China Says Its Economy Larger Than Earlier Reported

China said Tuesday its economy is much bigger and less dependent on exports than previously reported, issuing new data that analysts said make its roaring growth look easier to sustain and could encourage even more foreign investment.

A new survey of China's economy boosted its official output for 2004 by 16.8 percent by taking into account emerging service businesses, the government said. It said services' share of the economy rose sharply, while that of manufacturing fell.

The results show China's mainland replacing Italy as the world's 6th-largest economy, trailing Britain and France. China would jump to No. 4, behind only the United States, Japan and Germany, if it added in Hong Kong, which reports its economic figures separately.

The figures mean China's rates of exports and investment are smaller as a percentage of the total economy, possibly easing fears that 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 Center at St. Antony's College at Britain's Oxford University.

"It would mean the economy's ability to continue at the current rate of growth is better," Tsang said.

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

The new data put China's 2004 gross domestic product, the broadest measure of trade in goods and services, at nearly 16 trillion yuan ($2 trillion). That was up 2.3 trillion yuan ($285 billion) from numbers previously reported.

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

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

Based on the new data, exports fell from 34 percent of the economy to 29 percent, cutting China's "very high export dependency," Jun Ma, chief economist for Greater China at Deutsche Bank, said in a research report.

Ma's report said such evidence of strong consumer spending could encourage planners to stimulate even more growth in services, creating new opportunities for foreign investors.

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

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

And Li emphasized that despite the upward revision in sheer economic size, China's vast population of 1.3 billion people means it still ranks below the top 100 countries in output per capita.

"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.

The key problem was a system that focused on manufacturing and relied on each company to keep an employee to report statistics, something that few private businesses do.

Other governments have reported similarly large jumps in output when they switch economic measures, including a 17 percent increase for Indonesia in 2004 and 11 percent for Norway in 1995, according to the World Bank.

Li, the statistics official, said Beijing will have to wait until it compiles figures for 2005 to figure out its current rank among the world's economies.

"But undeniably they're going to be the second-largest economy in the world in a few years," said David Cohen of the consulting firm Action Economics in Singapore. "And then the question is, At what point do they surpass the U.S. in size?"