1. China Annual Expenditure-Based GDP Accounting Methods WU You 2009

2. Establishment and Development In 1989, Expenditure-based GDP estimates were developed on trial basis In Jan 1990, Expenditure-based GDP estimates were added to annual report In Oct 1993, Program of Explanatory Notes on Gross Domestic Product Indicators and Estimating Methods was issued in all regions

3. Establishment and Development In 1995, National Bureau of Statistics first published national expenditure-based GDP figures for 1978-1994 and 30 provinces, municipalities and autonomous regions figures for 1993 in "China Statistical Yearbook Department of National Accounts of National Bureau of Statistics has improved and revised the expenditure-based GDP accounting system for many times since 2000 At present, the state and regions have formally established the annual expenditure-based GDP accounting system

4. Basic Frame GDP Final Consumption Expenditure Household Consumption Expenditure Government Consumption Expenditure Gross Capital Formation Gross Fixed Capital Formation Changes in Inventories Net Export of Goods and Services Export of Goods and Services Inport of Goods and Services

5. Accounting Contents Food Clothing Residence Household Appliances and Services Health Care and Medical Services Transport and Telecommunications Education, Culture and Recreation and Services Financial Service Insurance Service Owned Housing Service Kind of consumption Other Goods and Services 1.Household Consumption Expenditure (Rural and Urban Household)

6. Accounting Contents 2. Government Consumption Expenditure Current Operating Expenditures – Operating revenue + Depreciation of Fixed Assets

7. Accounting Contents 3. Gross Fixed Capital Formation Residential Construction Non-Residential Construction Machinery and Equipment Land reclamation expenditures Mineral exploration costs Software Others

8. Accounting Contents 4. Increase in inventories Raw materials Fuels Finished products Unfinished products Semi-finished products Work-in-progress

9. Accounting Contents 5. Net Export of Goods and Services Goods import and export can be divided into general trade import and export, processing trade import and export and others. Services import and export can be divided into transport service, travel service, communication service, insurance service, computer and information service and others.

10. Accounting Methods (current price) 1. Household Consumption Expenditure (Rural and Urban Household) Consumer expenditure of Food, Clothing, Residence, Household Appliances and Services, Health Care and Medical Services, Transport and Telecommunications, Education, Culture and Recreation and Services, Others = Per Capita Consumer expenditure (relevant category in Rural and urban household surveys) × annual average number of residents Annual average number of residents = (the number of residents in the beginning of the year+ the number of residents in the end of the year) ÷2 Source: Annual survey data of rural and urban households

11. 1. Household Consumption Expenditure Finance Service Consumer Expenditure =financial intermediation services calculated indirectly + financial services paid directly of Rural and urban household consumption. Financial intermediation services calculated indirectly of household consumption expenditure = (savings deposit of household+ households consumer loans)/ (savings deposit of financial institutions+ balance of loans from financial institutions) *Financial intermediation services calculated indirectly Financial services paid by urban households directly are calculated basing on finance source of financial institution related.

12. 1. Household Consumption Expenditure Insurance intermediation services calculated indirectly of urban and rural households consumption expenditure= (total insurance expenditure/total insurance income) * Insurance intermediation services output calculated indirectly.

13. 1. Household Consumption Expenditure The imputed consumption expenditure of the urban households owner-occupied housing services =Repair maintenance cost of urban households owner-occupied housing+ Administer cost of urban households owner-occupied housing+ imputed depreciation of urban households owner-occupied housing And, imputed depreciation of urban household owner-occupied housing rate is: Urban 2%, rural 3%

14. 1. Household Consumption Expenditure Consumer expenditure of Food, Clothing, Residence, Household Appliances and Services, Health Care and Medical Services, Transport and Telecommunications, Education, Culture and Recreation and Services, Others----CPI Finance and insurance Service Consumer Expenditure----price index of financial intermediation services and insurance services in production-based GDP estimates The value of imputed consumption expenditure of the urban household owner-occupied housing services is deflated by volume extrapolation

15. 2. Government Consumption Expenditure Government Consumption Expenditure= Current Operating Expenditures– Operating revenue+ Depreciation of Fixed Assets Current Operating Expenditures= (Expenditures on Wages and Welfare+ Expenditures on Goods and Services+ Expenditures on National Defence) + (Subsidy Expenditures on Individual and Families- Pension Costs- Living Allowance- Relief Costs- School Aid Costs- Production Subsidies) Depreciation of Fixed Assets= Original value of fixed assets* Depreciation rate (4%) The main data sources of Government consumption expenditure are current Operating Expenditure in which is the final accounts of administration & institution from Ministry of Finance and Defense White Paper.

16. 2. Government Consumption Expenditure Current Operating Expenditures: CPI Depreciation of Fixed Assets: price index of fixed assets

17. 3. Gross Fixed Capital Formation Gross Fixed Capital Formation = Residential Construction +Non-Residential Construction+ Machinery and Equipment+ the value of land improved+ the prospecting of minerals+ computer software+ others Source: statistical annual report of fixed assets investment, Ministry of land and resources, department of industry and information.

18. 3. Gross Fixed Capital Formation The residence here refers to the building only for occupancy, for example, villa, apartment and dormitory. Residential Construction=residential investment+ value-added of Residential sales- corresponding fee in land requisition, purchase and resettlement compensation. Value-added of Residential sales refers to the difference in the accounting period between the sales value of residence and corresponding Investment completed, i.e. cost of project before buildings being sold. The formula is below. The fee in land requisition, purchase and resettlement compensation refer to all kinds of land compensation fees and allowance for arrangement, that land developers contribute to government in the situation of both remise and transfer of the using right of State-owned land.

19. 3. Gross Fixed Capital Formation Non-residential construction refers to the building not for residence, for example, office, commercial business buildings, factory and storeroom, public infrastructure. The formula is below. Non-residential construction= construction and installation of Total Investment in Fixed Assets in the Whole Country -investment in residential buildings -cost of purchasing old buildings -corresponding fee in land requisition, purchase and resettlement compensation + value–added of non-residential construction sales.

20. 3. Gross Fixed Capital Formation Machine and equipment refers to the equipments, tools and machines which enterprise and administrative institution buy or make by themselves and those reach the standard of fixed assets. The computation formula is below. Machine and equipment= machine and equipment investment+ fixed assets investment below five hundred thousand Yuan- costs purchasing old equipments.

21. 3. Gross Fixed Capital Formation Land improvements costs refer to investment on program of development of land reclaim which are examined and arranged by all levels of administrative departments of land resources. They are considered as part of gross fixed capital formation.

22. 3. Gross Fixed Capital Formation Mineral exploration costs refer to investment which is invested by all sections and units of the whole society to explore mineral resource. They are part of Intangible fixed asset. Computer software refers to the incomes from developing and selling software. They also are part of Intangible fixed asset.

23. 3. Gross Fixed Capital Formation Others: refers to the contents of gross fixed capital formation except the contents above. Such as large animal livestock cultivation, investment of tree and orchard, expenditure of national defense, urban greening and other expenditures. Others= Others of Total Investment in Fixed Assets in the Whole Country+ national defense fee- Land improvement costs- Mineral exploration costs

24. 3. Gross Fixed Capital Formation Residence and Non-residential construction deflated by construction and installation price index of fixed assets investment price index. Machine and equipment, deflated by equipment and instruments purchasing price index of fixed assets investment price index. Land improvement cost, deflated by fixed assets investment price index. Computer software, deflated by computer software price index of retail price index.

25. 4. Increase in inventories Increase in inventories= inventory value in the beginning of the year-inventory value in the beginning of the year adjusted And, Inventory value in the beginning of the year adjusted = inventory value in the end of the year in accounting× related price index Increase in inventories at current prices is computed by industry.

26. 4. Increase in inventories The increase in inventories in farming, forestry, animal husbandry and fishing is estimated in two parts: enterprise and farmer. (1) Increase in enterprise inventories. Limited by the data source, currently, only the state-owned enterprises increase in inventories is estimated. (2) Increase in farm family inventories: includes the increase in the grazing of pig, sheep and fowl feed by farmer, also includes the increase in grain reserves

27. 4. Increase in inventories Increase in industrial inventories consists of industrial enterprises above and below designated size. It is calculated using data from national economic census in census years and estimated by census data in non- census year. The value of inventories at the beginning is adjusted by PPI.

28. 4. Increase in inventories Increase in inventories on construction consists of two parts gained from two kinds of enterprise. The first kind is construction enterprises of both general contracting contractors and professional contractors. The second kind is construction enterprises of work subcontractors and other construction enterprises without qualification criteria. Increase in inventories of the first kind is computed by their financial table; and the second is estimated by economic census data. The value of the inventories at the beginning of year is adjusted by PPI.

29. 4. Increase in inventories Increase in inventories on transport, storage and post Increase in inventories on transport, storage and post is calculated by data of economic census in census years, estimated by finance data of state-owned enterprises of the State-owned Assets Supervision Administration Commission in non-census years. The value of transport inventories at the beginning of the year is adjusted by PPI of the means of production; the value of storage inventories at the beginning of the year is adjusted by Retail Price Indices; the value of post inventories at the beginning of the year is adjusted by PPI.

30. 4. Increase in inventories Increase in inventories on wholesale and retail trades Increase in inventories on wholesale and retail trades consists of wholesale and retail enterprises above and below designated size. Increase in inventories of wholesale and retail enterprises above the designated size is computed by concerning financial term tables obtained from Department of Trade and External Economic Relations of NBS. Increase in inventories of enterprise below the designated size is estimated by economic census data. The value of the inventories at beginning is adjusted by Retail Price Indices.

31. 4. Increase in inventories Increase in inventories on hotels and catering services Increase in inventories on hotels and catering services consists of hotels and catering services enterprises above and below designated size. Increase in inventories of hotels and catering services enterprises above the designated size is computed by main financial term tables of corporation units. Increase in inventories of enterprise below the designated size is estimated by economic census data. The value of the inventories at beginning is adjusted by Retail Price Indices, and Retail Price Indices are obtained from Retail Price Index tables

32. 4. Increase in inventories Increase in inventories on real estate Inventories in real estate industries include unsold building and building materials. Contained in gross fixed capital formation, unsold building should be deducted in the computation of increase in inventories avoiding double count. Because it is difficult to deduct unsold building from the inventories according to current data, unsold building is considered to be 5% of inventories in real estate industry. Financial terms statement of real estate enterprises is used in census years. Finance data of state-owned enterprises of the State-owned Assets Supervision Administration Commission is used to estimate in non-census years. The value of inventories at beginning of year is adjusted using PPI of industrial products.

33. 4. Increase in inventories Other services refer to information transfer, computer services and software; leasing and business services; scientific research, technical service and geological prospecting; management of water conservancy, environment and public facilities; services to household and other services; education; health, social security and social welfare; culture, sports and entertainment. Increase in inventories of these services is mainly calculated by economic census data and finance data of state-owned enterprises of the SASAC. The value of the inventories at the beginning is adjusted by CPI.

34. 4. Increase in inventories Commonly, there are two methods to calculate the increase in inventories on constant price. The first is inflated by price index. And the second is direct computation by means of multiplying base-period price by increment in accounting period. Increase in inventories of pig, sheep, domestic bird, rabbit and food is calculated by first method. The others use the second method.

35. 4. Increase in inventories Use agricultural products price index in agriculture, forestry, animal husbandry and fishing industry. Use index of producer price of industrial products in industry, building industry, transportation, storage industry and postal services. Use retail price index in retail and wholesale Industries, lodgings and catering services. Use price index of investment in fixed assets in real estate. Use corresponding price index in retail price index in others.

36. 5. Net Export of Goods and Services Net export of goods and services equals difference between export and import of goods and services. The value of goods export and import is computed by free-on-board price, services by market price when business actually occur. In addition, the data calculated by USD should be converted to the data calculated by CNY with annual average exchange rate. Export and import (CNY)= Export and import (USD) * annual average exchange rate

37. 5. Net Export of Goods and Services Most of import and export of goods price indices are the commodity price indices authorized by Maritime Customs Administration. Also, import commodity price indices should be adjusted according to consumer price index of main import country or district. At present, china has not authorized import and export services price index. In computation of services export at constant price, services export at constant price refers to service items price index of consumer price index, and the import of services price index refers to export of services price index in American, Japan, Korea, Hong Kong and EU.