The Overview of GDP Estimates and
Related Issues in China
Department of National Accounts, NBS
JIN Hong
Gross Domestic Product (GDP) Estimates at current price can be obtained by
three approaches (production, income and expenditure approaches). However, the
GDP released by NBS is the result combined production approach with income
approach.
I. Industrial Classification
According to the Industrial Classification & Codes of National Economy (GB/T
4754-2002) and the data availability of China, four levels industrial classification
have been used in annual GDP Estimates. One-digit category follows Three Industries
Division Regulation directly, which was established by NBS in 2003, but the tertiary
industry does not include International Organizations. Two-digit category is basically
equal with GB/T 4754-2002 at Two-digit category (section level). Three-digit
category is basically equal with GB/T 4754-2002 at division level, but real estate is
subdivided into group level, and individual-owned house service is added. Four-digit
category is consistent with three-digit category basically, and Mining, Manufacturing,
Production and distribution of electricity, gas and water have been subdivided into
more detailed industries based on practical experience and special demand (see Annex
1 attached).
II. Data Sources
Data which used in GDP estimates are mainly derived from statistical survey
data in NBS, and the others are derived from financial data and administrative records
in other government departments. Statistical sources include censuses and regular
sampling surveys. Financial data mainly refer to financial questionnaire from 18
administrative departments which were established as regular statistical surveys in
2008. Administrative records refer to the data from Ministry of Finance,
Administration of Taxation, People’s Bank of China, China Insurance Regulatory
Commission, China Securities Regulatory Commission, Administration for Industry
& Commerce, Ministry of Civil Affairs, and so on.
The detailed data sources are contained in the Annex 2 attached.
III. Measurement of Value Added by Industries
Industrial value added are measured by 94 industries respectively each year, and
then add together to obtain annual GDP. Due to the restrictions on data sources, only 4
industries (Agriculture, Forestry, Animal husbandry and Fishing) can be calculated by
production approach. 39 industries in Mining, Manufacturing, Production and
distribution of Electricity, Gas and Water are calculated by production approach and
income approach respectively at first, and then obtain the final estimates by means of
weighting. The other 51 industries are calculated by income approach. Due to the
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restrictions on data sources of production approach and income approach, the
measurement of value added by industries can be classified as the following
categories.
1. Direct Method
If the data sources can cover the whole industries, direct method is adopted in
estimates. That is to say, the total output and valued added are calculated directly
based on the data sources. 51 industries are adopted direct method, including
Agriculture, Industry, Railway Transport, Post, Finance, Social Welfare, etc, which
account for 55% of 94 industries and 63% of GDP.
2. Value Added Extrapolation Method
If the data sources only cover some part of industries, rather than the whole
industries, value added extrapolation method is adopted in estimates. That is to say,
value added is calculated based on data sources at first, and then extrapolation is
applied to calculate the valued added of the whole industries using the proportion in
basic year (census year). 31 industries are adopted value added extrapolation method,
including Construction, Wholesale and Retail, Accommodation and Restaurants, etc,
which account for 33% of 94 industries and 33% of GDP.
3. Reference Indicator Estimation Method
If data source is not enough in some industries, or no available survey data can be
used to calculate value added, then reference indicator estimation method is adopted
in estimates. That is to say, based on the total output or value added in basic year
(census year), growth rates of some reference indicators which can describe the real
development of related industries are regarded as the growth rates of related total
output or value added, and then value added are calculated by extrapolation. 11
industries are adopted reference indicator estimation method, including Storage,
Computer Services, Resident Services, etc, which account for 12% of 94 industries
and 4% of GDP.
IV. Major Improvement in Recent Period
In 2008, China has carried out the Second Economic Census. Accordingly, GDP
estimation methods have been made a series of adjustments and improvements.
1. Changes of Value Added Measurement of Individual Businesses
In the First Economic Census in 2004, the questionnaires of individual
businesses contain all the value indicators which can be used in value added
measurement, so it is possible to use census information directly to obtain value added.
However, according to the Design of Second Economic Census, Only the number of
self-employed households (including the total number of self-employed households,
the number of self-employed households with commercial registration, the number of
self-employed households with tax registration) and the number of employees by
industries at section level can be obtained, and the value indicators which can be used
in value added measurement have not been surveyed. Consequently, comparing to
First Economic Census, many changes was taken place in value added measurement
of individual businesses in Second Economic Census.
According to the tax data and the limited census data, value added of individual
businesses is calculated indirectly, and the basic approach is as follows: Firstly, we
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calculate the amount of taxes per household in each industry. Secondly, the amount of
taxes per household is multiplied by the number of self-employed households to
obtain tax revenue by industries. After that, tax revenue is divided by legal tax rates to
obtain output data. Finally, value added by industries can be calculated with output
and valued added rates of small-scale enterprises in relevant sectors.
2. Improvements of Output Measurement of Finance
The output of financial intermediation services indirectly measured (FISIM) is
calculated by reference rate approach which is recommended by SNA 2008. The
output of actual service does not include activities unrelated to financial services, such
as exchange gains and exchange losses. The output of Bank and securities do not
contain investment revenue any more.
In annual GDP estimates of the First Economic Census, FISIM is equal to the
sum of loan interest revenue, investment revenue, rental revenue and revenue from
transactions with financial institutions obtained by banks minus deposit interest
expense and expense from transactions with financial institutions. In annual GDP
estimates of the Second Economic Census, the measurement of FISIM change to
reference rate approach which is recommended by SNA 2008, which is equal to
indirect income obtained by banks from depositors due to depositing activities plus
indirect income obtained by banks from borrowers due to lending activities.
The formula is:
Output of bank intermediation services indirectly measured = Indirect income obtained by
banks from depositors due to depositing activities + Indirect income obtained by banks
from borrowers due to lending activities
where
Indirect income obtained by banks from depositors due to depositing activities
=annual average deposits of financial institutions × reference rate – actual interest income
of deposits
Indirect income obtained by banks from borrowers due to lending activities
=actual interest income of loans – annual average loans of financial institutions ×
reference rate
Reference rate = (deposit interest rate + loan interest rate – risk rate) ÷ 2
3. Changes of Value Added Measurement of Finance
⑴ The headquarter and all branches of People’s Bank of China are treated as
general bank enterprises to calculate their output and value added.
⑵ Value added of securities is subdivided into more detailed. According to the
Second Economic Census’s data, value added of securities is subdivided into three
parts, which are securities, fund and futures.
⑶ The treatment of stamp duty on securities transactions is improved. Based on
the principles of GDP estimates, only stamp duty of securities transactions paid by
agencies can be treated as production tax of securities, not including stamp duty on
securities transactions paid by individuals.
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4. Adjustments of Output Measurement of Headquarters
Headquarters belong to Business Service, and their output is measured by
expenditure side:
Output of Headquarters = aggregates of operating expense, management expense and
financial expense + depreciation at current year
5. Improvements of Value Added Measurement of Some Industries at Constant
Price
5.1 Finance industry. Value added of bank at constant price is calculated using
price index deflation method, and the deflator is calculated by deposit and loan
interest rates and inter-bank interest rates. Value added of securities at constant price
is calculated by the growth rate of stock transaction using quantity extrapolation
method. Value added of insurance at constant price is calculated with mixed method
which combined with quantity extrapolation method and price index deflation method.
Other financial service at constant price is obtained by bank deflator and value added
at current price.
The detailed formulas are as follows:
⑴ Bank
Deflator of bank = [(Interest revenue - interest expense) ÷ bank output] × deposit and
loan rate index + [(revenue from transactions with financial institutions – expense from
transactions with financial institutions) ÷ bank output] × inter-bank interest rate index +
{[bank output - (Interest revenue - interest expense) - (revenue from transactions with
financial institutions – expense from transactions with financial institutions)] ÷ bank output}
× consumption and investment price index
Deposit and loan rate index = (deposit interest rate index of one-year + loan interest rate
index of one-year) ÷ 2
Inter-bank interest rate index = interest rate index between banks
Consumption and investment price index = consumer price index × [final consumption
expenditure ÷ (final consumption expenditure + gross fixed capital formation)] + fixed
assets investment price index × [gross fixed capital formation ÷ (final consumption
expenditure + gross fixed capital formation)]
⑵ Securities
Value added of securities at constant price is calculated using quantity
extrapolation method.
Value added of securities at constant price = Value added of securities at constant price in
last year × stock trading volume index
⑶ Insurance
Deflator of insurance = (investment revenue ÷ insurance output) × deflator of securities
+ [(insurance output － investment revenue) ÷ insurance output] × consumption and
investment price index
Deflator of securities = value added index of securities Industry at current prices ÷ value
added index of securities Industry at constant prices
5.2 Household’s owner-occupied dwellings service. Value added of household’s
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owner-occupied dwellings service at constant price is calculated using quantity
extrapolation method, and the volume indicator is floor space of residents.
5.3 Value added of wholesale trade at constant price. For the part which engaged
in wholesale activities, simple average of producer price index and price index for raw
materials, fuel and power is used as deflator. For the part which engaged in customs
activities, import price index is used as deflator.
5.4 According to the different activities, value added of education, health and
other non-market activities at constant price are calculated using quantity
extrapolation method with some related volume indicators or price index deflation
method.
Ⅴ. Challenges
1. Industrial classification in GDP estimates should be more detailed
Before the First Economic Census in 2004, industrial classification in GDP
estimates only was divided into 16 industrial sectors in china. After that, it can be
divided into 94 sectors because of more data sources obtained in the First Economic
Census. However, comparing to some other countries, industrial classification in GDP
estimates is not detailed enough in china, which is only based on section level and
there is no other more detailed classification. Generally speaking, developed countries
have more than 200 industries in GDP estimates, so it should get further industrial
classification in china.
2. Make use of administrative records of all the departments and improve the
data quality as much as possible
Although statistic departments have much detailed statistical survey data, some
other countries still make use of administrative records of all the departments and
institutions in quarterly national accounts. Use of the administrative records not only
can reduce costs, but also it can review the data quality of estimated indicators from
the other sides. For example, although Canada has statistical sales data in retail
industry, they often use federal retail tax and provincial retail tax from tax department
to adjust the value added in retail industry.
Though the other administrative departments have a large number of
administrative records in china, resource sharing is still in low level. NBS should do a
lot of work to integrate the administrative records resources of all the departments
under its responsibility. It should also make use of those administrative records as
much as possible in GDP estimates, and review the data quality from the other sides.
Ⅵ. Main Issues need to be Consulted
1. How to obtain the data of industrial activity units
Industrial activity units are basic accounting unit in GDP measurement, but the
statistical data are collected based on legal units in china. How to transfer legal unit
data to industrial activity unit data?
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2. How to calculate depreciation for household’s owner-occupied dwellings
After the first Economic Census in 2004, the measurement of depreciation for
household’s owner-occupied dwellings have been revised, and the revision included
two aspects: Firstly, the method is changed using prices based on current construction
costs rather than historical prices to measure household’s owner-occupied dwellings.
Secondly, the depreciation rate used in the imputed calculation of rural households’
owner-occupied dwellings is changed from 2% to 3%, and the rate of urban
counterpart from 4% to 2%. Take urban households’ owner-occupied dwellings for
example, the formula is:
Depreciation Value = value of urban households’ owner-occupied dwellings × depreciation
rate (2%) = (Per capita floor space of urban residents × annual average of urban
population × urban dwellings construction cost of unit area) × the proportion of private
dwellings × depreciation rate (2%)
Where “urban dwellings construction cost of unit area” is measured at current
year price. In recent years, the prices of building materials rose rapidly in china, so
construction cost of unit area increased rapidly. However, most of the residential
dwellings built in previous years rather than current year. If we use the replacement
prices mentioned above, will overestimate the depreciation of household’s
owner-occupied dwellings?
2004
2005
2006
2007
urban dwellings construction cost of unit area
1080
1096
1300
1398
growth rate (%)
1.5
18.6
7.5
rural dwellings construction cost of unit area
226
268
288
314
growth rate (%)
18.4
7.5
9.0
Depreciation value
4061
4511
5712
6653
growth rate (%)
11.1
26.6
16.5
The proportion of depreciation in production
2.5
2.5
2.7
2.6
GDP estimates (%)
3. How to calculate value added for Real Estate Exploitation Management
Currently, we use the enterprises’ financial statements to calculate the output and
value added in real estate exploitation management industry. In practice, we find that
their financial statements do not reflect their real business circumstances accurately,
because these financial statements have some relationship with their business
circumstances in previous years, not only in the current year. As a result, the
performance of financial statements is not so good in the year when real estate sales
are good, and on the contrary, the performance is not so bad in slump year. How to
calculate value added for real estate exploitation management by income approach
based on these data?
Welcome to make some comments on the overview of GDP estimates in china,
and give some proposed solutions about the existing issues.
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Annex：
Table1: Industrial Classification in Chinese National Accounts
One-digit
Two-digit
categories
categories
Primary
Agriculture,
industry
Forestry,
husbandry
Fishery
Secondary
industry
Industry
Three-digit categories
Animals
and
Agriculture
Agriculture
Forestry
Forestry
Animals husbandry
Animals husbandry
Fishery
Fishery
Services in support of agriculture
Services in support of ag
Mining
Mining and Washing of C
Extraction of Petroleum
Mining of Ferrous Metal
Mining of Non-ferrous M
Mining and Processing o
7
Manufacturing
Processing of Food from
Manufacture of Foods
Manufacture of Beverag
Manufacture of Tobacco
Manufacture of Textile
Manufacture of Textile W
Manufacture of Leather,
Processing of Timbers,
Palm, and Straw Produc
Manufacture of Furniture
Manufacture of Paper an
Printing, Reproduction o
Manufacture of Articles f
Processing of Petroleum
Manufacture of Chemica
Manufacture of Medicine
Manufacture of Chemica
Manufacture of Rubber
Manufacture of Plastic
Manufacture of Nonmeta
Manufacture and Proces
Manufacture & Processi
Manufacture of Metal Pr
Manufacture of General
Manufacture of Special P
Manufacture of Transpo
Manufacture of Electrica
Manufacture of Comm
Electronic Equipment
Manufacture of Measu
Activity & Office Work
Manufacture of Artwork,
Recycling and Disposal
Production and Distribution of Electricity, Gas and Water
Production and Supply o
Production and Distribut
Production and Distribut
Construction
Construction of Building & Civil Engineering
Construction of Building
Architectural Installation
Architectural Installation
Architectural Decoration
Architectural Decoration
Other Construction
Other Construction
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Tertiary
Traffic,
Transport,
Transport Via Railway
Transport Via Railway
industry
Storage and Post
Transport Via Road
Transport Via Road
Urban Public Traffic
Urban Public Traffic
Water Transport
Water Transport
Air Transport
Air Transport
Transport Via Pipeline
Transport Via Pipeline
Loading, Unloading, Portage and Other Transport Services
Loading, Unloading, Por
Storage
Storage
Post
Post
Information
Telecom & Other Information Transmission Services
Telecom & Other Inform
Transmission,
Computer Services
Computer Services
Computer Services
Software Industry
Software Industry
Wholesale Trade
Wholesale Trade
Retail Trades
Retail Trade
Retail Trade
Hotels and Catering
Hotels
Hotels
Services
Catering Services
Catering Services
Financial
Bank
Bank
Intermediation
Security Activities
Security Activities
Insurance
Insurance
Other Financial Activities
Other Financial Activities
Development and Management of Real Estate
Development and Mana
Property Management
Property Management
Agency Services for Real Estate
Agency Services for Rea
Other Real Estate Activities
Other Real Estate Activi
Owner Occupied Dwellings Services
Owner Occupied Dwellin
Leasing
Leasing
Business Services
Business Services
Research and Experimental Development
Research and Experime
Professional Technical Services
Professional Technical S
and Software
Wholesale
and
Real Estate
Leasing
and
Business Services
Scientific
Research,
Technical
and
Service
Geologic
Prospecting
Management
Services of Science and Technology Exchanges
Promotion
and
Services of Science and
Geologic Prospecting
Geologic Prospecting
of
Management of Water Conservancy
Management of Water C
Water
Environmental Management
Environmental Managem
Conservancy,
Management of Public Facilities
Management of Public F
Environment
and Public Facilities
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Services
to
Services to Households
Services to Households
Other Services
Other Services
Education
Education
Health
Health
Security and Social
Social Security
Social Security
Welfare
Social Welfare
Social Welfare
Culture, Sports and
Journalism and Publishing Activities
Journalism and Publishi
Entertainment
Broadcasting, Movies, Televisions and Audiovisual Activities
Broadcasting, Movies, T
Cultural and Art Activities
Cultural and Art Activitie
Sports Activities
Sports Activities
Entertainment
Entertainment
Public Management and Social Organization
Public Management and
Households
and
Other Services
Education
Health,
Social
Public
Management
and
Social Organization
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Table2：Data sources of value added by industries
Industries
Statistical Survey Data in NBS
Financial statements by other Government
Agencies
Agriculture, Forestry,
Department of Agriculture: gross output and intermediate
Animals
consume
husbandry
value
of
Agriculture,
Forestry,
Animals
and Fishery
husbandry and Fishery
Industry
Department of Industry: main indicators of industrial
enterprise above the cutoff, sample survey material of
industrial enterprise under the cutoff.
Construction
Department
of
Investment
and
Construction:
main
economic indicators on construction enterprises of general
contractors and professional contractors, main indicators
of labour subcontractors in construction industry.
Traffic,
Transport,
Service survey center: indicators of passenger-kilometers
Ministry of Railways, State-owned Assets
and freight ton-kilometers, basic conditions of postal and
Supervision and Administration Commission
telecommunication, sample survey material of some
of the State Council, CNPC、SINOPEC :
service industries.
Financial Indicators.
Information
Service survey center: sample survey material of some
Ministry
Transmission,
service industries.
technology: Financial Indicators.
Storage and Post
Computer
of
industry
and
information
Services
and Software
Wholesale and Retail
Department of Trade and External Economic Relations:
Trades
financial indicators of wholesale and
retail trades
enterprises above the cutoff; sales of wholesale and retail
trades enterprises above the cutoff
Hotels and Catering
Department of Trade and External Economic Relations:
Services
financial indicators of catering enterprises above the
cutoff;
business
of
star-rated
hotels
and
catering
enterprises above the cutoff.
Financial
Center
bank 、 Securities
Intermediation
Commission
、
Regulatory
Insurance
Commission: Financial Indicators.
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Regulatory
Real Estate
Department of Investment and Construction: financial
indicators of enterprises for real estate development; main
indicators of enterprises for real estate development.
Department of Urban Survey: basic conditions and living
expenditure of urban households.
Leasing and Business
Service survey center: sample survey material of some
Services
service industries.
Scientific
Service survey center: sample survey material of some
MOF: Financial Accounting of Administrative
Research, Technical
service industries.
and Institution Unites of Revenue and
Service
Department of Investment and Construction: newly
Expenditure.
and
Geologic Prospecting
increased fixed assets in urban area by industries.
Department of Population: Annual Statistical Report of
Labor.
Management
Department of Investment and Construction: newly
MOF: Financial Accounting of Administrative
increased fixed assets in urban area by industries.
and Institution Unites of Revenue and
Environment
Department of Population: Annual Statistical Report of
Expenditure.
and Public Facilities
Labor.
Water
of
Conservancy,
Services
Households
to
and
Other Services
Service survey center: sample survey material of some
service industries.
Department of Urban Survey: basic conditions and living
expenditure of urban households.
Department of Population: Annual Statistical Report of
Population.
Education
Department of Investment and Construction: Newly
MOF: Financial Accounting of Administrative
increased fixed assets in urban area by industries.
and Institution Unites of Revenue and
Expenditure.
Health,
Social
Service survey center: sample survey material of some
Ministry of Health: Expenditure for Public
Security and Social
service industries.
Health.
Welfare
Department of Population: Annual Statistical Report of
MOF: Financial Accounting of Administrative
Labor.
and Institution Unites of Revenue and
Expenditure.
Culture, Sports and
Service survey center: sample survey material of some
MOF: Financial Accounting of Administrative
Entertainment
service industries.
and Institution Unites of Revenue and
Department of Population: Annual Statistical Report of
Expenditure.
Labor.
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Public
Management
and
Organization
Social
Department of Population: Annual Statistical Report of
MOF: Financial Accounting of Administrative
Population.
and Institution Unites of Revenue and
Department of Investment and Construction: Newly
Expenditure.
increased fixed assets in urban area by industries.
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