Explanatory Notes on Main Statistical Indicators

Gross Domestic Product (GDP) refers to the final products at market prices produced by all resident units in a country during a certain period of time. Gross domestic product is expressed in three different perspectives, namely value, income, and products respectively. GDP in its value perspective refers to the balance of total value of all goods and services produced by all resident units during a certain period of time, minus the total value of input of goods and services of the nature of non-fixed assets; in other words, it is the sum of the value-added of all resident units. GDP from the perspective of income includes the primary income created by all resident units and distributed to resident and non-resident units. GDP from the perspective of products refers to the value of all goods and services for final demand by all resident units plus the net exports of goods and services during a given period of time. 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.

For a region, it is called as Gross Regional Product(GRP) or regional GDP.

Gross National Income (GNI) also known as Gross National Product, refers to the final result of the primary distribution of the income created by all the resident units of a country (or a region) during a certain period of time. The value-added created by the resident units of a country engaged in production activities is distributed, during the primary distribution, mainly to the resident units of that country, while part of it is distributed to the non-resident units in the form of production tax and import duties (minus subsidies to production and import), compensation of employees and property income. In the meantime, a part of the value-added created abroad is distributed to the resident units of the country in the form of production tax and import duties (minus subsidies to production and import), compensation of employees and property income. The concept of Gross National Income is thus developed, which equals to Gross Domestic Product plus the net factor income from abroad. Unlike GDP which is a concept of production, GNP is a concept of income.

Three Strata of Industry Classification of economic activities into three strata of industry is a common practice in the world, although the grouping varies to some extent from country to country. In China, according to Industrial classification for National Economic Activities (GB/T 4754—2011), economic activities are categorized into the following three strata of industry:

Primary industry refers to agriculture, forestry, animal husbandry and fishery industries (not including services in support of agriculture, forestry, animal husbandry and fishery industries).

Secondary industry refers to mining and quarrying(not including support activities for mining), manufacturing(not including repair service of metal products, machinery and equipment), production and supply of electricity, heat, gas and water, and construction.

Tertiary industry refers to all other economic activities not included in the primary or secondary industries.

Compensation of Employees refers to the total payment of various forms to employees for the productive activities they are engaged in. It includes wages, bonuses and allowances, which the employees earn in cash or in kind. It also includes the free medical services provided to the employees and the medicine expenses, transport subsidies and social insurance, and housing fund paid by the employers.

Net Taxes on Production refers to taxes on production less subsidies on production. The taxes on production refers to the various taxes, extra charges and fees levied on the production units on their production, sale and business activities as well as on the use of some factors of production, such as fixed assets, land and labour in the production activities they are engaged in. In contrast to taxes on production, subsidies on production refer to the unilateral government transfer to the production units and are therefore regarded as negative taxes on production. They include subsidies on the loss due to implementation of government policies, price subsidies, etc.

Depreciation of Fixed Assets refers to the depreciation of fixed assets in a given period, drawn in accordance with the stipulated depreciation rate for the purpose of compensating the wear-and-tear loss of the fixed assets or the depreciation of fixed assets imputed in accordance with the stipulated unified depreciation rate in the national economic accounting system. It reflects the value of transfer of the fixed assets in the production of the current period. The depreciation of fixed assets in various enterprises and institutions managed as enterprises refers to the depreciation expenses actually drawn. In government agencies and institutions not managed as enterprises which do not draw the depreciation expenses, as well as for the houses of residents, the depreciation of fixed assets is the imputed depreciation, which is calculated in accordance with the stipulated unified depreciation rate. In principle, the depreciation of fixed assets should be calculated on the basis of the re-purchased value of the fixed assets. However, currently the conditions in China do not facilitate the revaluation of all the fixed assets. Therefore, only the above-mentioned methods can be adopted at present.

Operating Surplus refers to the balance of the value added created by the resident units after deducting the labourers remuneration, net taxes on production and the depreciation of fixed assets. It is equivalent to the business profit of the enterprises plus subsidies to production, but the wages and welfare expenses paid from the profits should be deducted.

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. The formula for computation is.:

GDP by expenditure approach = final consumption expenditure + gross capital formation + net export of goods and services

Final Consumption Expenditure refers to the total expenditure of resident units for purchases of goods and services from both the domestic economic territory and abroad to meet the needs of material, cultural and spiritual life. It does not include the expenditure of non-resident units on consumption in the economic territory of the country. The final consumption expenditure is broken down into household consumption expenditure and government consumption expenditure.

Household Consumption Expenditure refers to the total expenditure of resident households on the final consumption of goods and services. In addition to the consumption of goods and services bought by the households directly with money, the household consumption expenditure also includes expenditure on goods and services obtained by the households in other ways, i.e. the so-called imputed consumption expenditure, which includes the following: (a) the goods and services provided to households by employers in the form of payment in kind and transfer in kind; (b) goods and services produced and consumed by the households themselves, in which the services refer to the owner-occupied housing and services offered by paid family employees; (c) financial intermediate services provided by financial institution.

Government Consumption Expenditure refers to the consumption expenditure spent for the provision of public services provided by the government to the whole country and the net expenditure on the goods and services provided by the government to households free of charge or at reduced prices. The former equals to the output value of the government services minus the value of operating income obtained by the government departments. The latter equals to the market value of the goods and services provided by the government free of charge or at reduced prices to the households minus the value received by the government from the households.

Gross Capital Formation refers to the fixed assets acquired less disposals and the net value of inventory, thus including gross fixed capital formation and changes in inventories.

Gross Fixed Capital Formation refers to the value of acquisitions less those disposals of fixed assets during a given period. Fixed assets are the assets produced through production activities with unit value above a specified amount and which could be used for over one year. Natural assets are not included. Gross fixed capital formation can be categorized into total tangible fixed capital formation and total intangible fixed capital formation. Total tangible fixed capital formation includes the value of the construction projects and installation projects completed and the equipment, apparatus and instruments purchased (less those disposed) as well as the value of land improved, the value of draught animals, breeding stock and animals for milk, for wool and for recreational purposes and the newly increased forest with economic value. Total intangible fixed capital formation includes the prospecting of minerals and the acquisition of computer software minus the disposal of them.

Changes in Inventories refers to the market value of the change in the physical volume of inventory of resident units during a given period, i.e. the difference between the values at the beginning and at the end of the period minus the gains due to the change in prices. The changes in inventories can have a positive or a negative value. A positive value indicates an increase in inventory while a negative value indicates a decrease in inventory. The inventory includes raw materials, fuels and reserve materials purchased by the production units as well as the inventory of finished products, semi-finished products and work-in-progress.

Net Export of Goods and Services refers to the exports of goods and services subtracting the imports of goods and services. Exports include the value of various goods and services sold or gratuitously transferred by resident units to non-resident units. Imports include the value of various goods and services purchased or gratuitously acquired resident units from non-resident units. Because the provision of services and the use of them happen simultaneously, the acquisition of services by resident units from abroad is usually treated as import while the acquisition of services by non-resident units in this country is usually treated as export. The exports and imports of goods are calculated at FOB.

Institutional Units refer to economic entities that are in a position to own assets and incur liabilities; to engage independently in economic activities; and to conduct transactions with other entities.

Institutional Sectors refer to groups of institutional units that are homogenous in nature and have been grouped together. The following 4 institutional sectors are identified in the flow of funds accounts: non-financial corporations, financial institutions, general government and households. Also treated as an institutional sector is the rest of the world, which is composed of non-resident units that have economic relations with resident units.

Non-Financial Corporations and the Sector of Non-Financial Corporations Non-financial corporations refer to resident corporations that are engaged in the production of goods and the provision of non financial services in the market, mainly covering corporate enterprises of various types engaged in the above-mentioned activities. All non-financial corporations make up the sector of non-financial corporations.

Financial Institutions and the Sector of Financial Institutions Financial institutions refer to resident institutions that are engaged in the financial intermediary services or auxiliary financial activities that are closely related with financial intermediary services, mainly covering the Central Bank, commercial banks, policy banks, non-banking credit institutions, security institutions, insurance institutions and other financial institutions. All financial institutions together make up the sector of financial institutions.

General Government and the Sector of General Governments General government refer to legal entities and their auxiliary units within the territory of China that are established through the political process and are empowered with legislative, administrative or judicial rights over other institutional within specific regions. The main function of general government is to acquire funds through taxation or other means in order to provide public services to society and households, and to conduct redistribution of income and properties of society through transfer payment. General government cover mainly administrative and non-profit institutional units of various types. All general government together make up the sector of general governments.

Households and the Sector of Households Households refer to resident individuals or groups of resident individuals who share common living facilities, pool together entire or part of their income and properties for their common disposal, and share their housing, food and other consumer goods and services. All households together make up the sector of households.

Non-resident Units and the Rest of the World Non-resident units refer to units that are of a non-resident nature. All non-resident units that have transactions with resident units together make up the rest of the world.

Total Income from Primary Distribution Primary distribution refers to the distribution of net results from production activities among the owners of factors of production and the governments. The net result from production activities is the value-added. Factors of production include labour force, land and capital. Owners of labour force gain remuneration by providing labour. Owners of land receive rents from leasing of land. Owners of capitals get income of various forms depending on the type of capital: owners of loan capital receive income from interests. Share holders receive dividends or non-distributed profits. Government either obtains production tax or pays subsidies in participating directly or indirectly in the production processes. Results of primary distribution generate the total income from primary distribution of each sector, and the sum of the total income of primary distribution of all sectors make up the Gross National Income, or the Gross National Product.

Current Transfers Transfer refers to the transaction in the form of provision of goods, services or assets by an institutional unit to another institutional unit without receiving any goods, services or assets in return from the recipient. Current transfers refer to all kinds of transfers other than capital transfers. They include income tax, payment to social securities, social security benefits, social allowances and other current transfers.

Total Disposable Income Total income from primary distribution is re-distributed through current transfer, resulting in the total disposable income of various institutional sectors. The sum of total disposable income of all institutional sectors makes up the total national disposable income.

Total Savings refer to total disposable income subtracting final consumption. Total savings of all sectors make up the total national savings.

Capital Transfer refers to the free payment from one sector to another sector of non-financial investment capital, and is a transaction that seeks no return from the recipient. Capital transfer differs from current transfer in 2 aspects: 1) The purpose of the capital transfer is investment rather than consumption. 2) Capital transfer features the transfer of the ownership of assets other than inventory and cash, and capital transfer in its monetary form involves the disposal of assets other than inventory. Capital transfer includes investment subsidies and other capital transfers.

Net Financial Investment reflects the surplus or shortage of capitals of institutional sectors or of the economy in general. It refers to total savings plus the income from capital transfer minus payment for capital transfer and capital formation, and plus other non-financial assets minus disposal from the point of view of physical transaction. In terms of monetary transaction, it is the difference between the increase in financial assets minus the increase of the financial liabilities.

Currency refers to currency that is in circulation in the market, including local and foreign currencies.

Deposits refer to credit transactions by which financial institutions accept deposits from clients who could withdraw their deposit at any time or by an agreed time frame. They include demand deposit, time deposit, savings deposit, fiscal deposit, foreign exchange deposit and other deposits.

Loans refer to credit transactions by which financial institutions lend their capital to clients at certain level of interest rates, which the latter will repay by an agreed time frame. They include short-term loan, medium- and long-term loan, fiscal loan, foreign exchange loan and other loans.

Securities (excluding shares) refer to written certificates representing creditors’ rights as purchased by bond holders or as acquired by selling products, which can be transacted at the financial markets. They include government bonds, financial bonds, corporation bonds, commercial drafts, preferential stocks that provide fixed income without the right to share the residual value of corporations, and so on.

Shares and Other Holding Rights refer to the rights of stockholders and direct investors on the net assets of corporations they have invested in. Shares refer to negotiable securities on creditor’s rights, issued by share companies certifying the investment by stockholders and their rights and duties in accordance with the amount of stocks that they hold. Other holding rights refer to the direct investment by institutional units in other units with currency capital or with assets, in forms other than shares and negotiable securities on creditor’s rights, including such tangible assets such as land, buildings, machines and equipment, inventory, resources, etc., and such intangible assets as trade marks, patents, monopolies, rights on land use, licenses, commercial reputation, etc.. Documents of proof of holding rights usually include certificates on creditor’s right, certificates on investment or on participation, etc.

Insurance Reserve Funds consists of net equity of households in life insurance reserves and in pension funds reserves, prepayments of insurance premiums, and reserves for outstanding claims.

Settlement Fund refers to fund in float of financial institutions for settlement.

Inter- financial Institutions Accounts refer to flow of capital between financial institutions, consisting of nostro & vostro accounts, inter-bank lending.

Required and Excessive Reserves refer to financial institutions’ deposits with the People’s Bank of China.

Central Bank Lending refer to lending to financial institutions by the People’s Bank of China

Current Account includes goods, services, income and current transfers.

Import and Export of Goods refer to imported or exported goods through Chinese customs. Both import and export of goods are valued at free on board (f.o.b.) prices. Free on board prices can be regarded as the purchaser’s prices paid by importers when claiming goods at the border of the exporters. When the importer claim the imported goods, the goods have been loaded in importer’s carriers or other carriers, and the exporter has paid export duty or received export redeem.

Import and Export of Services refer to services provided between resident and non-resident units, including services on transportation, tourism, communications, construction, insurance, finance, computer and information, consultancy, advertising and publicity, as well as film, audio and video services, royalty for patents, trademarks and other special rights, other commercial services, and government services.

Income refers income from provision of factors of production between resident and non-resident units, including compensation of labour and earnings from investment. Earnings from investment include earnings from and expenses on direct investment, security investment and other investment, as well as reinvestment of earnings from direct investment.

Capital Account includes capital transfers such as immigration transfer, reduction or exemption of debts, etc.

Financial Account includes direct investment, security investment and other investments.

Direct Investment refers to investment by foreign investors or investors from Hong Kong, Macao and Taiwan in China, or by Chinese investors in foreign countries or in Hong Kong, Macao and Taiwan, in forms of exclusive investment, joint investment, contracted operation and cooperative development.

Security Investment refers to the issue of stocks and securities by China in foreign countries or in Hong Kong, Macao and Taiwan, and the purchase by Chinese units of stocks and securities issued in foreign countries or in Hong Kong, Macao and Taiwan.

Other Investment refers to all external transactions on financial assets and liabilities other than direct investment and security investment, including trade credits, loans, currency, deposits and other assets, provided by foreign countries to China and by China to foreign countries.

Reserve Assets, Net Increase refers to the difference between the end of the reference year and the end of the previous year, in gold reserve, foreign exchange reserve, special drawing rights in the International Monetary Fund, and the use of the Fund’s credits. An increase in reserve assets is expressed in a negative figure and a decrease in the reserve assets is expressed in a positive figure.