How China's GDP Is Calculated

Gross domestic product (GDP) is used to indicate the health of a nation’s economy. Investors use this figure to make decisions about investment in a particular nation, while governments use it for drafting policies. 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. (See related: The GDP And Its Importance.)

The need for a clear description and an indicator of the economic situation led the National Bureau of Statistics of China (NBS) to start a system of GDP estimation at both the national and provincial levels in 1985. Although it initially started with production-side estimation only, the NBS formally adopted an expenditure approach in 1993.

The quarterly GDP is estimated for the following eight industries: agriculture, forestry, husbandry, and fishing; mining and quarrying, manufacturing, electricity, gas, and water; construction; transport, post and telecommunications; wholesale, retail trade, and catering; banking and insurance; real estate; and other.

The annual GDP is estimated for 16 industries. Along with the eight industries included in quarterly GDP estimates, the following eight are included for annual GDP: services for agriculture, geological prospecting and water conservancy; transport and storage; social services; health care and social welfare; education, culture and arts, radio, film and television; scientific research and technological services; and government agencies, parties and social organizations.

There are three main sources of data in China.

1. Data collected by government agencies: The NBS collects data on agriculture, forestry, husbandry and fishing; mining and quarrying, manufacturing, electricity, gas, and water; construction; wholesale, retail trade, and catering, fixed-asset investment; labor; wages; price; household income and expenditure. State councils collect data on transport, customs, and balance of payments.
2. Final fiscal accounting datasets of revenues and expenditures from various administrative departments.
3. Final financial accounts belonging to multiple sectors, including banks, insurance, railways, civil aviation, and post and telecommunications.

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 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.)

Once the required datasets are ready, GDP calculations are made using both current and constant prices. (Detailed calculations are out of scope of this article, but readers are encouraged to refer to Section 5: Basic Calculation Methods of China’s gross domestic product estimation.)

GDP data calculation in China occurs in three phases as follows:

1. 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 availability at that time, PE is based on limited statistics in specific fields as available from different NBS departments.
2. 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.
3. 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.

China has remained a closed economy with a 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 includes 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 old System of National Accounting (SNA) 1993 standards to the newer SNA 2008 standards is one such initiative to win investors trust and have uniform accounting system similar to global standards.