Transcript IV. Major Improvement in Recent Period (Cont.)

Annual GDP Estimates by
Production and
Income Approaches in China
Jin Hong
Department of National Accounts-NBS
Nov.30, 2009
Content
I.
II.
III.
IV.
V.
VI.
Industrial Classification
Data Sources
Measurement of Value Added by Industries
Major Improvement in Recent Period
Challenges
Main Issues need to be Consulted
I. Industrial Classification in national accounts
 One-digit category follows Three Industries Division
Regulation
 Two-digit category is basically equal with GB/T 47542002 at Two-digit category (section level)
 Three-digit category is basically equal with GB/T 47542002 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 detail industries
I. Industrial Classification in national accounts (Continue)
 Four-digit category has been implemented
in annual GDP estimates, which includes 94
industries altogether.
 Two-digit category has been used in
Quarterly National Accounts. QNA is
measured by 16 industries.
II. Data Sources
 Statistical survey data in NBS
Censuses and regular sampling surveys
 Financial data
Financial questionnaire from 18 administrative
departments
II. Data Sources (Continue)
 Administrative records
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
Table2：Data sources of value added by industries
III. Measurement of Value Added by Industries
Annual GDP
Production approach:
4 industries in Agriculture, Forestry, Animal husbandry and
Fishing
Mix with Production approach and income approach:
39 industries in Mining, Manufacturing, Production and
distribution of Electricity, Gas and Water.
Income approach: The other 51 industries.
III. Measurement of Value Added by Industries (Cont.)
 Direct Method
Output and valued added are calculated directly
based on the data sources.
51 industries: Agriculture, Industry, Railway
Transport, Post, Finance, Social Welfare, etc.
Account for 55% of 94 industries and 63% of GDP.
III. Measurement of Value Added by Industries (Cont.)
 Value Added Extrapolation Method
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: Construction, Wholesale and Retail,
Accommodation and Restaurants, etc,
Account for 33% of 94 industries and 33% of GDP.
III. Measurement of Value Added by Industries (Cont.)
 Reference Indicator Estimation Method
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 : Storage, Computer Services, Resident
Services, etc.
Account for 12% of 94 industries and 4% of GDP.
IV. Major Improvement in Recent Period
1. Changes of Value Added Measurement of
Individual Businesses
Firstly, we 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.
IV. Major Improvement in Recent Period (Cont.)
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.
IV. Major Improvement in Recent Period (Cont.)
3. Changes of Value Added Measurement of
Finance



The headquarter and all branches of People’s Bank of
China are treated as general bank enterprises to
calculate their output and value added.
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.
The treatment of stamp duty on securities transactions
is improved.
IV. Major Improvement in Recent Period (Cont.)
4. Adjustments of Output Measurement of
Headquarters
Output of Headquarters
= aggregates of operating expense
+ management expense
+ financial expense
+ depreciation at current year
IV. Major Improvement in Recent Period (Cont.)
5. Improvements of Value Added Measurement of
Some Industries at Constant Price

Finance industry.
-- Bank: Price index deflation method. The deflator is
calculated by deposit and loan interest rates and interbank interest rates.
--Securities: Quantity extrapolation method, the growth
rate of stock transaction.
--Insurance: Mixed method which combined with
quantity extrapolation method and price index deflation
method.
--Other financial service: Same as Bank.
IV. Major Improvement in Recent Period (Cont.)

Household’s owner-occupied dwellings:
Quantity extrapolation method, the volume indicator is
floor space of residents.
IV. Major Improvement in Recent Period (Cont.)

Wholesale trade:
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.
IV. Major Improvement in Recent Period (Cont.)
 Education, health and other non-market
activities:
Quantity extrapolation method with some
related volume indicators or price index
deflation method.
Ⅴ. Challenges

Industrial classification in GDP estimates should be
more detailed

Make use of administrative records of all the
departments and improve the data quality as much as
possible
Ⅵ. Main Issues need to be Consulted

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?
Ⅵ. Main Issues need to be Consulted

How to calculate depreciation for household’s owneroccupied dwellings
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%)
Ⅵ. Main Issues need to be Consulted

How to calculate value added for Real Estate
Exploitation Management
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.
Thanks for your attention.