China economy much bigger than thought

Set to surpass UK and France in 2005

A revision to the way national statistics are calculated has led to a massive upward revision to China’s gross domestic product (GDP) figures and puts China as the 6th largest economy in the world in 2004 and probably the 4th, ahead of France and the UK, in 2005.

After a census that took a year to complete, the Chinese authorities upped GDP by 17% to take account of thousands of businesses that had been previously unaccounted for.

Around USD 285 billion (the equivalent of adding the economy of Cyprus 20 times over) was added to the GDP figure. GDP is now around USD 2 trillion.

A larger services sector than previously thought was the main reason for the upgrade, with retailing, real estate and insurance coming up much bigger than before. Services now account for 40% of GDP, up from 32% under the previous accounts.

Analysts said that the upward revision was actually good news, since it puts China’s investment ratios at a level that is more normal for an economy at this stage of development.

The buoyancy of services is also likely to attract more investment, they said. On the other hand, it is likely to lead trade protectionists in the US to call for a sharper revaluation of the Chinese remnimbi.

China revalued its currency by 2.1% earlier this year and it has gained around 0.4% this year.

The authorities also found that the economy has been growing faster than previously thought, something which may explain why China’s demand for oil this year took oil producers by surprise.

The statistics bureau said that the census would not change China’s policy of seeking to slow down the pace of investment.