Requirements of International Cooperation on National Accounts of China

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Requirements of International Cooperation on
National Accounts of China

• Xu Xianchun
• Dept. of National Accounts, NBS, CHINA
• 2004.12.6

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Requirements of International Cooperation on
National Accounts of China

• Requirements of international cooperation on GDP
  accounting
• Requirements of international cooperation on
  input-output accounting
• Requirements of international cooperation on
  institutional sector accounts
• Requirements of international cooperation on
  environmental accounting
• Requirements of international cooperation on
  analytical research

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I. Requirements of international cooperation on
GDP accounting

• Mainly include the following six aspects
• Establishing plan of GDP accounting in economic
  census years
• Establishing plan for historical GDP adjustment
  after economic census years
• Services statistics
• GDP accounting by expenditure approach
• Constant GDP accounting
• Regional GDP accounting

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1. Establishing plan of GDP accounting in
economic census years 1.1 Updating methods of
GDP accounting by production approach and
expenditure approach according to the economic
census plan 1.2 Adjusting some of the
inconsistency in GDP accounting of Chinas
practice with the international conventions (ex.
treatment for financial intermediation services,
for import duty, for computer software etc.)
1.3 Expanding the accounting scope (including
dwelling services, domestic help services, etc.
) 1.4 Further breaking down the industrial
classifications International best practice in
this field are expected to be referred on
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2. Establishing plan for historical GDP
adjustment after economic census years 2.1
Historical GDP revision according to the outcome
of economic census 2.2 Historical GDP revision
by considering some of the change of
treatment 2.3 Historical GDP revision by
considering the expansion of accounting scope
International best practice in this field are
expected to be referred on
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3. Services Statistics 3.1 No regular survey
system established for some service industries
and self-owned enterprises 3.2 Government
departmental administrative statistics is
incomplete Confined to institutions within
the administrative system Focusing on physical
statistics 3.3 Problems to be tackled in the ADB
TA project on improving services statistics of
China
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4. GDP accounting by expenditure approach

• Chinese GDP accounting has been focusing on
  GDP by production approach, where GDP by
  expenditure approach need to be improved in the
  following aspects
• 4.1 Households consumption Studying and
  following the international conventions to
  estimate household consumption in terms of
  household survey data
• 4.2 Government consumption Referring to the best
  practice of other countries to make best use of
  the government financial statements
• 4.3 Change in inventories Data are difficult to
  be collected. Referring to the best practice of
  other countries to improve the estimation method
  currently used in China
• In addition, China needs to draw on the
  experience of other countries to establish its
  own quarterly GDP accounting by expenditure
  approach gradually

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5. Constant GDP accounting

• China never published GDP at constant prices
  since its start of compilation of GDP in 1985
  because of the immature of the estimation method
  of constant GDP. To improve the quality of
  constant GDP estimation, requirement of
  international cooperation in this field includes
• 5.1 Learn operational methods from experienced
  countries on their constant GDP estimation (both
  by production approach and by expenditure
  approach), especially methods of constant
  estimates of value added of various services and
  methods of constant government consumption, of
  imports and exports of services
• 5.2 Re-basing problems in constant estimation and
  historical data consistency adjustment from the
  perspective of time series
• 5.3 The conversion method of Chinese chain price
  indices and Chinese fixed indices used in
  national accounts

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6. Regional GDP accounting

• Chinese GDP accounting follows a system that
  national GDP and regional GDP are estimated
  independently, which results in the difference
  between the national data and the sum of regional
  data. The discrepancy tends to be increasing in
  recent years. In order to improve the data
  quality, and to make the sum of regional data
  consistent with the national data, international
  cooperation in this field is needed in the
  following aspects
• 6.1 Learn operational methods on reconciling
  regional data with national data from other
  countries with regional accounting
• 6.2 Treatment of units operating in
  multi-regions or administrated by departments of
  central government
• 6.3 How to choose different price indices for
  different regions, and how to reconcile national
  GDP with regional GDP at constant price
• 6.4 Reconciliation method of national data
  and regional data

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II. Requirements of international cooperation on
input-output accounting

• The compilation method used currently in
  China is a direct decomposition method, which
  imposes heavy reporting burden on selected
  enterprises in the survey years. Consequently,
  enterprises tend to be reluctant or even
  resistant to fill in the questionaires that leads
  to more uncertainty of the quality of the
  grass-root data. In such circumstances, to
  replace the traditional practice with the U-V
  method is a good solution. It is primarily agreed
  that the commodity flow method should be used in
  the compilation of 2007 input-output table of
  China, at least the idea of the commodity flow
  method should be incorporated in the design of
  the compilation and survey schemes of table 2007.
  Therefore, international cooperation is needed in
  the following three aspects

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• 1. Training courses
• 1.1 Instructing the theoretical method of
  commodity flow method
• 1.2 Introducing the practice of OECD countries,
  including the classification, the sources data
  availability, the flow-chart of the compilation,
  the relevant software, the difficult issues and
  the corresponding treatment etc.
• 1.3 How to make the U V tables play a framework
  role in national accounting, how to incorporate
  the needs of environmental accounting and the
  needs of regular annual and quarterly accounting
  into the scheme design of input-output tables
• 1.4 Profile the application of input-output table
  and the development trends in this field

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• 2. International experts involved in the scheme
  design of 2007 input-output table
• 3. Working with staffs in the statistical bureau
  of the experienced countries to grasp the
  operational method and the corresponding
  compilation techniques

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III. Requirements of international cooperation on
institutional sector accounts

• China started to compile domestic
  institutional sector accounts in 1992, and has
  finished the most recent accounts for 2002.
  However, due to the incomplete method and the
  lack of sources data, the quality of such
  accounts needs to be improved, so is the
  international comparability. For achieving the
  above objectives, three aspects of international
  cooperation are expected

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• 1. Allow changes and innovations of financial
  instruments reflected in the financial accounts
• For instance, to include the activities of
  security companies, and investment funds in the
  financial accounts to include instruments of the
  share of open funds etc. in the financial
  accounts

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• 2. To improve the compilation method of
  non- financial corporation accounts
• Wish to learn the practice of the compilation
  method of non-financial corporation accounts of
  other countries in order to improve the quality
  of corresponding Chinese accounts

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• 3. Break down the classification of the
  institutional sectors into a more detailed level
• Currently, the institutional sectors of China
  are only classified into five sectors, which are
  non-financial corporation sector, financial
  corporation sector, government, households and
  the rest of the world due to the lack of
  accessibility and proper departmental statistics.
• Experiences in other countries with better
  performance in this field are needed.

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• IV. Requirements of international cooperation on
  environmental accounting
• 1. General plan for environmental accounting in
  China
• 1.1 Establish the basic framework of green
  national accounts
• 1.2 Implement land, forest, mineral resources,
  water accounting, establish the corresponding
  accounts of the above four resources. Identify
  the proper indicators and suitable methods
• 1.3 Implement survey to evaluate the cost of the
  environmental degradation and the pollution
• 1.4. Incorporate environmental investigation into
  the input-output survey framework, and establish
  the environmental protection expenditure accounts
  (EPEA)

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• 2. Preliminary Intention of Cooperation with
  Canada
• 2.1 Establish the basic framework of green
  national accounts
• 2.2 Establish the forest accounts, mineral
  resources accounts (in physical terms and
  partial monetary terms)
• 2.3 Implement survey to evaluate the cost of
  the environmental degradation and the pollution
• Any other interested field of environmental
  accounting except the above mentioned is left to
  other countries.

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V. Requirements of international cooperation on
analytical research

• 1. Review of cooperation with OECD in this
  field
• In 1998, cooperation with OECD on cyclical
  indicator analysis.
• Stage 1 Focusing on the construction of key
  indicators for China at national level.
  Economic Cycle and Cyclical Indicators of China
  was published in March, 2001.
• Stage 2 Exploring the possibility to apply
  the same OECD method to construct the regional
  indicators for the main economic zones in China.
  Regional Cyclical Indicators for Shanghai was
  published in April 2002.
• Stage 3 Current cooperation with Shananxi
  Statistical Bureau to establish a system of
  cyclical indicators for Shananxi Province

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• 2. Encouraging results from the cooperation
  with OECD
• Through cooperation, the relevant Chinese
  staffs have grasped the technique of the
  cyclical indicator analytical system developed
  by OECD and the use method of the corresponding
  software, including seasonal adjustment,
  identification of turning point, indicator
  selection, construction of leading indicators,
  simultaneous indicators, and lagging indicators
  etc.

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• 3. Further requirement on international
  cooperation
• 3.1 A further step of cooperation with OECD
  focusing on two aspects
• First, how to explain the leading
  indicators properly
• Second, how to apply the result of
  cyclical analysis to the macro-economic
  analysis
• 3.2 If possible, we are also interested in
  cooperating with IFO, Germany.
• 3.3 Hope to obtain support and technical
  assistant from INSEE, France, to conduct policy
  effect evaluation and forecast analysis by
  establishing quarterly econometric model.