)
expenditure on goods and services in the form of payment and transfer in kind, (c)
goods produced and consumed by households themselves, (d) expenditure on
financial intermediate services, (e) expenditure on insurance services, (f) expenditure
on owner-occupied dwelling services.
According to the characteristics of the consumption of urban and rural households in
China, rural and urban household consumption expenditure can be divided into 11
categories:
Food
Clothing
Residence
Household Appliances and Services
Health Care and Medical Services
Transport and Telecommunications
Education, Culture and Recreation and Services
Financial Services
Insurance Services
owner-occupied dwelling services
Other Goods and Services
1. Calculation at current price
Household Consumption Expenditure is mainly based on the data from sample survey
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of rural and urban households carried out by NBS and other statistics. It is calculated
by categories above.
(1) Expenditure on Food, Clothing, Residence, Household Appliances and Services,
Health Care and Medical Services, Transport and Telecommunications, Education,
Culture and Recreation and Services, expenditure in kind, Others = Consumption
expenditure Per Capita (relevant category in Rural and urban household survey) ×
annual average number of residents
And,
Annual average number of residents = (the number of residents at the beginning
of the year+ the number of residents at the end of the year) ÷2
(2) Expenditure on financial Service includes financial intermediate services
indirectly measured (FISIM) and explicit financial services consumed by rural and
urban household.
And,
FISIM consumed by household
= (annual average of savings deposits + annual average of personal housing
accumulation fund deposits + annual average of consumption loan) * (interest of
loans – interest rate of deposits)/2
Explicit financial services consumed by households are calculated basing on
related financial data of financial institutions.
(3) Household consumption expenditure on insurance services refers to the
expenditure resulted from the fact that residents involve in the insurance service
provided by insurance institutions.
Household consumption expenditure on insurance services = Gross output of
Insurance * insurance claim of households/ total insurance claim
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(4) The value of imputed consumption expenditure of household owner-occupied
dwelling services is equal to the imputed rent. When the imputed rent is inavailable,
the cost of housing is used. The formula is:
The imputed consumption expenditure of the urban households owner-occupied
housing services =Repair and maintenance cost of urban households owner-occupied
dwelling+ management fees of urban households owner-occupied dwelling+ imputed
depreciation of households owner-occupied dwelling
And, imputed depreciation rate of household owner-occupied dwellings is 2% for
urban area and 3% for rural area.
(5) Consumption expenditure in kind is calculated by total non-cash income per capita
of households and average number of households.
(6) Consumption expenditure on other goods and services means the expenditure
except above, including expenditure on jewelry, hair beauty appliances, cosmetics,
hotel accommodation, funeral fee, etc, which is calculated by per capita expenditure
of miscellaneous goods and services of households and average number of
households.
2 .Calculation method at constant price
Household consumption expenditure at constant price is calculated by rural and urban
residents, and deflated by relevant price indices respectively. Categories of household
consumption expenditure and related price index are as follows:
Household consumption categories
food
Price index categories
General food price index
clothing
Clothing price index
residence
Residence price index
Household facilities, articles and
services price index
Health care price index
Transportation and communication
price index
Recreation, education and culture
articles price index
Household facilities, articles and services
Health care
Transportation and communication
Recreation, education and culture articles
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Owner-occupied dwelling service
weighted average of Consumer price
index and fixed assets investment
price index
Renting price index
Other goods and services
Personal services price index
Financial and Insurance services
III. Government consumption expenditure
Government Sectors includes administrative and non-profit institutional units of
various types. There are: (1) Service Activities for Agriculture, Forestry, Animal
Husbandry and Fishing; (2) Scientific Research, Technical Service and Geologic; (3)
Management of Water Conservancy, Environment and Public Facilities; (4) Nursery
and Bury Service of Services to Households and Other Services; (5) Education; (6)
Health, Social Security and Social Welfare; (7) Culture, Sports; (8) Public
Management and Social Organization. The main data sources of the calculation of
government consumption expenditure are Defense White Paper and current operating
expenditure from Ministry of Finance.
1. Calculation at current price
Government Consumption Expenditure= Current Operating Expenditures–
Operating revenue+ Depreciation of Fixed Assets
And,
Current Operating Expenditures= (Expenditures on Wages and Welfare+
Expenditures on Goods and Services+ Expenditures on National Defence) +
(Subsidies on Individual and Families- Pension Costs- Living Allowance- Relief
Costs- School Aid Costs- Production Subsidies)
Operating revenue of Government Sectors= Operating revenue of the national
budget units
Depreciation of Fixed Assets= Original value of fixed assets* Depreciation rate
6
(4%)
2. Calculation at constant price
Government Consumption Expenditure at constant prices is deflated in two parts: One
is Depreciation of Fixed Assets and the other is the margin, equal to Government
Consumption Expenditure minus Depreciation of Fixed Assets. The former is deflated
by Producers’ Prices of Industrial Products; the latter is deflated by Consumer Price
Index.
IV. Gross Fixed Capital Formation
According to the international standard and data source, Gross Fixed Capital
Formation consists of 7 parts: Residential Construction, Non-Residential Construction,
Machinery and Equipment, the value of land improvement, the prospecting of
minerals, computer software, others.
That is below:
Gross Fixed Capital Formation = Residential Construction +Non-Residential
Construction+ Machinery and Equipment+ the value of land improved+ the
prospecting of minerals+ computer software+ others.
Total investment in fixed assets is the main basic data and source for accounting
Gross Fixed Capital Formation. Gross Fixed Capital Formation covers urban area
investment, real estate development investment, rural fixed assets investment projects
which is over 500,000 Yuan; Statistical frequency is monthly and annual. Data are
collected by the system of reporting form with complete enumeration.
1. Calculation at current price
（1） Residential Construction
The residence here refers to the building only for occupancy, for example, villa,
apartment and dormitory. The formula is below.
Residential Construction=residential investment + value-added of Residential sales corresponding fees in land requisition, purchase and resettlement compensation.
Residential investment refers to the investment of the buildings only for occupancy,
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for example, villa, apartment, dormitory, etc.
Value-added of Residential sales refers to the difference in the accounting period
between the sales value of residence and corresponding Investment completed, i.e.
cost of project before buildings being sold. The formula is below.
Value-added of Residential sales = actual sale of residential buildings – (floor
space of residential buildings ×cost of residential buildings completed) - investment in
land development - corresponding fee in land requisition, purchase and resettlement
compensation.
Investment in Residential Land development refers to upfront project investment of
real estate companies. That is investment in road, water supply, power supply, land
leveling.
The fee in land requisition, purchase and resettlement compensation refers to all kinds
of land compensation fees and allowance for arrangement, that land developers
contribute to government in the situation of both remise and transfer of the using right
of State-owned land. These costs don’t increase the Gross Capital Formation, so it
should be deducted from Investment in fixed assets completed.
（2） Non-residential construction
Non-residential construction refers to the building not for residence, for example,
office, commercial business buildings, factory and storeroom, public infrastructure.
The formula is below.
Non-residential construction
= Construction and installation of Total Investment in Fixed Assets in the Whole
Country-investment in residential buildings
-cost of purchasing old buildings
-corresponding fee in land requisition, purchase and resettlement compensation
+ value–added of non-residential construction sales
Costs of purchasing old buildings: it is similar to the costs of purchasing old
equipment, Costs of purchasing old buildings are included in Total Investment in
Fixed Assets, but don’t increase the fixed assets, so it should be deducted from
Investment in fixed assets completed.
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Corresponding fee in land requisition, purchase and resettlement compensation in
non-residential construction: It is similar to residence. It is included in completed
investment in fixed assets, but it doesn’t increase the total fixed capital formation, so
it should be deducted from fixed capital completed Investment.
Value-added of non-residential construction sales refers to the difference within the
accounting period between the sales value of non-residential construction and
corresponding completed Investment, i.e. cost of the project before sold. The formula
is below.
Non-residential construction sales added value= commercial residential building
actual sales revenue- residence actual sales revenue- (commercial residential building
saleable area- residence saleable area) ×residential buildings cost- commercial land
development investment- commercial land purchase fee.
（3） Machine and equipment
Machine and equipment refers to the equipment, tools and machines bought or made
by enterprises and administrative institutions and reach the standards of fixed assets.
The computation formula is below.
Machine and equipment = machine and equipment investment + fixed assets
investment below five hundred thousand Yuan- cost on purchasing old equipments.
Machine and equipment investment refers to the costs of equipment, tools and
machines bought or made by enterprises and administrative institutions and reach the
standards of fixed assets.
Fixed assets investments below 500 thousand Yuan: Since they are not included in
total investment of fixed assets, and most of them are used to buy machine and
equipment, these are estimated as 0.2‰ of total investment in fixed assets.
Cost on purchasing old equipments is included in total investment in fixed assets, but
the cost doesn’t increase the fixed assets, so the cost should be deducted from the total
investment in fixed assets.
（4）Land improvement costs
Land improvement costs refer to the investment in projects examined and arranged by
all levels of administrative departments of land resources in order to increase the
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amount of land, improve the quality of land or increase land productivity. They are
considered as a part of gross fixed capital formation.
（5）Mineral exploration costs
Mineral exploration costs refer to the capital invested on underground mineral
resource exploration by all sections and units of the whole society. They are part of
intangible fixed asset.
（6）Computer software
Computer software refers to the income of enterprises from developing, producing
and selling software. They also are part of Intangible fixed asset.
2. Calculate method at constant price
Total fixed capital formation at constant price is computed by deflation. Items of total
fixed capital formation at current price are deflated by corresponding price index.
Residence, deflated by construction and installation price index of fixed assets
investment price index.
Machine and equipment, deflated by equipment and instruments purchasing price
index of fixed assets investment price index.
Non-residential construction, deflated by construction and installation price index of
fixed assets investment price index.
Land improvement cost, deflated by fixed assets investment price index.
Mineral exploration cost, deflated by fixed assets investment price index.
Computer software, deflated by computer software price index of retail price index.
V. Increase in inventories
The inventory includes the raw materials, fuels and reserve materials purchased by the
production
units,
as
well
as
finished
products,
semi-finished
products,
work-in-progress, etc. Increase in inventory refers to the market value of the change
in physical inventory during the accounting period, i.e. the difference of the inventory
value between the beginning and the end of the period minus the holding gains or
losses resulted from price fluctuation.
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1. Calculate method at current price
Increase in inventory is estimated mainly by the value at the beginning and the end
of the period in the accounting records. But the holding gains or losses resulted from
price fluctuation should be deducted when calculating the increase in inventory,
because they are included in the inventory value in accounting records. The method
is: adjust the inventory value at the beginning of the accounting period to the value
atn the end of the period by related price indexes.
Formula is below.
Increase in inventories= inventory value at the end of the year - inventory value
at the beginning of the year adjusted
And,
Adjusted inventory value at the beginning of the year = inventory value at the
end of the year in accounting× related price index
Increase in inventories at current prices is computed by industries. The specific
computation method is below:
（1）Increase in inventories in farming, forestry, animal husbandry and fishing
The increase in inventories in farming, forestry, animal husbandry and fishing is
estimated in two parts: enterprise and farmer.
① Increase in enterprise inventories.
Limited by the data source, currently, only the increase in inventories of state-owned
enterprises is estimated. The inventory value at the beginning is adjusted by faming
products price index.
② Increase in farm family inventories: includes inventory increases from
raising pig, sheep and fowl, as well as the increase in grain reserves.
a. Inventory increase from raising raising pig, sheep and fowl= (Number in
stock at the end- Number in stock at the beginning)×average unit price at the end
b. Inventory increase in grain reserves= (grain stock at the end- grain stock at
the beginning) × average grain unit price at the end
（2）Increase in inventories on industry
Increase in industrial inventories consists of industrial enterprises above and below
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designated size. It is calculated by the economic census data in census years and
estimated by census data in non-census year. The value of inventories at the
beginning is adjusted by PPI.
（3）Increase in inventories of construction
Increase in inventories in construction consists of two parts gained from two kinds of
enterprise. The first kind is construction enterprises of both general contracting
contractors and professional contractors. The second kind is construction enterprises
of work subcontractors and other construction enterprises without qualification
criteria. Increase in inventories of the first kind is computed by their financial
statement; and the second is estimated by economic census data. The value of the
inventories at the beginning of year is adjusted by PPI.
（4）Increase in inventories on transport, storage and post
Increase in inventories on transport, storage and post is calculated by data of
economic census in census years, estimated by finance data of state-owned enterprises
of the State-owned Assets Supervision Administration Commission in non-census
years. The value of transport inventories at the beginning of the year is adjusted by
PPI of the means of production; the value of storage inventories at the beginning of
the year is adjusted by Retail Price Indices; the value of post inventories at the
beginning of the year is adjusted by PPI.
（5） Increase in inventories on wholesale and retail trades
Increase in inventories on wholesale and retail trades consists of wholesale and retail
enterprises above and below designated size. Increase in inventories of wholesale and
retail enterprises above the designated size is computed by related financial term
tables obtained from Department of Trade and External Economic Relations of NBS.
Increase in inventories of enterprise below the designated size is estimated by
economic census data. The value of the inventories at the beginning is adjusted by
Retail Price Indices.
（6）Increase in inventories on hotels and catering services
Increase in inventories on hotels and catering services consists of hotels and catering
services enterprises above and below designated size.
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Increase in inventories of hotels and catering services enterprises above the
designated size is computed by main financial term tables of corporation units.
Increase in inventories of enterprise below the designated size is estimated by
economic census data. The value of the inventories at beginning is adjusted by Retail
Price Indices, and Retail Price Indices are obtained from Retail Price Index tables.
（7）Increase in inventories on real estate
Inventories in real estate industries include unsold building and building materials.
Contained in gross fixed capital formation, unsold building should be deducted in the
computation of increase in inventories to avoid double count. Because it is difficult to
deduct unsold building from the inventories according to current data, unsold building
is considered to be 5% of inventories in real estate industry. Financial terms statement
of real estate enterprises is used in census years. Finance data of state-owned
enterprises of the State-owned Assets Supervision Administration Commission is used
to estimate in non-census years. The value of inventories at beginning of year is
adjusted using PPI of industrial products.
（8）Increase in inventories on other services
Other services refer to information transfer, computer services and software; leasing
and business services; scientific research, technical service and geological prospecting;
management of water conservancy, environment and public facilities; services to
household and other services; education; health, social security and social welfare;
culture, sports and entertainment. Increase in inventories of these services is mainly
calculated by economic census data and finance data of state-owned enterprises of the
SASAC. The value of the inventories of information transfer, computer services and
software at the beginning is adjusted by price index of communicate services. The
value of inventories of leasing and business services, scientific research, technical
service and geological prospecting, management of water conservancy, environment
and public facilities, and services to household and other services is adjusted by price
index of service items. The value of inventories of education, culture, sports and
entertainment at the beginning is adjusted by correlative service indices. The value of
inventories of health, social security and social welfare at beginning is adjusted by
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correlative health care indices.
2. Calculate method at constant price
Commonly, there are two methods to calculate Increase in inventories on constant
price. The first is inflated by price index. And the second is direct computation by
means of multiplying base-period price by increment in accounting period.
Computation of increase in inventories at constant price of pig, sheep, domestic bird,
rabbit and food use the first method. The others use the second method. The specific
method is below.
Use agricultural products price index in agriculture, forestry, animal husbandry and
fishing industry. Use index of producer price of industrial products in industry,
building industry, transportation, storage industry and postal services. Use retail
price index in retail and wholesale Industries, lodgings and catering services. Use
price index of investment in fixed assets in real estate. Use corresponding price
index in retail price index in information transfer, computer services and software,
leasing and business services, scientific research, technical services and geological
prospecting, management of water conservancy, environment and public facilities,
services for residents and other services, health care, social security and social
welfare, culture, sports and entertainment.
VI. Net Export of Goods and Services
Net export of goods and services refers to the difference between export and import of
goods and services. The export includes the value of all kinds of goods and services
which resident units sell or transfer for free to non-resident units. The import includes
the value of all kinds of goods and services which non-resident units buy or gain for
free from resident units.
1. Calculate method at current price
Net export of goods and services equals difference between export and import of
goods and services. Goods import and export can be divided into general trade import
and export, processing trade import and export and others. Services import and export
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can be divided into transport service, travel service, communication service, insurance
service, computer and information service and others. The value of goods export and
import is computed by free-on-board price, services by market price when business
actually occur.
In calculation, the total export and import amount of goods and services is gained
directly from balance of payments. Data of goods import and export (general trade
import and export, processing trade import and export and others) are from customs
statistics. Because the import data gained from customs are counted with cost,
insurance and freight price, so the data should be adjusted to free-on-board price with
adjustment coefficient. The data of services import and export (transport service,
travel service, communication service, insurance service, computer and information
service and others) are from balance of international payment statement directly.
In addition, the data calculated by USD should be converted to the data calculated by
CNY with annual average exchange rate. The formula is below.
（1）Net export of goods
Import of goods (CNY) = Import of goods (USD) ×annual average exchange rate
(CNY/USD)
Export of goods (CNY) = export of goods (USD) ×annual average exchange rate
(CNY/USD)
Net export of goods (CNY) = Import of goods (CNY) - Export of goods (CNY)
（2）Net export of services
Import of services (CNY) = Import of services (USD) ×annual average exchange
rate (CNY/USD)
Export of services (CNY) = export of services (USD) ×annual average exchange
rate (CNY/USD)
Net export of services (CNY) = Import of services (CNY) - Export of services
(CNY)
2. Calculate method at constant price
Net export of goods and services at constant price refers to the difference of export
and import of goods and services at constant price. Import and export at constant price
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are deflated respectively by corresponding price indices.
The formula is below.
Import/export of goods at constant price = [import/export of goods at current
price ÷ import/export of goods price index] ×annual average exchange rate in
base-year
Import/export of services at constant price = [import/export of services at current
price ÷ import/export of services price index] × annual average exchange rate in
base-year
Net export of goods and services at constant price = export of goods at constant
price + export of services at constant price - import of goods at constant price - import
of services at constant price
Most of import and export of goods price indices are the commodity price indices
authorized by Maritime Customs Administration. Also, import commodity price
indices should be adjusted according to consumer price index of main import country
or district.
At present, china has not authorized import and export services price index. In
computation of services export at constant price, services export at constant price
refers to service items price index of consumer price index, and the import of services
price index refers to export of services price index in American, Japan, Korea, Hong
Kong and EU.
P.S.
Some questions about expenditure-based GDP:
1. Which Deflator should be applied to government consumption expenditure at
constant price?
2. What is the data source to compute gross fixed capital formation (whether to
use the Balance Sheet of government and enterprises)? How to get and process these
data?
3.
How to compute the change of inventories exactly and comprehensively?
How to estimate the value of inventories at the beginning and the end of the period?
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