China is likely to declare itself the world's fourth largest economy next week, having leapfrogged Italy, France and Britain, after a widely expected revision of its annual gross domestic product figures.
Economists say the National Bureau of Statistics (NBS), which is due to release part of the results of its first national economic census on December 20, is likely to put a much bigger figure on the size of China's services sector.
Chinese Premier Wen Jiabao is reportedly telling the East Asia Summit Leaders Dialogue in Kuala Lumpur on Monday that China gross domestic product (GDP) reached US$2 trillion in 2004 following an average economic growth rate of a meteoric 9.4 per cent rise over the past 27 years, since 1978.
Chinese Government hopes to double that figure to US$4 trillion and raise its per-capita GDP to at least US$3,000 by 2020, the English-languge national newspaper China Daily newspaper quoted Wen as saying.
The Hong Kong-based The South China Morning Post, citing unnamed economists, reported Tuesday that the agency would probably revise GDP by as much as $300 billion, or about 20 percent of 2004 output.
A revision of that magnitude could catapult China from the world's seventh-largest economy into fourth spot, now occupied by Britain.
Jim O'Neill, chief global economist at Goldman Sachs in London, said China could attain that status even without such a big revision based on growth rates and currency changes in 2005.
Not only has China grown far more quickly than Italy, France and Britain this year, but the yuan has risen about 2.5 percent against the dollar, further boosting its output when measured in dollars. The euro and sterling, by contrast, have fallen.
"China could squeak in ahead of Britain even without a revision," O'Neill said. "It just goes to show how much it's contributing to the world economy."
Economists said an upward revision of 20 percent, as reported by the Hong Kong-based South China Morning Post, would be in line with their own estimates -- or could even be too modest.
Chen Xingdong, chief China economist for BNP Paribas Peregrine in Beijing, said he would not be surprised if the NBS revised up its estimate of China's GDP, which totalled $1.65 trillion in 2004, by 15 percent to 20 percent.
China's number-crunchers have failed to capture the boom in small and medium-sized industrial enterprises, Chen said.
"We always argue that it has been largely underestimated for a long, long time," he said. "Even a number like 15 percent is not that large for us."
Dong Tao, chief economist for non-Japan Asia at Credit Suisse First Boston (Hong Kong) Ltd., said China's GDP would still be understated even if it was revised up by $300 billion.
"There's a massive under-reporting of GDP in the service sector," Tao said.
He cited the relatively low quality of data collection in China as one reason for that. Economists have long pointed to shortcomings in China's statistics, due to a central planning legacy that put priority on collecting data on the production of physical goods from state-owned enterprises.
Tao said another reason was that many service enterprises fall through the statisticians' net because they fail to report income for tax reasons.
"Just take a walk into any restaurant in Shenzhen or Beijing. If you buy a meal without asking for the receipt, for tax reasons these things will not be in China's GDP," he said.
France came fifth in the World Bank's rankings, with 2004 GDP of $2.00 trillion, and Italy sixth, with output of $1.67 trillion. The United States, followed by Japan and Germany, topped the list.
(Source: Reuters/Chinadaily.com.cn/Photo: baidu)