1. 政府統計處 Census and Statistics Department 1 Latest developments of compiling Gross Domestic Product of Hong Kong Speakers:Ms Sharon NG, Senior Statistician Miss Gloria MA, Senior Statistician Miss Winnie TAM, Statistician Ms Jasmin LEE, Statistician

2. 政府統計處 Census and Statistics Department 2 Contents (I)Fundamental concepts and uses of GDP (II)Methods and data sources for compiling GDP (III)Chain volume measures of GDP (IV)Commonly asked questions on the concepts of GDP (V)Q&As

3. 政府統計處 Census and Statistics Department 3 (I) Fundamental concepts and uses of GDP

4. 政府統計處 Census and Statistics Department 4 What is Gross Domestic Product (GDP)?  Gross Domestic Product (GDP): measure of the total value of production (product) of all resident producing units of a country or territory (domestic) in a specified period, before deducting allowance for consumption of fixed capital (gross).

5. 政府統計處 Census and Statistics Department 5 International statistical standards for the compilation of GDP 1993 System of National Accounts (SNA)  ensure GDP statistics compiled by different economies are based on consistent concept, coverage and standardised framework  ensure international compatibility of GDP data

6. 政府統計處 Census and Statistics Department 6 Three approaches for compiling GDP

7. 政府統計處 Census and Statistics Department 7 Three approaches to measure GDP 1. Production measure of GDP ( sum of value added of all economic activities) Production measure of GDP 2. Income measure of GDP (sum of compensation of employees and gross operating surplus of entrepreneurs) Income measure of GDP 3. Expenditure measure of GDP (final expenditures on consumption, capital formation, and exports less imports) Expenditure measure of GDP Supply Income Demand

8. 政府統計處 Census and Statistics Department 8 Given there can be 3 alternative approaches to compile GDP, are we supposed to have 3 figures of GDP or one single figure of GDP? In theory GDP estimates by the 3 approaches should be the same In practice Statistical discrepancy exists, as different data sources are used for different approaches Supply Income Demand

9. 政府統計處 Census and Statistics Department 9 Availability of GDP statistics in Hong Kong  Expenditure-based GDP -Annual series from 1961 -Quarterly series from 1973  Production-based GDP -Annual series traced back to 1980 -Quarterly series from 2000  Income-based GDPIncome-based GDP -Once compiled for 1970 - 1980, but had discontinued since 1981   

10. 政府統計處 Census and Statistics Department 10 Which approach is adopted for compiling and presenting the GDP figures? Hong KongGDP(E) as the headline GDP, supplemented by GDP(P) USGDP(E) as the headline GDP SingaporeGDP(P) as the headline GDP, supplemented by GDP(E)

11. 政府統計處 Census and Statistics Department 11 Uses of GDP

12. 政府統計處 Census and Statistics Department 12  Measure of economic growth Why is GDP so important?

13. 政府統計處 Census and Statistics Department 13 GDP is commonly used for charting the economic growth of an economy  Measured by change in the volume measure of GDP over time (growth rate in real terms)  Positive growth : expansion of economic activities  Negative growth : contraction of economic activities

14. 政府統計處 Census and Statistics Department 14 GDP as an indicator for measuring the economic growth  Year-on-year percentage change - GDP in real terms of a quarter compared with that of the same quarter last year e.g. In the first quarter of 2011, the GDP increased by 7.2% in real terms over a year earlier. GDP in real terms for Q1 2011 GDP in real terms for Q1 2010 = [ - 1] x 100% = 7.2% [ - 1] x 100% 438,525* 408,926* * In chained (2009) HK$Mn

15. 政府統計處 Census and Statistics Department 15 Seasonally adjusted GDP series  Seasonally adjustment: remove the seasonal effects which repeat each year in a systematic manner  Quarter-to-quarter percentage change - seasonally adjusted GDP of a particular quarter compared with that of last quarter - capture turning point more promptly GDP as an indicator for measuring the economic growth (Cont’d)

16. 政府統計處 Census and Statistics Department 16 Economic growth cycles in Hong Kong tracked by the real growth of GDP Average real growth each year 1962-1970: 8.8% 1971-1980: 9.0% 1981-1990: 6.7% 1991-2000: 3.9% 2001-2010: 4.0% 1 3 2 4 2010 5

17. 政府統計處 Census and Statistics Department 17 Economic slow-down in the late-1960s 1967 social unrest 1 2010

18. 政府統計處 Census and Statistics Department 18 Economic slow-down in the mid-1970s 1974-75 Oil Crisis 2 2010

19. 政府統計處 Census and Statistics Department 19 Economic slow-down in the mid-1980s 1985 global slow down in external trade 3 2010

20. 政府統計處 Census and Statistics Department 20 Economic down-turn in the late-1990s 1997/98 Asian Economic Crisis 4 2010

21. 政府統計處 Census and Statistics Department 21 Economic down-turn in the late-2000s Global financial tsunami in latter part of 2008 5 2010

22. 政府統計處 Census and Statistics Department 22 Uses of different measures of GDP  Production measure Production measure - Indicate the relative contribution of different economic activities to the total GDP  Income measure Income measure - Study the relative shares of compensation of employees and gross operating surplus of companies  Expenditure measure Expenditure measure - Analyse the relative economic significance of household, government and investment expenditure - Indicate the degree of external orientation of an economic territory

23. 政府統計處 Census and Statistics Department 23 (II) Methods and data sources for compiling GDP

24. 政府統計處 Census and Statistics Department 24 Statistical system for GDP GDP Trade statistics Gov’t Account Household survey Establishment survey Price data Admin. data

25. 政府統計處 Census and Statistics Department 25 Data sources for compilation of GDP(E) ComponentData sources 1. Private consumption expenditure (PCE) = CXDM + REA - NXDM Consumption expenditure in domestic market (CXDM) - goods Monthly Survey of Retail Sales CXDM - servicesQuarterly Survey of Restaurant Receipts and Purchases; government revenue statistics; administrative data from HK Jockey Club, MTR, bus companies, ferry companies Expenditure of residents abroad (REA) Household surveys on expenditure abroad; Immigration Department Expenditure of non-residents in the domestic market (NXDM) Data from Hong Kong Tourism Board (HKTB)

26. 政府統計處 Census and Statistics Department 26 Data sources for compilation of GDP(E) (Cont’d) ComponentData sources 2. Government consumption expenditure (GCE) = CE + Purchase - Sales General revenue accounts; income and expenditure data from quasi-government institutions (e.g. HKTB, HKMA, HA, etc) 3. Gross domestic fixed capital formation (GDFCF) Cost of ownership transferStamp duties collected by IRD; no. of property transfer cases registered with the Land Registry Building and constructionQuarterly Survey of Construction Output; data from government accounts, quasi-government institutions and public corporations (e.g. MTR, AA, etc) Machinery, equipment and computer software Trade data; data from government accounts, quasi-government institutions and public corporations; data from economic surveys

27. 政府統計處 Census and Statistics Department 27 ComponentData sources 4. Changes in inventoriesQuarterly Survey of Industrial Production; Quarterly Survey of Services Industries; Monthly Survey of Retail Sales; data on hydrocarbon oil from Electrical and Mechanical Services Department 5. Exports and imports of goodsTrade data 6. Exports and imports of services (e.g. transportation, travel, trade services, financial services) Data from HKTB and Immigration Department; Survey of Imports and Exports of Services; household surveys on expenditure abroad Data sources for compilation of GDP(E) (Cont’d)

28. 政府統計處 Census and Statistics Department 28 Data sources for compilation of GDP(P) Economic ActivityData sources 1. Agriculture, fishing, mining and quarrying Agriculture and fishing: Agriculture, Fisheries and Conservation Department; Mining and quarrying: Annual Survey of Economic Activities (ASEA)

29. 政府統計處 Census and Statistics Department 29 Data sources for compilation of GDP(P) (Cont’d) Economic ActivityData sources 2. Manufacturing ASEA 3. Electricity, gas and water supply, and waste management 4. Construction 5. Import/export, wholesale and retail trades 6. Accommodation and food services 7. Transportation, storage, postal and courier services 8. Information and communications 9. Financing and insurance 10. Real estate, professional and business services

30. 政府統計處 Census and Statistics Department 30 Data sources for compilation of GDP(P) (Cont’d) Economic ActivityData sources 11. Public administration*, social and personal services Government revenue accounts; Income and expenditure data from Quasi- government institutions (e.g. HKTB); Administrative records for government subvented non-profit institutions; Financial reports of private non-profit institutions; and ASEA * Includes general administration, public order and safety services and other services provided by government departments which are not engaged in market activities

31. 政府統計處 Census and Statistics Department 31 Data sources for compilation of GDP(P) (Cont’d) Economic ActivityData sources 12. Ownership of premises*Rating and Valuation Department; Administrative records of the government; and A specially conducted survey on premises owned and occupied by private non-profit institutions * Ownership of premises includes: (1)leasing services provided to tenants by owners of premises in their individual capacity; and (2) leasing services which owners of premises like households, government and private non-profit institutions, provided to themselves

32. 政府統計處 Census and Statistics Department 32 Compilation of value added of the manufacturing sector based on data collected in ASEA Major activity: Production of goods GO 1.Value of all sales of goods produced (adjusted by the value of changes in inventories of finished goods and work-in progress) 2.Receipts for industrial work and industrial services rendered to other establishments 3.Resale margin (value of resale of goods in same condition as purchased – purchases of goods for resale) 4. Rental income. IC 1.Expenses on materials, supplies for production and business operation 2.Payments for sub-contract work 3.Rentals (e.g. land and buildings, machinery, equipment and vehicles) 4.Payments for repair and maintenance services 5.Expenses on fuels, electricity and water 6. Transport, travelling and courier service expenses....

33. 政府統計處 Census and Statistics Department 33 Compilation of value added of the construction sector based on data collected in ASEA Major activity: Construction of both buildings and other structures and facilities undertaken by the construction contractors GO 1.Net value of construction work performed (i.e. total of overall contract sum for all main contractors and fee sub-contractors less value of payment for fee sub- contract work recorded) 2. Commissions and fees for consultancy or other services rendered 3. Rental income and letting out of machinery and equipment without operator : IC 1. Expenses on consumption of building materials and supplies on sites 2. Expenses on consumption of sundry supplies in business operation 3. Rentals (e.g. land and buildings, machinery, equipment and vehicles) 4. Payments for repair and maintenance services 5. Expenses on fuels, electricity and water 6. Expenses on other services such as transportation, technical consultancy, insurance, etc. :

34. 政府統計處 Census and Statistics Department 34 Compilation of value added of the transport sector based on data collected in ASEA IC 1.Contract work (e.g. rental of vehicles with drivers) 2.Fuels, materials and supplies used in business operation 3. Agency fees, commissions and brokerage fees 4.Rentals (e.g. land and buildings, machinery, equipment and vehicles) 5. Payments for repair and maintenance services 6. Other operating expenses such as advertising, transportation, legal services and insurance etc.. GO 1. Freight revenue 2. Passenger revenue 3. Charter hire receipts 4. Rentals from letting land and buildings 5. Other business receipts such as agency fees, parking fees, and tolls, etc.. Major activity: Provision of services in carrying passengers and goods

35. 政府統計處 Census and Statistics Department 35 Compilation of value added of the import/export, wholesale and retail trades sector based on data collected in ASEA Major activity: Distribution of goods * Expenditures on purchases of goods for sales are not included in the intermediate consumption and are deducted from the sales value in calculating the gross margin on sales of goods. GO 1.Gross margin realised on trading* (i.e. value of sales of goods less total value of purchase of goods for sale and adjusted by the value of changes in stock of goods for sale) 2. Commissions, fees and other services charge 3. Rental income. IC 1.Expenses on materials, supplies used in business 2. Rentals (e.g. land and buildings, machinery, equipment and vehicles) 3. Payments for repair and maintenance services 4. Expenses on fuels, electricity and water 5. Transport, travelling and courier service expenses.

36. 政府統計處 Census and Statistics Department 36 Compilation of value added of the financing sector based on data collected in ASEA Major activity: Provision of financial intermediation services GO 1.Net interest receipts (i.e. interest received less interest paid) 2. Commissions and fees received 3. Services charges received (e.g. credit, bills transactions and loans and investment banking services) 4. Rental income. IC 1.Service charges, commissions and fees paid in respect of banking and financial services 2.Expenses on office stationery and supplies 3.Rentals (e.g. land and buildings, machinery, equipment and vehicles) 4. Expenses on advertising, legal, accounting, communications, transportation and other services.

37. 政府統計處 Census and Statistics Department 37 Latest developments in the compilation of GDP(P)  Starting from the reference year of 2009, the presentation of GDP(P) has been changed from Hong Kong Standard Industrial Classification (HSIC) V1.1 to V2.0.  To align with the International Standard Industrial Classification of All Economic Activities Revision 4 (ISIC Rev. 4)  This can better reflect the structural changes of the local economy and enhance international comparability of related statistics.

38. 政府統計處 Census and Statistics Department 38 Latest developments in the compilation of GDP(P) (Cont’d)  Major changes in classification under HSIC V2.0HSIC V2.0 (1)Combination of the sectors of “agriculture and fishing” and “mining and quarrying”; (2)Introduction of a new sector of “information and communications”; (3)Splitting of the two sectors of “wholesale, retail and import/export trades, restaurants and hotels” and “financing, insurance, real estate and business services” into four.

39. 政府統計處 Census and Statistics Department 39 Latest developments in the compilation of GDP(P) (Cont’d)  The valuation of value added has been changed from factor cost to basic prices to follow international standard. This can better reflect the prices actually paid and received by the producers.  The basic price, measures the amount retained by the producer, is the price most relevant for the producer’s decision making.  The valuation at basic prices had been adopted by most of the statistically advanced economies, like the UK, Australia, Canada and Singapore. The adoption of such approach in Hong Kong will enhance the international comparability of Hong Kong’s estimates.

40. 政府統計處 Census and Statistics Department 40 Factor cost vs Basic prices vs Market prices Value added at basic prices = Value added at factor cost + Taxes on production (e.g. government rent and rates and business registration tax) Value added at market prices = Value added at basic prices + Taxes on products* (e.g. alcoholic beverages, tobacco and hydrocarbon oil) * Payable per unit of goods and services

41. 政府統計處 Census and Statistics Department 41 Factor cost vs Basic prices vs Market prices (Cont’d) Value added at factor cost Taxes on production Taxes on products GDP at market prices 80128100 Value added at basic prices Taxes on products GDP at market prices 80 + 12 = 928100 ++= + =

42. 政府統計處 Census and Statistics Department 42 How is ‘Implicit Price Deflator’ of GDP compiled? Implicit price deflators (IPD) of GDP and its expenditure components GDP in volume terms x 100 = GDP at current prices

43. 政府統計處 Census and Statistics Department 43 IPD of GDP In contrast to a deflator, an implicit price deflator is NOT an input for GDP in volume terms (a misconception) Current price GDP IPD of GDP =GDP in volume terms  Current price GDP GDP in volume terms IPD of GDP =

44. 政府統計處 Census and Statistics Department 44 Implicit Price Deflator of GDP (IPD) and Consumer Price Index (CPI) CPI  a measure of price changes encompassing goods and services purchased by households IPD of GDP  a broad measure of economy-wide inflation, encompassing a wide varieties on goods and services for consumption, capital formation (investment), exports and imports

45. 政府統計處 Census and Statistics Department 45 (III) Chain volume measures of GDP

46. 政府統計處 Census and Statistics Department 46 Chain Volume Measures of GDP  C&SD has replaced the constant price measures by the chain volume measures of GDP  Why? –Align with the latest international statistical guidelines –Provide a better measure of the real growth rate of the aggregate economic activity in an economy as compared with the constant price volume measure of GDP

47. 政府統計處 Census and Statistics Department 47 Basic concepts of the volume measures of GDP

48. 政府統計處 Census and Statistics Department 48 Change over time in the value of GDP can be factored into two components (v = p x q) Change in prices of goods and services $ 10 each 2009 2008 2010 $20

49. 政府統計處 Census and Statistics Department 49 Value in 2009 increases by 20%, purely due to inflation $ 10 each $ 12 each 2009 2008 2010 $20 $24

50. 政府統計處 Census and Statistics Department 50 Value in 2010 surges by 50%, as prices increase from $12 to $18 $ 10 each $ 12 each $ 18 each 2009 2008 2010 $20 $24 $36

51. 政府統計處 Census and Statistics Department 51 Changes in value at price fixed at $10 reflect changes in volume ‚Change in their volumes $ 10 each 200920082010 $40$20$60

52. 政府統計處 Census and Statistics Department 52 Base year vs Reference year What is the base year?  Base year is the year from which the price structures are used as weights for deriving the aggregate volume measures  For constant price volume index, the base year is selected arbitrarily and updated at a 5-10 yearly interval  For chain volume index, the base year is always the preceding year in principle, i.e. t-1

53. 政府統計處 Census and Statistics Department 53 Base year vs Reference year (Cont’d) What is the reference year?  Reference year is the year to which the time series of the volume measures has been referenced  Unique for chain volume index, no need in constant price volume index  The reference year provides a reference time point for linking up the pairs of preceding-year weighted short- term volume indices in order to obtain a continuous time series  For the reference year, the chain volume index is equal to 100

54. 政府統計處 Census and Statistics Department 54 Compilation of volume measures of GDP

55. 政府統計處 Census and Statistics Department 55 International guidelines on volume measures of GDP  C&SD follows the 1993 System of National Accounts (SNA)  The 1968 SNA: fixed-weighted volume index approach – constant price measure of GDP  The 1993 SNA: annually re-weighted chain linking approach – chain volume measure of GDP

56. 政府統計處 Census and Statistics Department 56 Constant price measures of GDP  Adopt the price structure of a fixed base year (say 2000) as weights for aggregating the volumes of components in compiling the volume measure of the GDP aggregate (hence the concept of “fixed-weighted”)  Update the base year (rebasing) once every 5 or 10 years  Link up the constant price series on different base years (1966, 1973, 1980, 1990 and 2000) to obtain a continuous time series of the volume measures of GDP and its components (linking or splicing method)

57. 政府統計處 Census and Statistics Department 57 Chain volume measures of GDP  Volume measure of GDP for a particular year (e.g. 2010) adopts the price structure of the preceding year (2009) as weights for aggregating the volumes of components (hence the concept of “annually re-weighted”)  Links up the pairs of preceding-year weighted short-term volume indices and chains to a reference time point (the reference year) to obtain a continuous time series of the chain volume indices of GDP and its components (hence the concept of “chain linking”)

58. 政府統計處 Census and Statistics Department 58 Chained dollar estimates of GDP and components  Further convert the chain volume index series into chained dollar series by multiplying the current price value in the reference year (e.g. 2009) by the chain volume index  The resultant series is referred to as the chained (2009) dollar estimates (i.e. chain volume measures expressed in dollar terms)  The chain linking process is carried out for GDP and its components independently in order to preserve the historical real growth rates

59. 政府統計處 Census and Statistics Department 59 Illustration of compilation method of the chain volume measures of GDP

60. 政府統計處 Census and Statistics Department 60 Price levelPrice change 20072008200920082009 $1,800$1,600$1,500-11.1%-6.3% $50$52$53+4.0%+1.9% $900$1,100$800+22.2%-27.3% The price of mobile phone falls in 2008 and 2009 Food price is stable whereas price of clothing is fluctuating

61. 政府統計處 Census and Statistics Department 61 QuantityVolume change 20072008200920082009 101215+20.0%+25.0% 200210225+5.0%+7.1% 151617+6.7%+6.3% Mobile phone records fast volume growth Volume growth of food and clothing is moderate

62. 政府統計處 Census and Statistics Department 62 Constant (2007) price estimates of the aggregate for 2008 and 2009 are calculated by aggregating components revalued at prices of the fixed base year of 2007 Price in fixed base year 20082009 2007 Quantity in 2008 Value at 2007 prices Quantity in 2009 Value at 2007 prices $1,80012$21,60015$27,000 $50210$10,500225$11,250 $90016$14,40017$15,300 Aggregate$46,500$53,550 (+15.2%)

63. 政府統計處 Census and Statistics Department 63 20082009 Price in 2008 Quantity in 2008 Value at 2008 prices Quantity in 2009 Value at 2008 prices $1,60012$19,20015$24,000 $52210$10,920225$11,700 $1,10016$17,60017$18,700 Aggregate$47,720$54,400 (+14.0%) Chain volume estimate of the aggregate for 2009 is calculated by aggregating components revalued at preceding-year (2008) prices Contribution of fast growing mobile phone to the aggregate is reduced as a result of adopting more up-to-date (2008) price weights

64. 政府統計處 Census and Statistics Department 64 Illustration of chain linking of data series Year20062007200820092010 Values at current prices ($) 1,0001,2001,3001,4001,600 Year-on-year change in prices (%) 3.414.07.76.7 Values at preceding year prices ($) 1,1601,1401,3001,500 Short-term volume index100116 (preceding year = 100)10095 100 107 Chained volume index (2006=100) 100116110 118 Real growth rate (%)16.0-5.007.1 Values at chained (2006) dollars ($) 1,0001,1601,102 1,181

65. 政府統計處 Census and Statistics Department 65 Merits of the chain volume measure of GDP over the constant price measure

66. 政府統計處 Census and Statistics Department 66  Due to change in product mix, price structures in the base year (if fixed) become progressively less relevant over time, in particular for periods which are distant from the base year (old products disappear from the markets to be replaced by new products)  In chain volume measure, overlapping of products between 2 consecutive years is largest 19801995200020052007 1. Better accommodate changes in product mix

67. 政府統計處 Census and Statistics Department 67 2. Take account of latest price structures  Divergence in price movements of different products e.g. prices of information and communication technology products such as mobile phones and personal computers have fallen or increased at a slower pace whereas energy prices have accelerated in recent years  Chain volume measures use information updated every year to give each component the most relevant weights, thus providing a better measure of the real growth of the GDP aggregate

68. 政府統計處 Census and Statistics Department 68 3. More accurately portrait the changing economic conditions  Changes in the Hong Kong economy (and elsewhere) have speeded up in the last decade  In times of dramatic economic changes and volatility of relative prices and the associated volume changes of different components (e.g. consumption, investment, external trade etc.), updating the base year once every several years may no longer be sufficient to reflect the changing economic environment  Chain volume measures can better gauge the contributions of components to the real growth of the GDP aggregate

69. 政府統計處 Census and Statistics Department 69 (IV) Commonly asked questions on the concepts of GDP

70. 政府統計處 Census and Statistics Department 70 Q1. How does the occurrence of natural disaster affect GDP?  GDP is a measure of total value of production of all resident producing units of a country or territory in a specified period.  Destruction of buildings and structures after natural disaster is not production activity; hence it will not affect GDP. It will reduce the stock of fixed assets in the balance sheet.  If natural disaster affects current production activities of resident producing units, then GDP will be affected.  E.g. (1) If electricity supply network is destroyed leading to suspension of manufacturing activities, then this will reduce GDP; (2) Re-building works after natural disaster will increase building and construction activities and this will be increase GDP.

71. 政府統計處 Census and Statistics Department 71 Q2. How is redevelopment projects recorded in GDP?  Redevelopment projects generally involve two types of economic activities : (1)Construction activity: A construction contractor is engaged to demolish the old building and build a new building. These construction activities are covered in Building and Construction of GDFCF. (2)Real estate development activity: The value of the old building and the payment to contractor are costs to the real estate developer in the redevelopment project. These costs, in addition to other project development outlays (e.g. architectural, engineering, and other professional fees, marketing, brokerage fees etc.), are netted against the value of the new building. The gross margin (i.e. value of new building less costs) is included in Building and Construction of GDFCF.  In sum, the value of the new building less old building is captured in GDFCF.

72. 政府統計處 Census and Statistics Department 72 Q3. People regard the purchase of a residential flat an investment. Is it included in GDFCF of GDP during the period when the flat is purchased?  No.  The value of the flat has already been included in GDFCF of GDP previously when the flat was built.  The purchase of a flat is a transfer of ownership rather than creation of a new asset. Therefore, no new capital formation is captured in GDP.  However, SNA states that costs incurred in the transfer of ownership of the asset e.g. brokerage fees, legal fees and stamp duties, are included in GDFCF during the period when the flat is purchased.

73. 政府統計處 Census and Statistics Department 73 Q4. How is donation (say to Community Chest) recorded in national accounts?  Donation is a kind of transfer payment. This means that the party receiving the donation (say Community Chest) does not provide goods and services to the donor in return for the donation. Hence, no production activity is involved and GDP is not affected.  Following this concept, GDP in a period will not increase because of more donation nor decrease because of less donation in the same period.

74. 政府統計處 Census and Statistics Department 74 Q5. Is the natural growth of fish in sea included in the production boundary of GDP?  The growth of natural resources without human involvement or direction is not included in the production boundary.  According to the System of National Accounts, a necessary condition for an activity to be treated as production is that the activity should be carried out under the responsibility, control and management of a unit (SNA para. 1.20).  Therefore, the natural growth of fish in open sea is not regarded as production whereas the catching of fish in open sea and the culture of fish in fish ponds or rafts are regarded as production activities.

75. 政府統計處 Census and Statistics Department 75 Q6.Should ‘Illegal Transactions’ be included in GDP?  In theory, the answer is YES (1993 SNA’s recommendation) due to the following reasons. (1) Incomes from illegal production can be spent on purchasing legal goods and services. (2)Illegal goods and services can be purchased using incomes from the legal sources. (3) Discrepancies will appear in the account if such production is omitted.  Practically, reliable estimates are difficult to be produced.  In Hong Kong, only unlicenced hawkers are included in GDP.

76. 政府統計處 Census and Statistics Department 76 (V) Q&As

77. 政府統計處 Census and Statistics Department 77 The End

78. 政府統計處 Census and Statistics Department 78 Production-based GDP  GDP(P) : sum of gross values added (VA) of all resident producers (e.g. factories, shops, service organizations) in the economic territory of an economy  Gross value added (VA) =Gross output (GO) - Intermediate consumption (IC) [output from other producers] =unduplicated measure of output

79. 政府統計處 Census and Statistics Department 79 Income-based GDP  GDP(I) : sum of incomes for factors of production (labour, capital and entrepreneurship) generated by domestic production  Factor incomes include : - Compensation of employees (CE, return to labour) - Gross operating surplus (GOS, return to entrepreneur) - Gross mixed income (GMI, operating surplus of unincorporated enterprises owned by households)  Sometimes known as gross domestic income (GDI) (e.g. in the U.S.)

80. 政府統計處 Census and Statistics Department 80 Expenditure-based GDP  GDP(E) : Total expenditures on goods and services for final use, less import contents  Final expenditures include : - Private consumption expenditure (C) - Government consumption expenditure (G) - Gross domestic capital formation (I) - Exports of goods and services (X)  GDP(E) = C + G + I + X - M where M = Imports of goods and services

81. 政府統計處 Census and Statistics Department 81 Why GDP by income approach is not compiled? 1.Collection of corporate profit data will increase respondents’ burden 2.Conceptual limitations in compiling volume measures

82. 政府統計處 Census and Statistics Department 82 Percentage share of value added of economic activities of GDP 19801990200020052009 Manufacturing22.816.74.82.91.8 Construction6.55.24.92.93.2 Services of which 68.375.487.291.292.6 Import/export, wholesale and retail trades 15.619.321.826.123.6 Financing and insurance6.96.611.912.715.2 Others (e.g. electricity, fishing) 2.52.73.1 2.3 Note: Data for 1980 and 1990 are classified under Hong Kong Standard Industrial Classification (HSIC) V1.1 and for 2000, 2005 and 2009 are classified under HSIC V2.0.

83. 政府統計處 Census and Statistics Department 83 ( ): % share of factor income HK$Bn GDP by factor income 200020052009 Compensation of employees 673 (54%) 690 (52%) 836 (55%) Gross operating surplus 572 (46%) 643 (48%) 691 (45%)

84. 政府統計處 Census and Statistics Department 84 Degree of openness of Hong Kong compared with other economies Ratio of total exports to GDP, 2010 Exports of goods and services Total trade in goods and services Singapore 2.113.94 Hong Kong 2.234.40 Malaysia 0.971.76 Thailand 0.711.35 Korea 0.521.02 UK 0.290.62 Japan 0.150.29 US 0.130.29

85. 政府統計處 Census and Statistics Department 85 Compilation of GDP in volume terms by expenditure component 1.First obtain volume measures of expenditure categories/sub-categories (a hundred of items) by dividing current price value by an appropriate price index to remove the effect of price change (the process of deflation) Quantity Value Price =

86. 政府統計處 Census and Statistics Department 86 Compilation of GDP in volume terms by expenditure component (Cont’d) 2.Aggregate deflated values of sub-categories to obtain deflated expenditure categories 3.Aggregate deflated values of expenditure categories to obtain GDP in volume terms GDP = C + G + I + X - M

87. 政府統計處 Census and Statistics Department 87 Annual Survey of Economic Activities (ASEA)  An integrated establishment survey introduced as from the reference year of 2009  The ASEA covers the following major economic activities: (1)industrial sector; (2) building, construction and real estate sectors; (3) import/export, wholesale and retail trades, and accommodation and food services sectors; (4) transportation, storage and courier services sector; (5) information and communications, financing and insurance, professional and business services sectors; and (6) social and personal services sectors.

88. 政府統計處 Census and Statistics Department 88 Classification of economic activities in HSIC V2.0 1. Agriculture, fishing, mining and quarrying 2. Manufacturing 3. Electricity, gas and water supply, and waste management 4. Construction Services 5. Import/export, wholesale and retail trades 6. Accommodation and food services 7. Transportation, storage, postal and courier services 8. Information and communications 9. Financing and insurance 10.Real estate, professional and business services 11.Public administration, social and personal services 12.Ownership of premises

89. 政府統計處 Census and Statistics Department 89 Hyperlink End