Huge growth in Chinese economy

China says its economy is much bigger and less export-dependant than previously reported, issuing new data that analysts say may ease fears its roaring growth is unsustainable – and encourage even more foreign investment.

A new survey of China’s economy boosted its official 2004 output by 16.8% by counting emerging service businesses, a previously underreported sector, the government said yesterday.

It said services’ share of the economy rose sharply, while that of manufacturing fell.

The results show mainland China replacing Italy as the world’s 6th-largest economy, trailing Britain and France.

China would jump to No. 4 – behind the US, Japan and Germany – if it added Hong Kong, which reports economic figures separately.

The figures mean China’s export and investment rates are smaller as a percentage of the total economy, possibly easing fears they were unsustainably high, analysts said.

“The Chinese economic miracle will look less like a miracle and more like a normal country,” said Steve Tsang, director of the Asian Studies Centre at St. Antony’s College Oxford University. “It would mean the economy’s ability to continue at the current rate of growth is better.”

The figures were released by the National Bureau of Statistics, which said it surveyed 30 million businesses including restaurants and karaoke bars.

The new data put China’s 2004 gross domestic product, or GDP, the broadest measure of trade in goods and services, at nearly 16 trillion yuan ( 2 trillion dollars) – up 2.3 trillion yuan ( 285 billion dollars) from previous numbers.

“Based on these figures, we can have even more confidence in our long-term, fairly fast and sustained economic growth,” said Li Deshui, director of the statistics bureau.

Even more important could be the finding that Chinese consumers are spending far more than previously thought, fuelling economic growth and reducing reliance on exports, economists said.

Based on the new data, exports account for 29% of the economy rather than the previously stated 34%, cutting China’s “very high export dependency,” said Jun Ma, chief economist for Greater China at Deutsche Bank.

The government will be revising GDP growth figures back to 1993, Li said.

The new figures should not affect China’s policy on the exchange rate of its currency, Li said. China’s trading partners complain that its government-controlled exchange rate is too low, giving China’s exporters an unfair price advantage.

And Li emphasised that China’s vast population of 1.3 billion people means it still ranks below the top 100 countries in per capita output.

“We still have a long way to go to catch up with the developed countries,” he said.

Economists have long said China understated the size of its economy due to its failure to collect statistics accurately from small, private businesses, especially in services.