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Last Updated: Tuesday, 20 December 2005, 07:55 GMT
China climbs world economic table
Chinese factory worker puts finishing touches to toy
China's cheap work force has been driving a boom in exports
China has moved up the world economic rankings after reporting that its gross domestic product (GDP) is much larger than had earlier been thought.

According to a state report on Tuesday, China's economy was 16.8% larger in 2004 than initially calculated.

That puts China into sixth place in terms of economic size, ahead of Italy and close behind the UK and France.

If current growth continues, China could squeeze into fourth position by the end of 2005, economists believe.

As it gets larger, China is going to have to deal with both political and economic implications, analysts said.

'Long tradition'

Beijing is already under pressure to allow its currency to strengthen, with nations including the US arguing that it is keeping the yuan undervalued in order to boost exports.

As its economy becomes bigger and more robust, critics are likely to argue that it can better withstand a more freely traded currency.

Some sceptical economists point out that China has a long tradition of massaging statistics
Louisa Lim, BBC Beijing

China also is catching up on Asia's biggest economy, Japan, and there are likely to be political concerns as it becomes a more important and dominant force in the region, analysts say.

However, Louisa Lim, the BBC's correspondent in Beijing, urged caution when dealing with data compiled by the Chinese government.

"Some sceptical economists point out that China has a long tradition of massaging statistics for political motives," she said.

Even so, she pointed out that the World Bank had welcomed the new figures as a major improvement.

"It's not uncommon for countries with dynamic economies to under-represent rapidly growing enterprises," she said.


Tuesday's figures were issued by the National Bureau of Statistics following a survey that aimed to gather more accurate data.

According to the report, China's economy was 2,300bn yuan ($283bn) bigger than previous figures had shown.

Foodstall in Beijing
The improving economy has driven domestic demand for services

The new research raised the estimate of China's economic output in 2004 to nearly 16 trillion yuan.

Service industries accounted for 93% of the revision, the bureau said - a reflection of how the sector is playing an ever more important role in China's economy.

"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 National Bureau of Statistics, told a news conference.

Economists have long said that China's official annual growth figure of 9% understates the size of its economy.

Inside and out

China has recently been benefiting from strong exports and improving domestic demand.

The Organisation for Economic Co-operation and Development (OECD) said last month that domestic demand would improve between 2006 and 2007, and that China would increase its share of global trade.

The OECD expects the Chinese economy to grow by 9.3% in 2005, rising to 9.4% next year and 9.5% in 2007.

Despite the sharp upward revision of its GDP, economic output per person is still quite low.

"We still have a long way to go to catch up with the developed countries," Mr Li said.

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