- BEIJING (Reuters) - China
on Tuesday raised its estimate of the output of the world's fastest-expanding
major economy by a sixth, a revision that leaves growth better balanced
but may increase pressure on Beijing to let the yuan rise faster.
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- The new estimate, based on a vast nationwide census,
hoists China above Italy into sixth place in the world economic rankings
of 2004 output, measured in dollars at market exchange rates.
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- What's more, based on exchange rate movements and relative
growth rates in 2005, economists calculate that China by now has risen
to fourth place, ahead of France and Britain, and behind only the United
States, Japan and Germany.
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- The National Bureau of Statistics (NBS) said the revision
reflected better information on the services sector and on private firms,
unearthed during a year-long survey for which the government mobilized
13 million data-gathers -- one in every 100 Chinese.
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- For investors, the bigger economic pie means some ratios
that had looked worryingly high, such as investment or bad loans as a share
of GDP, now look more sustainable.
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- "The revised statistics show that China's economic
structure is more reasonable and healthy than the previous figures showed,"
Li Deshui, the head of the statistics office, told reporters.
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- The NBS now estimates that GDP in 2004 totaled 15.99
trillion yuan, 16.8 percent more than its previous estimate.
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- Using the end-2004 exchange rate of 8.276 yuan per dollar,
that comes to $1.93 trillion, compared with $1.67 trillion for Italy, according
to World Bank figures.
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- Fast-growing service industries such as telecommunications,
retailing and real estate accounted for 93 percent of the revision and
boosted the service sector's share of economic output in 2004 to 40.7 percent
from 31.9 percent.
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- Industry's hitherto outsized share of GDP dropped to
46.2 percent from 52.9 percent, while the share taken by farming and fisheries
shrank to 13.1 percent from 15.2 percent.
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- FOREIGN PRESSURE
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- The changes mean China will need to lean less on ever-faster
industrial output, and the ever-rising demand for energy and raw materials
it entails, to sustain the 9 percent-plus GDP growth rates of the past
three years.
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- "Given that the size of the services sector is much
bigger than initially estimated, the sustainability of growth in China
is much better than many people thought," said Frank Gong, chief economist
at JPMorgan Chase in Hong Kong.
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- Because policy makers now know that growth is less reliant
on export-orientated industries, they could be more relaxed about letting
the yuan rise, which would favor consumption and services growth, Gong
said.
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- "It will ease further some of the concerns within
China on a strong yuan," he said.
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- Jim Walker with brokers CLSA in Hong Kong said the fact
that China is now almost certainly the fourth-biggest economy could raise
hackles in Washington, where U.S. Senator Charles Schumer is threatening
to reintroduce a bill that would impose a 27.5 percent tariff on Chinese
imports unless the yuan is revalued.
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- "This gives him much much more ammunition,"
Walker said.
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- Big revisions to GDP are not uncommon, even among countries
with sophisticated data-gathering systems.
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- Misha Belkindas with the World Bank's development data
group said Indonesia revised up its GDP 17 percent in 2004, Italy by more
than 17 percent in 1987 and Norway by 11 percent in 1995.
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- Still, Jun Ma with Deutsche Bank in Hong Kong agreed
that a larger GDP could lead to more foreign pressure on China to act as
"a more responsible" large nation by letting the yuan rise.
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- Since it was revalued by 2.1 percent in July and depegged
from the dollar, the yuan has risen just a further 0.49 percent against
the U.S. currency.
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- The share of Chinese exports in GDP has now fallen to
29 percent from 34 percent, so the revisions could ease policy maker concerns
that a rapid rise in the yuan, also known as the renminbi, would sap growth
and increase unemployment, Ma said.
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- "This suggests that further flexibility of the renminbi
may not be viewed as dangerous as before in terms of its impact on the
overall economy," he said.
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- (Additional reporting by Eadie Chen)
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