Download Inter-relationship Between China’s Input- Output Estimation, production-based GDP and Expenditure-based GDP

Inter-relationship Between China’s InputOutput Estimation, production-based GDP
and Expenditure-based GDP
PENG Zhilong
Department of National Accounts, NBS
Content
 Introduction
 The relationship between input-output estimation and GDP
at production and expenditure approach
 The relationship between GDP at production approach and
GDP at expenditure approach
 Difficulties and doubts
Introduction
 China started it’s GDP estimation from production side at
1985, GDP estimation from expenditure side at 1992, and
input-output estimation at 1987 (which had been compiled
before this year, but it was at 1987 that NBS began to
compile formally). The three accounts have made great
progress through years of efforts, data source is getting
more richful and accounting methods is becoming
increasingly normative, which could provide more and
more information.
Introduction
 However, an inevitable outstanding question is that the data
source and measurement of these accounts are lack of close
inter-relationship, and the accounting contents appear to be
independent with each other in practice, therefore it is
difficult to guarantee the consistency of the results.
I. The relationship between input-output
estimation and GDP at production and
expenditure approach
 1. What are the contents of input-output survey?
I-O survey targets at major products of enterprises and at
enterprises or corporations for service industry, which belongs to a
kind of major survey on the whole.
There are several structures contained in the survey, including：the
structure of intermediate input of products (enterprises or
corporations)；the structure of value-added (the proportion of
depreciation, compensation of employees, net production tax and
operating surplus)；the structure of household consumption；the
structure of fixed capital formation; the structure of inventory; and
the structure of imports and exports.
I. The relationship between input-output
estimation and GDP at production and
expenditure approach
 2. The characteristics of input-output table compiling
China’s I-O table uses gross output value (output) and value-added
by industries (94 industries) in GDP as the level in the first and third
quadrant of I-O table respectively, then calculate each sub-item of
intermediate input and value-added with the structure data obtained
from I-O survey.
NBS uses household consumption, government consumption, gross
fixed capital formation, changes of inventory, imports and exports in
expenditure GDP as the level in the second quadrant of I-O table,
then combining with the structure data obtained from I-O survey to
determine each column vector of final use.
I. The relationship between input-output
estimation and GDP at production and
expenditure approach
 2. The characteristics of input-output table compiling
For example：The intermediate input JI of industry Jand corresponding
gross output value JX are obtained from I-O survey, in which JI   JI1JI2 JIn 
JI
thus we could derive the intermediate input structure by JX, and the
value-added structure JV could be calculated directly using survey
information, that is JV   JV1JV2 JVn . We could find gross output value
JXT and value-added JVT in GDP, therefore the intermediate input of
JI
industry J could be derived by JXT  JX , similarly, the value-added vector
of industry couldJ be calculated by
. The
JVT
 JVcalculation of data in
the second quadrant operates the same.
I. The relationship between input-output
estimation and GDP at production and
expenditure approach
 2. The characteristics of input-output table compiling
Obviously, at present, China’s I-O survey and I-O table measurement are
conducted after GDP estimation at production and expenditure approach,
then use gross output value (output) and value-added in production-based
GDP, combining with household consumption, government consumption,
gross fixed capital formation, changes of inventory and imports and
exports in expenditure-based GDP to determine the main aggregates in IO table, while I-O survey just provides some structure ratios which are
used as estimating base but not the base for GDP accounting.
I. The relationship between input-output
estimation and GDP at production and
expenditure approach
 2. The characteristics of input-output table compiling
Further more, I-O survey just captures some small structure ratios, such
as the internal-structure of intermediate consumption and value-added.
According to the current relationship between GDP and I-O survey or I-O
table, it is apparently that it is GDP that serves I-O table compiling and
related data from GDP turn into the control data of corresponding part in
I-O table, instead of I-O survey or I-O table serving GDP estimation and
creating certain control data for GDP estimation from I-O table.
II. The relationship between GDP at production
approach and GDP at expenditure approach
 China’s production-based GDP is not the sense of GDP at
production approach in deed. Actually, except of agriculture
and industry, other industries’ value-added are estimated
using income approach (distribution approach).
II. The relationship between GDP at production
approach and GDP at expenditure approach
 1. Annual Estimation
There are three aspects where GDP at production and expenditure
approach have correspondence:
a. government (administrative and institutional units) output and
government expenditure, which use the same data source in their
estimation, that is ‘Final Annual Accounts of administrative and
institutional units’ compiled by Ministry of Finance；
b. owner occupied dwellings, which is not only treated as output of
corresponding sub-industry in production-based GDP, but also as part of
household consumption in expenditure-based GDP. In practice, it is plus
the part of owner occupied dwellings to the urban and rural household
consumption;
c. FISIM, it is using certain method to identify the part of FISIM serving
for household, and plus it to household consumption.
II. The relationship between GDP at production
approach and GDP at expenditure approach
 2. Quarterly Estimation
In quarterly GDP estimation, nearly no relationship is indicated between
the data from production and expenditure approach. In quarterly GDP
estimation from production side, the following formula is used
massively to calculate the value-added by industries indirectly:
value-added by industries = base number of the same period last year
× growth rate of the representative operational indicator of the industry
× elasticity ratio.
In which,
elasticity ratio = growth rate of value-added of the industry last year /
growth rate of the representative operational indicator of the industry.
III. Difficulties and doubts
 1. The relationship between specific statistics and GDP Estimates
In GDP estimation, we usually need to use a lot of specific statistics,
which are compiled and published by specific statistical departments，
for example, statistics of gross output value and value-added in
agriculture, statistics of industrial value-added, statistics of gross output
value in construction, statistics of sales output value in wholesale and
retail trades, statistics of operating income in hotel and catering services,
statistics of investment in fixed assets, statistics of total retail sales of
commodities, statistics of imports and exports.
III. Difficulties and doubts
If use these data directly in GDP estimation (which were required to be
adjusted with GDP coverage before), both gross data and growth rate
would appear great discrepancy between production-based GDP and
expenditure-based GDP.
Under such circumstance, how to treat the relationship between GDP
accounting and specific statistics?
Whether we could do man-made adjustments with specific statistics?
For example, multiplying specific statistics by a ratio unequal to 1？
III. Difficulties and doubts
 2、How to apply the information of I-O table and I-O survey to annual
and quarterly GDP calculations?
 3、How to use the information of I-O table and I-O survey to control
the discrepancy appears between the production-based GDP and
expenditure-based GDP?
 4、How to keep the consistency of the deflators between GDP
production and expenditure approach?
 5、Whether there is any method to evaluate the reliability of GDP
growth rate, such as single-indicator evaluation and multi-indicators
evaluation?
Thanks for your attention!