US$214 for everyone. That's the per capita increase in China's GDP under the adjustments announced in the second week of January. Its about the same price as a month-long ISDN connection in Shanghai, a night in a good hotel in Guangzhou or the rent on a 10 sq m room near the Oriental Plaza in Beijing.
The revisions, the first since the early 1990s, were derived from a detailed, two-year economic survey. The results show an economy that was larger by Rmb 2,336.3 billion (US$281.9 billion) in 2004, or 17.1% (note that the Rmb appreciation since July 2005 has no effect on the revisions to 2004 data). According to the survey, the services sector is now thought to be 49.4% larger than before, manufacturing 2.3% and the primary agricultural, forestry and fishing 0.9% larger.
On the supply side, the revisions are mainly in domestic trade, catering, transport, storage, telecoms and real estate. Flip the national acccounts to the demand side, and one discovers an extra 22% (Rmb 1,087.9 billion). Fixed capital formation, by way of comparison, is now thought to be Rmb468.5 billion larger. Consumption thus rises from 36.3% to 37.8% while investments drops from 52.9% to 48.1%. Net trade also declined, from 9.1% to 6.3%, which leaves an unfortably larger residual (7.8%, up from 1.7%) in the new data. Inventory build-up, anyone?
Among the 18 provinces for which I have found revised data (more complete data would be most welcome), the average change among those showing larger economies is 11.1% while those reporting smaller economies shrank by an average 4.2 %. These 18 (of 31 sub-national entities, which for convenience will be referred to as provinces) represent 67.5% of the pre-adjustment provincial total or 80% of the pre-adjustment national GDP. The difference between the two figures is due to an inconsistency: the sum of the provinces' economies has exceeded the stated national GDP for many years, often by as much as 20%.
Guangdong Province, the largest sub-national economy, increased in size by Rmb282.5 billion (17.6%, equal to US$34 billion) whereas centrally located Hubei Province shrank by Rmb 67.8 billion (10.7%). The largest percent increase was in Beijing (up 41.7% or Rmb177.7 billion) while the smallest was Chongqing at 1% (Rmb2.7 billion).
Given the expected ease of documenting government activities, the adjustment to Beijing's data are puzzling. The municipal press release states that Rmb 154.4 billion (86.9% of the total) arises from revised service sector data.
The change in denominator means that every "/GDP" figure needs to be revised (it does not, however, improve the quality of any numerators). Hence, broad money (M2) is now 158.9% of GDP, not 186.1%; and narrow money (M1) drops from 70.3% to 60.0%. Central government revenues are now equal to 16.5% of the economy (down from 19.3%) and spending 17.7% (from 20.8%). The fiscal deficit didn't shrink much, just two-tenths of a percent, to 1.3%. Overall, the new figures suggest the Mainland and Hong Kong governments are roughly equal fiscal burdens to their respective economies.
On the current account, those who worried that 4.2% was too large in 2004 can rest assured it was only 3.6% (but, net trade was almost double that level, as noted above). Goods and services exports amounted to 35% of GDP (not 41%) and net direct foreign investment 2.8% (down from 3.2%).
Economists who tried to guess the size of the economy based on energy consumption need to revisit their spreadsheets. The country now generates Rmb11,534 worth of GDP for every ton of oil equivalent consumed, rather than Rmb9,848.
Stop making sense
Aside from incomplete data, there is also a problem with inconsistent pre-revision figures. According to Commerce Vice Minister Huang Hai, quoted in the state-controlled Beijing Review (May 13, 2005), China's final consumption as a share of GDP was 61.1%, 59.8%, 58.2%, 55.4% and 58.5% in 2000-04, respectively. United Nations figures suggest that final consumption didn't decline as quickly as Vice Minister Huang suggests, but neither set of numbers is even close to those cited by National Bureau of Statistics Director Li Deshui this month.
|Different Views of China's Final Consumption Expenditure|
(% of GDP)
Sources: Huang Hai, Vice Minister of Commerce, quoted in Beijing Review (May 13, 2005; Author's own calculations based on United Nations data; and pre-revision and post-revision figures from Li Deshui, National Bureau of Statistics Director, quoted in People's Daily Online (December 21, 2005)
China carries out economic surveys on various parts of the economy at regular intervals, and has laid out a timetable for future refinements. Because the new data is still maddeningly incomplete, and full figures are probably still 6-12 months away, readers will need to very carefully read economic analysis of the PRC economy. "New" insights based on old data are going to be common for a while.