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WSJ: China's GDP exceeds Italy, nudges France
By James T. Areddy, Jason Dean (The Wall Street Journal)
Updated: 2005-12-21 13:32
China said it has replaced Italy as the world's sixth-largest economy based
on 2004 gross-domestic-product figures, and the nation now threatens France's
No. 5 ranking.
China said its economy is more than a sixth larger than previously stated
after a nationwide census revealed vibrant activity in its developing service
sector that had previously gone underreported.
The upward revision suggests that the world's fastest-growing economy is less
reliant on manufacturing and exports for its growth than previously thought,
which could be good news for companies looking to sell products to its 1.3
billion people. But at the same time, the latest figures could stoke simmering
concerns about China's rapid rise.
The revision by China's National Bureau of Statistics could put China's
economy on course to catch up to that of France when data for 2005 are announced
early next year, said Li Deshui, director of the statistics bureau. That would
put the size of China's economy behind that of only the U.K., Germany, Japan and
the U.S.
The revised figures give China a 2004 gross domestic product of 15.988
trillion yuan, or about $1.932 trillion, said Mr. Li. That is about 17% larger
than the 13.688 trillion yuan calculated under the bureau's old measurements.
The figures were revised as a result of China's first economic census, an
effort involving more than three million auditors and supervisors. The central
finding: Services, from real estate to transportation and restaurants,
constituted 40.7% of GDP last year, not the 31.9% previously reported. The newly
discovered activity in the service sector accounted for almost all of the GDP
increase. Economists said the new figures suggest that China's economy faces
less danger of overheating -- some people had feared that investment rates were
too high relative to the size of the economy.
Still, analysts said the findings could add pressure to China to further
appreciate the yuan, which critics charge gives China an unfair advantage by
making its exports cheap.
The revision "only reconfirms our longstanding view that China is already an
important player in global economy," Qu Hongbin, an economist for HSBC in Hong
Kong, said after the announcement in a note. "The flip side is that it may stir
up more noises about China and lead to greater political pressure for [currency]
revaluation."
Recognizing the potential political impact of the numbers, Chinese officials
stressed that the country still faces enormous challenges.
"The international community shouldn't think that because there's been a
little bit of change in the data, China is all of the sudden exceedingly
powerful," Mr. Li said. "Problems and complications are still there," the
government statistician said, referring to the economy. He specifically rejected
the argument that China now needs to rethink its currency policy.
The data show that China relies less on activity like manufacturing -- 46.2%
of GDP versus 52.9% before -- and exports than thought. Agriculture and related
activities fell to 13.1% of GDP from 15.2%.The government is using the new
findings to revise numbers going back until 1993.
Despite the larger number, China's income levels remain far behind those of
the developed world. Per capita income for each of China's nearly 1.3 billion
people under the new numbers is about $1,230 a year. That remains a stark
difference to the U.S., which with an economy six times as large as China's has
a per capita income of just over $40,000. Mr. Li said the revisions move China
to 107th in per capita economic output, from the earlier 112th position
world-wide.
Some say the new numbers reflect the difficulty of getting a firm read on
China's economy. The revisions are "a reflection of the lack of control and the
lack of detailed understanding of what happens in China," said Robert Broadfoot,
managing director of Political & Economic Risk Consultancy Ltd. in Hong
Kong.
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