True Tone [Ｔｒｕｅ　Ｅｃｏｎｏｍｉｃ　Ｓｔｒｅｎｇｔｈ]

　　The new snapshot of the Chinese economy has surprised everyone. China revised the size of its economy in 2004, saying its gross domestic product (GDP) was 16.8 percent higher than previously reported, mainly because the service sector was not fully taken into account.
　　China raised its 2004 GDP to 15.99 trillion yuan ($1.93 trillion) from 13.65 trillion yuan ($1.64 trillion), based on the results of the country’s first nationwide economic census.
　　Li Deshui, Commissioner of the National Bureau of Statistics (NBS), said at a recent news conference that of the total increased amount of 2.3 trillion yuan ($287.5 billion), 2.13 trillion yuan ($266.25 billion), or 93 percent, comes from the tertiary industry.
　　The revision lifts China above Italy as the sixth biggest economy in the world in 2004. The top five are the United States, Japan, Germany, France and the United Kingdom.
　　“China still ranks below the top 100 in terms of per-capita economic output, although the aggregated size of its GDP increased 16.8 percent and its economic ranking moved ahead a little. China’s per-capita GDP accounts for only about one-fifth of the world’s average,” said Li.
　　The government would revise annual GDP growth rates back to 1993 in light of the results from the census, Li said.
　　But the revision did not change China’s status as the world’s largest developing country, he added. “We cannot forget that China still has more than 100 million people in poverty.”
　　
　　Wide gap
　　
　　ECONOMIC POLL: China conducts its first national economic poll in 2005 to better understand its true economic strength
　　China’s top statistician pointed out that the census was merely a snapshot of the economy and that the statistics themselves are not national wealth.
　　Responding to the question of why some citizens’ wallets are not bulging as the country’s GDP figures have increased, the official joked that if the census actually inflated our wealth we would repeat the process indefinitely.
　　According to the survey, the value-added of the tertiary industry was revised to 6.5 trillion yuan ($785 billion) from the previous estimate of 4.4 trillion yuan ($531.4 billion).
　　Li said it is the under-reporting of the tertiary industry in the regular statistics that has led to the above situation.
　　China had long been using the Material Product System (MPS), which was developed under the centrally planned economic system in its national account statistics until the 1980s, resulting in very weak statistics for the service sector, said Li.
　　As the scope of the tertiary industry is widening and becoming more complex with the mushrooming of a large number of new and dynamic services along with China’s rapid economic growth, it is very difficult to conduct statistics surveys in the industry, resulting in a certain degree of under-reporting, Li added.
　　Li mentioned the three sectors where private and individual ownership has taken a large share, including transport, storage, post and telecoms, wholesale, retail trade and catering, and real estate. The added value in the three sectors was about 1.5 trillion yuan ($187.5 billion) larger than the regular preliminary estimation, accounting for 70 percent of the total increase of the tertiary industry.
　　In addition, a number of services affiliated to manufacturing and construction enterprises were classified into the second industry, while still others were neglected, said Li.
　　Currently, governments in various localities are using a unified system to revalue their regional GDP according to the statistics of the national economic survey, said Li.
　　Private sector expands
　　According to the census, there were about 3.25 million companies in second and tertiary industries by 2004. Of them, state-owned enterprises accounted for only 6 percent, and collective, private and foreign-funded companies made up the other 94 percent (see table 1).
　　According to Li, compared with the previous survey in 2001, the number of companies increased by 7.4 percent, or 223,000. Of them, state-owned, state jointly operated and fully state-funded companies totaled 192,000, a decrease of 177,000, or 48.2 percent.
　　Meanwhile, collective, collective jointly operated and partnership share companies totaled 456,000 in number, a decrease of 402,000, or 46.9 percent. Other limited-liability companies and stock limited companies numbered 406,000, an increase of 106,000, or 35.2 percent. The number of private enterprises grew by 658,000 to 1.98 million, or 49.7 percent. Other domestically funded companies numbered 62,000, an increase of 25,000, or 66.5 percent. Hong Kong-, Macao- and Taiwan-funded enterprises totaled 152,000 in number, a rise of 13,000, or 9.6 percent.
　　Li said these numbers indicate that China’s non-public enterprises have developed faster than state-owned enterprises.
　　
　　Sound structure
　　
　　After the number-crunching, the ratio of the primary industry in GDP was 13.1 percent, or 2.1 percentage points lower than the previous calculation. The share of the secondary industry in GDP shrank from 52.9 percent to 46.2 percent, a drop of 6.7 percentage points. The ratio of the tertiary industry rose from 31.9 percent to 40.7 percent, an increase of 8.8 percentage points.
　　Li said the new statistics from the national economic survey indicate the structure of the three industries is more consistent with the country’s actual situation and more in line with the general level of developing countries.
　　He pointed out that the statistics indicate China’s economic growth was not totally driven by manufacturing, nor by exports as concluded by some others. The service industry has made undeniable contributions to economic expansion. “As the service industry directly links to consumption, we can say the role of consumption in driving economic growth is also underestimated,” said Li.
　　Therefore, according to Li, the ratio of consumption in driving economic growth was pushed to 37.8 percent from 36.3 percent; that of fixed capital declined from 52.9 percent to 48.1 percent; and that of exports dropped to 6.3 percent from 9.1 percent. The ratio of fixed asset investment to GDP slid from 51.5 percent to 44.1 percent.
　　
　　Persistent policy
　　
　　According to State Council’s decision, the survey results will be used as a basis for the central and local governments in compiling 2005 national account statistics, in highlighting economic and social development for the 10th Five-Year Plan period (2001-05), and in compiling the 11th Five-Year Development Program and the 2006 annual development plan, said Li.
　　But he said the government will not change its macro-economic policies, as the key problems in economic operation, such as energy consumption, did not change fundamentally just because of the census revision. He added that the previous data basically reflect the overall level and trend of the country’s socioeconomic development.
　　However, some scholars have different opinions in this regard. Professor Bai Zhong’en from Tsinghua University said the revision means much to policy-makers. The revision indicates that the tertiary industry has gained relatively rapid development, and statistics, such as the ratio of investment, savings deposits and exports to GDP, also changed, so macro-economic policy should adjust accordingly.
　　Jia Kang, a finance and tax expert, said the proportion of financial deficits to GDP in 2005 would decrease to less than 2 percent from 2.5 percent in 2004 after the census revision, which means China’s financial expenditure budget might change.
　　Yuan Gangming of the Chinese Academy of Social Sciences said as the service industry is more developed in eastern areas than in central and western regions, the tertiary industry’s major contribution to the increased GDP indicates that the income gap between these regions widens. So the Central Government might have to increase financial input in central and western regions.
　　

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