1. Overview on Annual GDP Accounting
1.1 Basic Concepts
Gross Domestic Product (GDP) refers to the final products at market prices produced by all resident units in a country (or a region) during a certain period of time. GDP is the core indicator of the national accounts, and also an important indicator to measure the economic conditions and the level of development of a country or region.
In the practice of national accounting, gross domestic product is calculated from three approaches, namely production approach, income approach and expenditure approach, which reflect gross domestic product and its composition from different angles. GDP by production approach refers to the method from the point of view of production of measuring resident units create new value for a new accounting period, i.e. production from various sectors of the national economy during the accounting period, the total value of the product, minus the value of intermediate inputs in the production process to obtain value-added. The accounting formula as follows: value-added = total output - intermediate inputs. The income approach refers to the accounting method of measuring final income which obtained from the production process by the factors of production to reflect the final outcome for stand at the point of view from the production process. Under this accounting method, the sum of the value-added obtained from four parts: workers compensation, net taxes on production, depreciation of fixed assets and operating surplus. The expenditure approach is to measure the final destination of the products and services of the accounting period from the end-use perspective, including final consumption expenditure, capital formation, total and net exports of goods and services in three parts. GDP by Expenditure Approach refers to the method of measuring the final results of production activities of a country (region) during a given period from the perspective of final uses. It includes final consumption expenditure, gross capital formation and net export of goods and services.
1.2 Accounting Coverage
1.2.1 Production Coverage
Production range of GDP accounting includes the following three parts: firstly, the production of goods and services provided to or ready to provide to other units by the producers, secondly, subsistence production of goods for own final consumption or capital formation by the producers, thirdly, owner-occupied housing services of owner-occupied housing owners to provide for their own final consumption, and paid subsistence family service production. Production range does not include subsistence family services without remuneration, nor no units controlled natural activities, such as wild, non-cultivated forest, berries or wild berries natural growth, the natural growth of the number of fish in the public sea, etc.
1.2.2 Geographical Scope
The GDP accounting range principally covered all economic activities of all resident units having center of economic interests within China's economic territory. The quarterly GDP data in this report is national data produced by the NBS, GDP data of Hong Kong SAR, Macao SAR, and Taiwan Province is not included.
1.3 Accounting Unit
GDP accounting mainly uses corporate units as the accounting units, in the process of accounting, the corporate units are divided into different industries according to their principal activities, and calculate the value-added of each industry separately, and then aggregate the value-added of every industries into GDP.
1.4 Accounting Steps
In accordance with the timeliness requirements of GDP accounting, annual GDP accounting of China has three steps, which are GDP preliminary accounting, preliminary verification and final verification. Every accounting result will vary.
1.4.1 Preliminary Accounting
As China's quarterly GDP accounting is cumulative, the GDP preliminary accounting of 1-4 quarters is annual GDP preliminary accounting. Annual GDP preliminary accounting is accomplished before 20 January, using the method of quarterly GDP accounting (See the Results of Preliminary Verified GDP for the First Three Quarters in 2012, http://www.stats.gov.cn/tjfx/jdfx/t20121023_402844638.htm).
1.4.2 Preliminary Verification
Annual GDP preliminary verification is completed before the end of September of the following year. The reason to do the annual GDP preliminary verification is to get more comprehensive and reliable basic data, including the professional statistical annual report of the NBS, the annual financial information of some industries and so on. Using these data, the value-added of industries can be accounted respectively using production approach or income approach.
1.4.3 Final Verification
The annual GDP final verification was completed in January of the following year. The reason to do the annual GDP final verification is the acquisition of new basic information after annual GDP preliminary verification, including financial statement information and the annual financial information of some industries and so on. Similar to annual GDP preliminary verification, using these data, the value-added of industries can be accounted respectively using production approach or income approach.
1.5 Related Laws and Regulations
GDP accounting was strictly complying with the provisions of the Statistics Law of the People's Republic of China. At present, China's GDP was measured in accordance with the requirements of the System of National Accounts (2002)"(CSNA), the system adopted basic accounting principles, contents and methods by the "National Economy Accounting System"(SNA) of United Nations in 1993.
According to the Article 9, Chapter I of the Statistics Law of the People's Republic of China, statistics institutions and statisticians shall keep confidential the State secrets, business secrets and personal information that are learned in the process of statistical work.
The staff related to national accounting will strictly keep the confidentiality of the statistical data of subject matter areas and administrative records data used in GDP accounting, so as to the GDP results of the current period before releasing.
1.7 User Needs
The main domestic users of annual GDP data are the government departments, research institutions, universities, trade associations, the media, and the public. In addition, the NBS regularly provides China’s annual GDP data to international organizations, such as the UN, the IMF, OECD, ADB, etc.
2. Accounting Methods of Annual GDP
In accordance with the Industrial Classification for National Economic Activities"(GB/T 4754-2002) and the actual situations in China, the industrial classification adopted in quarterly GDP accounting is a three level classification. The first level of classification directly adopts the Three Industries Classification Regulations enacted in 2003 by the NBS, which divided into primary industry, secondary industry and tertiary industry, but excluding international organizations in the tertiary industry. The second level of classification is basically the sections in the Industrial Classification for National Economic Activities, while three sectors, i.e., mining, manufacturing, electricity, gas and water production and supply are classified industrial. Based on the second level of classification, the third level of classification refines detailed divisions.
The industrial classification of annual GDP accounting includes two categories: the first category is the industrial classification of annual GDP preliminary accounting. Since the annual GDP preliminary accounting uses quarterly GDP accounting methods, the classification of annual GDP preliminary accounting is also the same with quarterly GDP accounting. The second category is the industrial classification of annual GDP preliminary verification and final verification, a refinement based on the classification of quarterly GDP accounting. The differences between these two categories are mainly the differences in the refinement of the third level of classification.
2.1.1 the Industrial Classification of Annual GDP Preliminary Accounting
The annual GDP preliminary accounting divides parts of sections of the tertiary industry into divisions, and real estate industry into groups. The sections include transportation, warehouse and post industry,
information transmission, software and IT services industry, wholesale and retail trade industry, lodging and catering industry, financial industry, real estate industry, leasing and business service industry, resident services and other services industry.
2.1.1 the Industrial Classification of Annual GDP Preliminary Verification and Final Verification
This classification follows the three levels of classification of annual GDP preliminary accounting, and divides agriculture, industry, and construction industry in the third level of classification into divisions, as well as divides all sectors of the tertiary industry into divisions.
2.2 Sources of data
Annual GDP preliminary accounting adopts the methods and data sources of quarterly GDP accounting. See the Results of Preliminary Verified GDP for the First Three Quarters in 2012 for more details. Only the data sources of annual GDP preliminary verification and final verification will be given here.
The first part is national survey data, which refers to the various annual reports obtained from the statistical surveys conducted by the national statistical system, including annual reports from statistical survey of agriculture, forestry, animal husbandry and fisheries, industry, construction, wholesale and retail trade, hotel and catering services, real estate, etc., household survey data, data of population and labor, sampling survey data of services industry, etc..
The second part is departmental annual financial information, which is the annual financial accounts data of different industries, unified by the NBS and organized as well as implemented by relevant administrative departments and part of the state-owned enterprises, such as the annual financial information summarized by the Ministry of Railways, Ministry of Health, and the China Petrochemical Corporation, as well as the owned enterprises or institutions of them.
The third part is financial accounts data, which is the fiscal revenue and expenditure accounts data compiled by the Ministry of Finance, and the revenue and expenditure accounts data of administrative institutions of central departments.
The fourth part is the administrative record data from administrative departments, and mainly includes relevant data from the State Administration of Taxation, the People's Bank of China, the China Insurance Regulatory Commission, China Securities Regulatory Commission, for example, financial institutions and foreign currency credit balance of payments situation of the People's Bank of China, and tax information by industry of the State Administration of Taxation.
2.3 Accounting methods
Annual GDP preliminary accounting adopts the methods of quarterly GDP accounting (see the Results of Preliminary Verified GDP for the First Three Quarters in 2012). The methods of annual GDP preliminary verification and final verification will be given below.
2.3.1 Accounting Methods at Current Price
The value-added of agriculture, forestry, animal husbandry and fisheries is calculated in production approach, while that of other industries is calculated in income approach.
2.3.2 Accounting Methods at Constant Price
Value-added by industry at constant price is calculated using fixed base period method, and currently the base period is replaced once every five years. The base period is 2010 at present.
Annual GDP accounting at constant price mainly uses method of price index deflation and method of volume indices extrapolation.
(1) method of price index deflation
This method means directly deflating value-added at current price by using relevant price index, and calculating value-added at constant price. The accounting formula as is follows:
Value-added at constant price of some industry = value-added at current price of the industry÷ price index of the industry
(2) method of volume indices extrapolation.
This method means calculating the growth rate of value-added at constant price by using the growth rate of relevant volume indices, then multiplying value-added at constant price in the same period of last year and the calculated growth rate of value-added at constant price, to obtain current value-added at constant price. The accounting formula is as follows:
Value-added at constant price of some industry = value-added at constant price of the industry in the same period of last year × (1+ growth rate of value-added at constant price of the industry)
Of which, the growth rate of value-added at constant price is determined according to the growth rate this year of relevant volume indices (such as transport turnover and employees).
3. Revision of annual GDP data
3.1 The necessity for revision
Preliminary accounting of annual GDP data have strong timeliness, generally it is released about 20 days after that year. At this time, as the large amount of annual financial information can not meet the requirements of annual GDP accounting in time, the basic information on which the initial count of annual GDP accounting are based are monthly data and quarterly data, the annual GDP data calculated accordingly are estimated to a great extent. After that, as the basic information continues to increase, especially the annual financial information is submitted successively, the GDP data should be revised duly based on more comprehensive and reliable basis information, in accordance with the common practice in different countries.
3.2 Revision procedures
In accordance with “regulations on the reform of China’s GDP accounting and data release system”, China’s quarterly GDP accounting has three steps, which are preliminary accounting, preliminary verification and final verification. Preliminary verification is the revision of preliminary accounting data, and final verification is the revision of preliminary verification data. After carrying out national economic census and having found new basic information that has a great impact on GDP data, or with calculation methods and classification criteria changing, the historical annual GDP data will be revised accordingly.
4. Quality assessment on annual GDP data
4.1 Assessment on basic data
For the statistical data of subject matter areas and the administrative records data used in GDP accounting, the relevant departments will examine their quality to ensure that the data reasonably reflect the actual situation of economic development. After getting these basic data, The GDP accounting department will examine the completeness and accuracy of the data once again to ensure that these data are consistent with the GDP accounting concepts and requirements.
4.2 Assessment on accounting methods
In GDP accounting process, the GDP accounting department will revise China's quarterly GDP accounting method in accordance with the actual situation of China’s continually developing economy, and in accordance with the standards of national accounting which are constantly improving, so as to ensure the rationality of accounting methods.
4.3 Assessment on accounting results
After getting the annual GDP accounting data, it is needed to examine GDP and its sub-item data, as well as the coherence of GDP data and other accounting data, the statistical data of related subjetc matter areas, statistical data from different departments, to ensure the coherence and matching of GDP data and other key data.
4.4 Comparability of data
4.4.1 International Comparability
China’s National Economic Accounting System (2002) adopted the basic accounting principles, contents and methods of the United Nation's System of National Accounts (SNA) in 1993, therefore the annual GDP data of China are internationally comparable.
4.4.2 Comparability of Time Series Data
After the national censuses have been carried out, or the calculation methods and classification criteria have been changed, not only the GDP data of the year will get re-accounting, but also the historical GDP data will be revised. Therefore, time series data of annual GDP are comparable since the 1952.
5. Annual GDP data release
5.1 Release date
Preliminary accounting data of annual GDP are generally released about 20 days after that year. Preliminary verification data of annual GDP are released at the end of September of the following year. Final verification data of annual GDP are released in the following January.
5.2 Release methods
Preliminary accounting data of annual GDP will be released at the Annual Statistical Press Conference, on the NBS website (www.stats.gov.cn), and in the “China Monthly Economic Indicators”. Preliminary and final verification data of annual GDP will be released on the NBS website (www.stats.gov.cn) as bulletins. At the same time, preliminary verification data of annual GDP will also be published in the “China Statistical Yearbook” next year, and final verification data of annual GDP will be published in the "Statistical Abstract of China" and "China Statistical Yearbook" the year after next. national statistical database (http://184.108.40.206) will be updated simultaneously.
 National GDP data is constantly revised based on more complete and reliable basic data, which is the international practice of GDP accounting. For example, the annual GDP data of America will be revised five times after the estimating data is released in May next year; the annual GDP data of Canada will be revised three times after the first release in early March next year; the annual GDP data of Germany will be revised four times after the release in January next year.