China has raised its estimate of the
output of the world's fastest-expanding major economy by a sixth, a revision
that leaves growth better balanced but may increase pressure on Beijing to let
the yuan rise faster, reports Reuters.
The new estimate, based on a vast
nationwide census, hoists China above Italy into sixth place in the world
economic rankings of 2004 output, measured in dollars at market exchange rates.
What's more, based on exchange rate
movements and relative growth rates in 2005, economists calculate that China has
now risen to fourth place, ahead of France and Britain, and behind only the US,
Japan and Germany.
The National Bureau of Statistics said
the revision reflected better information on the services sector and on private
firms, unearthed during a year-long survey for which the government mobilised
13m data-gathers - one in every 100 Chinese.
For investors, the bigger economic pie
means some ratios that had looked worryingly high, such as investment or bad
loans as a share of gross domestic product, now look more sustainable.
"The revised statistics show that
China's economic structure is more reasonable and healthy than the previous
figures showed," Li Deshui, the head of the statistics office, told
The NBS now estimates that GDP in 2004
totalled Yuan15.99trn ($1.9trn), 16.8% more than its previous estimate.
Using the end-2004 exchange rate of
Yuan8.276 per dollar, that comes to $1.93trn, compared with $1.67trn for Italy,
according to World Bank figures.
Fast-growing service industries such as
telecommunications, retailing and real estate accounted for 93% of the revision
and boosted the service sector's share of economic output in 2004 to 40.7% from
Industry's hitherto outsized share of
GDP dropped to 46.2% from 52.9%, while the share taken by farming and fisheries
shrank to 13.1% from 15.2%.
The changes mean China will need to
lean less on ever-faster industrial output, and the ever-rising demand for
energy and raw materials it entails, to sustain the 9%-plus GDP growth rates of
the past three years.
"Given that the size of the
services sector is much bigger than initially estimated, the sustainability of
growth in China is much better than many people thought," said Frank Gong,
chief economist at JPMorgan Chase in Hong Kong.
Because policymakers now know that
growth is less reliant on export- orientated industries, they could be more
relaxed about letting the yuan rise, which would favour consumption and services
growth, Mr Gong said.
"It will ease further some of the
concerns within China on a strong yuan," he said.
Jim Walker of brokers CLSA in Hong Kong
said the fact that China is now almost certainly the fourth-biggest economy
could raise hackles in Washington, where US Senator Charles Schumer is
threatening to reintroduce a Bill that would impose a 27.5% tariff on Chinese
imports unless the yuan is revalued.
"This gives him much much more
ammunition," Mr Walker said.
Big revisions to GDP are not uncommon,
even among countries with sophisticated data-gathering systems.
Misha Belkindas of the World Bank's
development data group said Indonesia had revised up its GDP 17% in 2004, Italy
by more than 17% in 1987 and Norway by 11% in 1995. Still, Jun Ma of Deutsche
Bank in Hong Kong agreed that a larger GDP could lead to more foreign pressure
on China to act as "a more responsible" large nation by letting the
Since it was revalued by 2.1% in July
and depegged from the dollar, the yuan has risen just a further 0.49% against
the US currency.
The share of Chinese exports in GDP has
now fallen to 29% from 34%, so the revisions could ease policymaker concerns
that a rapid rise in the yuan, also known as the renminbi, would sap growth and
increase unemployment, Mr Ma said.
"This suggests that further
flexibility of the renminbi may not be viewed as dangerous as before in terms of
its impact on the overall economy," he said.