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China gdp 20 percent bigger than expected { December 13 2005 }

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China to revise size of GDP
By Richard McGregor in Beijing
Published: December 13 2005 05:10 | Last updated: December 13 2005 11:28

China is poised to announce its economy is significantly larger than the government’s official measure following a national economic census which found a large underestimation of the country’s thriving and largely private services sector.

The revision is also expected to show the economy is less reliant on investment and more driven by consumption than previously projected, two trends that Chinese leaders have been trying to encourage.

A spokesman for the National Bureau of Statistics said Tuesday it would announce the findings of the census and its impact on the calculation on GDP at a press conference in Beijing next week.

The NBS refused to say by how much it would revise the GDP figures, but it is expected that the new measure could show the economy was larger by about 20 per cent.

Beijing-based economists said they expected the revision to add between Rmb2,000bn ($248bn) and Rmb2,4000 to the size of GDP, which last year was Rmb13,650bn.

“The figures we used in the past have all been changed,” said Zhou Xiaochuan, the governor of the central Bank, at a conference in Beijing this week.

The increase is mainly due to the past underestimation of China’s service sector, such as small industrial enterprises and shops, restaurants, hair salons and other entertainment venues.

The NBS is also likely to give greater weight in calculating GDP to these rapidly growing enterprises over the less nimble and more mature state sector, another factor behind the upward revision.

The revision has been expected since the NBS completed the country’s first national economic census mid-year, a survey involving millions of data collectors dispatched to register businesses not picked up by previous surveys.

It is not yet clear how the NBS proposes to present the revisions, and whether it will say that it has underestimated the rate of growth of the economy in recent years.

Independent economists have long said that China’s official growth figures over the past two to three years have substantially underestimated the real rise in economic output.

In addition, the NBS may use the survey to revise the size of the economy in the mid-90s, and then recalculate growth from a larger base.

Song Guoqing, a professor at Peking University, said he believed that a revision of GDP by 20 per cent would still not be large enough to capture the true size of the economy.

“Private companies may continue to understate the size of their business in order to escape tax,” he said.

Professor Song and other economists said the most significant result of the survey could be the upward revision of the share of consumption in the Chinese economy, and a reduction in the contribution of investment.

“The bottom line is that China’s much-touted ‘overinvestment economy’ is probably a relic of the existing statistics,” said Jonathan Anderson, of UBS, in Hong Kong. Investment now accounts for nearly half of China’s annual GDP growth.

The quality of China’s economic statistics have long been criticised, including by the country’s leaders, who worry that local officials exaggerate their own GDP growth in order to win plaudits in Beijing.

The NBS has worked hard to make the figures more credible, setting up independent reporting lines to the provinces in an attempt to get around any local distortions.

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