By Mark Magnier
Wall Street Journal
Dec 19, 2014
New Calculation Adds About 3.4% More to 2013 Data
BEIJING — With the stroke of a pen, China announced Friday that world’s second largest economy was 3.4% larger last year than previously thought — chiefly due to a more accurate counting of services and their impact on economic output.
China’s 2014 gross domestic product will be calculated using the new methodology when the full-year results are released next month.
The new calculation added 1.92 trillion yuan ($308.3 billion)—or about the equivalent of the economy of a Colorado or a Singapore—to the size of China’s economy in 2013, bringing it to a total of 58.80 trillion yuan.
While at one level the statistical change is fairly arcane, it should give investors and policy makers a more accurate picture of the economy as Beijing tries to pivot from investment-led growth in industry and infrastructure toward services and consumption.
“I think they’re genuinely trying to improve the quality of the numbers,” said Michael Pettis, professor at Peking University’s Guanghua School of Management. “When you have bad numbers, it’s hard to make policy, and this is especially important in China, where the single most important player is the government.”
Analysts said the recalculation likely moves forward the date approximately a decade from now when China’s economy is projected to surpass the U.S.’s as the world’s largest. The U.S. surpassed the U.K. as the world’s largest economy in 1872. China has been expected to surpass the U.S. as the world’s largest economy around 2024 or 2025. Continue reading “China Revises Its GDP Calculations”