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Home >> Opinion
UPDATED: 17:17, December 21, 2005
Top statistician on China's economic figures: services sector
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People's Daily has interviewed Li Deshui, head of China's National Bureau of Statistics (NBS), on the revision of China's GDP (gross domestic product) of the year 2004 and other adjustments that have resulted from the nationwide economic survey recently.

The share of China's tertiary industry in the country's 2004 GDP has risen from the earlier estimated 31.9 percent to 40.7 percent, which is mainly attributed to the underestimation in conventional means of statistics.

Reporter: What are the reasons for such a remarkable rise of the share of tertiary industry in China's GDP?

Li Deshui: The results indicate there was an under-coverage of the tertiary industry's contribution to GDP.

First, 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, leading to very weak statistics for the services sector. Since the 1990s, as China gradually linked itself with internationally practiced System of National Accounts (SNA), statistics for the services sector were somehow improved but the fundamental statistics have not caught up.

Second, working units in the tertiary industry are wide-ranged, their situations complicated, financing systems unsound and means of statistics backward.

Third, as the reform deepens, economic components grow diversified. In particular, private and individual ownership have been developing rapidly, scattering and changing frequently, making the statistics more difficult, hence the under-coverage.

For example, the sectors of transport, storage, post and telecommunications, wholesale and retail trade, catering and real estate, where private and individual ownership have taken a large share and long been under-reported, see a value added of about 1.5 trillion yuan, or 70 percent of the newly-added amount for the tertiary industry.

Fourth, emerging and mushrooming services, due to lack of information, are hard to calculate accurately. Examples are computer service, software, Internet information, satellite transmission, entertainment, renting and business service, as well as housekeeping, which are developing robustly but were downplayed.

Fifth, some service industries affiliated with industrial and construction enterprises are mixed with the second industry and more often overlooked.

The higher share of tertiary industry in the economic mix has proved that China's economic growth is not driven only by manufacturing industry, nor export. The contribution of the services sector should not be overlooked.

Reporter: What is the global ranking of China's tertiary industry after it was found to take up a bigger share in GDP?

Li: It remains the level of a developing country, which can be seen from two groups of figures. The contributions of the tertiary industry to GDP in developed countries are: the United States, 75.3 percent; Japan, 68.1percent; South Korea, 55.1 percent; France, 72.4 percent, Britain, 72.6 percent , and Germany, 69.2 percent. The figures in developing countries are: Indonesia, 39.9 percent, India, 51.2 percent, Malaysia, 41.8 percent, the Philippines, 53.2 percent, Thailand, 46.3 percent and China 40.7 percent.

Reporter: What does the bigger percentage indicate? What is the significance?

Li: In the economic survey, which is focused on the tertiary industry, carpeting investigations were conducted and the situation of the country's tertiary industry has been grasped. This is indeed impossible through regular statistics. The findings of the economic survey therefore give a comparatively accurate and objective portrait of the development of China's tertiary industry.

The increased proportion of the tertiary industry by a large margin shows a more rational and sounder makeup of economic growth than indicated from previous statistics. China's economic growth is not all counted on manufacturing, or driven by export, as some think. The contribution of the tertiary industry cannot be overlooked as well. Second, since the services sector is the most directly linked with consumption, that is to say, in the three pillars for China's economy, we undervalued the role of consumption in the past.

The risen proportion accordingly leads to significant changes to a series of ratios: the contribution of final consumption to GDP has risen from 36.3 percent to 37.8 percent; that of fixed capital formation fallen from 52.9 percent to 48.1 percent; net exports, down to 6.3 percent from 9.1 percent; the ratio of fixed-assets investment to GDP from 51.5 percent to 44.1 percent; the ratio of M2 (used to indicate the fluidity of capital) to GDP down from 1.85 times to 1.58 times. By expenditure approach, consumption rate, investment rate, fixed capital formation rate have all changed correspondingly.

The economic survey also brings about changes to some indicators in macro-economy. For example, energy consumption for per 10, 000 yuan of GDP drops from 1.58 tons of coal equivalent to 1.39 tons; electric elasticity index from 1.53 percent to 1.44 percent; the ratio of fiscal revenue to GDP falls from 19.3 percent to 16.5 percent; that of government expenditure to GDP down from 20.8 percent to 17.8 percent. On the other hand, the ratio of research funds to GDP drops from 1.44 percent to 1.23 percent; that of government educational expenditure to GDP declines from 3.28 percent to 2.8 percent, which highlights the inadequate of input into scientific research and education.

What are these changes of ratios telling us? It shows that China's economic structure and some proportional relations are not as bad as formerly estimated and this will bears much significance for the country to map out its macro-economic policy.

By People's Daily Online

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