Beijing Rethinks Formula for GDP

[cirr]

Methods to Make It Easier for Farmers to Sell Land

Nov. 18, 2013 8:06 a.m. ET

BEIJING—China is studying new ways to measure the size of its economy to reflect ambitious reform plans to make it easier for farmers to sell their land and to take into account property values.

The new methods, which dovetail with an economic blueprint for reforms agreed on at a key meeting of Communist Party leaders that ended last week, are likely to increase the size of China's economy, already the world's second largest, according to the National Bureau of Statistics.

"We need to revise the method of calculating the size of our domestic economy to make it conform with a new economic structure, the latest economic developments and…international standards," the statistics bureau said.

Officials didn't specify how much the new calculations might change China's headline numbers, or whether it is likely to speed up or slow growth rates. The statistics bureau will announce gross-domestic-product estimates using the new method along with revised historical data, the statement said.

China's Communist Party leaders unveiled a broad program of reforms last week. One of their objectives was to make it easier for farmers to sell the right to use some of their land. Farmers don't own their land, but have the right to use it. Among a number of changes outlined in a document released Friday, China's leaders pledged to boost income for rural residents by giving them more property rights, allowing them to mortgage their property and envisioning experiments in letting farmers sell their land.

Given the rapid growth in the property market, the statistics bureau also wants to gain a more accurate assessment of higher land and housing values in calculating GDP, using market rates and bringing its calculations more in line with international practice, it said.

The authorities have already begun the new calculations in some parts of the country on a trial basis. The statistics bureau will announce the GDP estimates using the new method along with revised historical data, the statement said.

The Chinese economy was estimated at 51.89 trillion yuan ($8.52 trillion) in 2012. It grew 7.7% in the first nine months of 2013, compared with the period in 2012.

The proposed revisions by the statistics bureau are part of an effort to implement reform guidelines unveiled at the Communist Party meeting, which ended last week, said Xu Xianchun, the statistics bureau's deputy chief, in a statement on the bureau's website.

Income of corporate employees from options and shares issued by their employer also will be included into the new measuring system, Mr. Xu said. At present, there are no indicators to measure such income, he said. Consumption measurements also will be revised to include some services paid by the government, such as for education and medical treatment, the statement said.

A final plan will be announced at the end of next year or in early 2015, according to the statement.

—Liyan Qi

China Studies New Ways to Measure Size of Economy - WSJ.com

 

[Chinese-Dragon]

The US also accuses us of "undervaluing" our currency by around 50%.

Which means they think our GDP is massively larger than current numbers suggest.

Anyway, bringing our GDP calculation methods closer to standard international practices is a good idea.

 

[Genesis]

sell land, excellent, I always wanted my own farm land in China to grow vegetables for myself and family.

 

[Götterdämmerung]

I read that China is going to adopt the international SNA 2008 standard to calculate GDP. That means a lot of economic activities that Europe and the US include in their GDP will also be included in China and that means a huge boost for the next GDP revision.

I have alsways suspected that China's GDP is much larger and the new insternational standard will indeed reflect hat.

 

[BigDaddyWatch]

What constitutes GDP has been defined in 1934 by Simon Kuznets GDP = private consumption + gross investment + government spending + (exports − imports). Any redefinition is fraude. What China is doing is the same as the US, EU and others ie inflate the GDP numbers to make it look bigger. Bad move but not unexpected. Its still in the proposal phase so it may not be implemented, but i'm not optimistic.

 

[Okemos]

I read that China is going to adopt the international SNA 2008 standard to calculate GDP. That means a lot of economic activities that Europe and the US include in their GDP will also be included in China and that means a huge boost for the next GDP revision.

I have alsways suspected that China's GDP is much larger and the new insternational standard will indeed reflect hat.

Less developed countries always have harder time accurately calculating their GDPs since there are more unreported economic activities from small shop owners, farmers, etc. For example, I heard TV reports that some farmers are only making less than $1000 a year, well, but they consume what they have produced and the $1000 is from selling leftover produces to their neighbors or farmers' market, etc. They live quite conformable life, are they under poverty line and do they need government subsidies? Yes, if they live in a "developed country" where number of self-sufficient farmers are negligible, so those economic transactions generate lots of GDP. But a farmer that relies on himself contributes 0 to GDP "on paper."

China also has another layer of its uniqueness due to its quasi-communist practices in the past and still lingering at present, i.e. government subsidies etc. that have not been included in GDP calculation, as the article suggested.

I have lived in both China and U.S. for extended period of time, I don't fee my life quality is 8 times better in U.S. than in China as their respective per capita GDP would suggest. I mean 8 times! gee

 

[cirr]

Basically there are 4 items missing from the current GDP calculation：

（1）R & D expenditure as a form of fixed capital
（2）housing cost/expenditure for owner-occupiers
（3）farmers‘ income（expenditure for the counterpart）from transferring the right of use of land
（4）company stock options as a form of labour wage/expenditure）

Item（1），for example，“inflates” the US GDP by about 2.5%

 

[cirr]

Nov. 18, 2013, 4:26 a.m. EST

China to revise method for estimating GDP

By MarketWatch

BEIJING--China is studying new ways to measure the nation's economy by adding new indicators such as farmer income from the sale of land use rights and revisions in the way it calculates the contribution from housing, the nation's statistics bureau said Monday.

The proposed revision could boost the size of the nation's estimate of its gross domestic product, which rose 7.7% over the first nine months of the year from a year earlier and came in at 38.6762 trillion yuan ($6.35 trillion).

The National Bureau of Statistics is considering making the changes to reflect the latest economic and social developments and implement the reform guidelines unveiled at a key Communist Party meeting that was concluded last week, Xu Xianchun, deputy bureau chief, said in a statement on the bureau's website.

Among a series of reforms outlined in a document released last Friday, China's leaders pledged to boost income for rural residents by giving them more property rights, allowing them to mortgage their properties and envisioning experiments in allowing farmers to sell their land.

Income from selling the right to use land will be considered as part of income of farmers, Mr. Xu said.

Currently, Chinese farmers don't own the land they use, but the recent reform guidelines suggest that Beijing wants to give farmers more liberty in selling their right to use the land.

Given the rapid growth in the property market, land and property values have risen sharply. The statistics bureau wants to gain a more accurate assessment of this value in calculating the gross domestic product, using market rates and bringing its calculations more in line with international practice, the bureau said.

The authorities have already begun the new calculations in some parts of the country on a trial basis.

Income of company employees from options and shares issued to them by their employer will also be included in the new measuring system, Mr. Xu said. At present, there are no measurements of this type of income, he added.

The indicator measuring consumption will also be revised to include services that are paid for by the government, such as education and medical services, the statement said.

The final plan will be announced at the end of next year or in early 2015, the statement said.

China to revise method for estimating GDP - MarketWatch

 

[cirr]

Evidences are mounting that China's GDP is under-estimated by at least 10% of its officially reported figure.

November 30, 2013

Adjusting China GDP shows China economy is less unbalanced and has 47% GDP from consumption and 42% national savings rate

It is increasingly accepted that China’s consumption is underestimated, while its investment is overestimated. Two studies, among others, have shed light on the subject. One is on unreported ‘grey’ income by Professor Wang Xiaolu of the National Economic Research Institute; the other is on consumption underestimation by Professors Zhang Jun of Fudan University and Zhu Tian of the China-Europe Business School. Many have heard of these studies, but most believe that the difference is insignificant.

By combining the results of the two studies, however, my conclusions show very significant changes to China’s GDP composition. The corrections would raise household consumption by 11 per cent of GDP, while reducing the shares of investment and government spending by 8 per cent and 3 per cent of GDP, respectively.

Even that only brings consumption from 36 per cent to 47 per cent, still a long way away from desirable. But the implication is profound: it would mean that China need not be so aggressive in slowing investment and that it has less scope than previously believed to stimulate consumption.



1) household income is underestimated due to massive unreported ‘grey income’, particularly at the high end. By extension, ‘grey consumption’ is also left out. Wang finds that grey income amounted to Rmb6.2tn ($1tn) in 2011. He also estimates that GDP is underestimated by Rmb3.7tn. This implies that government and enterprise incomes are overestimated by Rmb2.5tn, which would curb their spending and investment. In other words, the Rmb3.7tn of additional GDP should be entirely classified as consumption.

2) the value of housing use is underestimated. The GDP data put the value added of both owner- and tenant-occupied housing at an average of just Rmb1,868 a year or Rmb156 a month per household (both rural and urban). If we assume Rmb500 a month, which is still on the low end, then the extra rental value would be about Rmb1.7tn, which would be additional service consumption within GDP. By contrast, US GDP data assumes about $1,200 a month per household.

3) a large amount of household consumption is disguised as business costs, government spending and investment. Vehicle use, gifts, vacations, meals, even groceries can be counted as business costs, so long as tax receipts can be procured.

Adjusting China GDP shows China economy is less unbalanced and has 47% GDP from consumption and 42% national savings rate