China alters quarterly GDP calculation method

08 Jul '16

2 min read

In a step toward aligning with global standards and improving accuracy, China's National Bureau of Statistics (NBS) has altered the way quarterly GDP data are calculated, Xinhua reported.

Post alteration, expenditure incurred toward research and development (R&D) that can economically benefit companies will be treated as fixed capital formation instead of the earlier intermediate consumption.

After revision, the NBS also released re-calculated GDP figures from 1952 through the first quarter of 2016. For last year, China's GDP increased by 879.8 billion yuan ($131 billion) or 1.3 per cent, but the year-on-year growth rate remained at 6.9 per cent. The increase in GDP was due to continuous increase in R&D spending and the accumulation of R&D investment stock.

The upward revision in GDP better reflects the contribution of innovation to economic growth, said Cheng Zilin, head of the NBS department of national accounts.

R&D has played an increasingly significant role in China's economic growth in recent years, but the old method of calculating GDP did not reflect this importance, as intermediate consumption only measures value of goods and services that are transformed or entirely used up in the course of production.

According to the System of National Accounts 2008 (SNA 2008), an international standard for measuring a country's economic activity, R&D expenditures that yield economic benefit should not be considered "completely used up in the accounting period", and should be recorded as fixed capital formation, which is part of GDP.

The SNA 2008 methodology, introduced in 2009, has been adopted by most member countries of the Organization for Economic Cooperation and Development (OECD), including the US, Canada and Australia.

Now with China adopting this reform, it has improved the international comparability of its accounting data, said Zilin. (RKS)

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