Thursday, October 15, 2015

China’s economy larger than what the official data suggests - NAB

FXStreet (Delhi) - Gerard Burg, Senior Economist at NAB, suggests that one of the key challenges in comparing China’s economic growth with international peers is that China’s national accounting methodology is comparatively dated and if we switch to the new methodology then its economy is likely to be larger than what the official data suggests.

Key Quotes

“China’s approach is based on the 1993 System of National Accounts (as opposed to the 2008 methodology that is used by advanced economies), which provides a relatively narrow coverage of activity in a range of service sectors, including research & development, real estate and finance – meaning that some economic activity isn’t currently being counted.”

“A new study published by the Center for Strategic and International Studies (CSIS) suggests that adopting the latest methodology would lead to a significant increase in the estimated size of China’s economy – in stark contrast to the most recent downward revision for 2014.”

“The study re-estimated China’s nominal GDP for 2008 and suggested that the economy was between 13% and 16% larger under the current methodology. This is consistent with major upward revisions in advanced economies when they switched to this approach.”
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