Gross domestic product (GDP) is a widely used metric to measure the health of a nation's economy. Investors use this figure to make decisions about investment in a particular nation, while governments use GDP for drafting policies. Essentially, GDP is the total value of goods and services produced in the nation in a particular year, and while the definition appears simple, calculating GDP is a complex task. (For more, see The Importance of GDP.)
China’s GDP History
The need for a clear description and a reliable measurement of economic activity led the National Bureau of Statistics of China (NBS) to design a system of GDP estimation at both the national and provincial levels in 1985. Although it initially started with production-side estimation, the NBS formally adopted an expenditure estimation approach in 1993.
The quarterly GDP is estimated for the following industries:
- Farming, forestry, animal husbandry and fishing
- Wholesale and retail trade
- Transportation, storage and post
- Accommodation and restaurants
- Real estate
- Information transmission, software and IT services
- Renting/leasing and business services
The annual GDP is estimated for the following industries:
- Agriculture, fishing, mining and quarrying
- Electricity, gas and water supply, and waste management
- Import/export, wholesale and retail trade
- Accommodation and food services
- Transportation, storage, postal and courier services
- Information and communications
- Financing and insurance
- Real estate, professional and business services
- Public administration, social and personal services
- Ownership of premises
Primary Data Sources
There are two primary sources of data for GDP accounting.
- National data survey. This statistical data is collected from surveys conducted by the national statistical system, covering industries such as agriculture, forestry, animal husbandry and fishing, industry, construction, wholesale and retail trade, hotel and catering services, real estate etc.
- Administrative data. This information includes data from the Ministry of Finance, the People's Bank of China, the State Administration of Taxation, the China Insurance Regulatory Commission, the China Securities Regulatory Commission and other state agencies.
Data Collection Method
The NBS owns and delegates data collection through its various departments at both national and state levels.
Firms and industries are required to report data about the production, sales, and financial status by submitting prescribed forms either directly to NBS, or to local statistical agencies, or both. Further verification is done through surveys conducted by the Enterprise Investigation Organization unit of the NBS. The methodology includes NBS calculating the value-added for different enterprises on the data it has collected on its own (or through its departments). Similar values are derived or calculated by local agencies and competent authorities at the state and province levels.
All the data collected through these various routes get verified, sampled, consolidated, and aggregated by the NBS to calculate the GDP figures. (See related: China’s GDP Examined: A Service Sector Surge.)
GDP calculations are made using current and constant prices. (Detailed calculations are out of the scope of this article, but readers are encouraged to refer to Section 5: Basic Calculation Methods of China’s gross domestic product estimation.)
Timeline of Annual GDP Calculation
GDP data calculation in China occurs in three phases as follows:
- Preliminary Estimation (PE) - Aimed as a quick primer for the current macroeconomic situation, PE is conducted early the following year. For example, for 2019, the PE would occur in the first quarter of 2020. Due to limited data available at that time, PE is based on limited statistics in specific fields as available from different NBS departments.
- Primary Revision - The primary revision is conducted around the second quarter when more data becomes available from various NBS departments, ministries of states, and various administrative datasets. This enhances the earlier PE report, but still lacks data on final fiscal accounts, and financial accounts of multiple sectors, including those from banks, insurance, railways, civil aviation, and post and telecommunications.
- Final Revision - The final revision is made in the last quarter, once all the data related to accounting, statistical and administrative sets for annual GDP estimation become available.
To ensure uniform comparability across historical datasets, periodic adjustments to the historically published datasets are also made as needed, including when new data sources are identified, or there is a change in industry classification or in accounting methods.
The Bottom Line
China has remained a closed economy with tight government control. The authenticity of data sources, data collection techniques, calculations, and published figures has been questioned time and again. China has taken a few measures to circumvent the associated problems, which include reforming the survey and aggregation methods, increasing the scope of the survey, and revamping the calculation methods. The change to its method of national accounting from the old System of National Accounting (SNA) 1993 standards to the newer SNA 2008 standards is one such initiative to gain global credibility, which could result in an inflow of investor dollars, and have a uniform accounting system similar to global standards.