SHANGHAI (Interfax-China) -- China's first national economic census added about $284 million to the country's 2004 GDP number, making it the world's sixth largest economy. However, unbalanced wealth distribution and the lack of stable social security systems could hamper growth of the domestic market, economists told Interfax.
The first-ever economic census, conducted by the National Bureau of Statistics (NBS), found that China's service sector had been understated by around $262 billion, Li Deshui, head of China's NBS, said at a press conference in Beijing Tuesday.
China's service sector accounted for 40.7% of the country's 2004 GDP, up from the previous figure of 31.9%. The country's agricultural sector accounted for 13.1% of GDP last year, while the manufacturing industry accounted for 46.2%, according to the new economic survey. The failure of collecting the service sector's contribution into GDP was mainly due to the out-of-date calculation method, Li said.
The Chinese government adopted the Material Product System (MPS), which was developed under the centrally planned economic system, for producing national economic statistics up until the 1980s, resulting in very weak statistics for the services sector, Li said. However, as part of its WTO entry, China agreed to adhere to the International Monetary Fund's method for calculating GDP starting from 2006. China's revision of its 2004 GDP number at the end of this year is being carried out to meet that commitment, Jim Walker, chief economist for investment bank Credit Lyonnais Securities Asia (CLSA), told Interfax.
Although the service sector played a more important role in the nation's total economy, the structure of China's economy is still not satisfactory, Li said.
"Even though we have revised up the service sector to 40.7% from 31.9%, the percentage is still very low and accelerating development of the service sector is still an important task," said Li.
Economists agreed with Li. They said the growth of China's service sector was still restrained by slow increases in domestic consumption, partly due to weak social security systems and unbalanced wealth distribution.
"People are not willing to spend their money on nonessential consumption because they feel a lot of pressure to spend on things they need, which are not provided by a national social security system," Hu Yanni, an economist for CSC Securities Co. Ltd., a joint venture between CITIC Securities and the investment arm of the China Construction Bank, told Interfax Thursday.
The lack of social support systems for healthcare, education, and retirement means that Chinese citizens must spend more on these products and services than consumers in developed nations would. Healthcare and education were among the top categories for expenditures among Chinese consumers, a survey by China Legal News showed.
In addition, the lack of balanced wealth distribution has created a large gap between rich and poor. Economic development in China has not reached all levels of society.
"About two-thirds of the country's earnings are obtained from government investment and exports, which won't reach the common people," Andy Xie, chief economist for Morgan Stanley Asia-Pacific, said.
Official statistics released Tuesday showed that China's gross domestic product (GDP) figure in 2004 had been undervalued by $284 billion, or 16.8%. China's revised GDP figure was RMB 15.98 trillion ($1.98 trillion). The new figure makes China the world's sixth largest economy, behind the U.S., Japan, Germany, the U.K. and France.
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