Contact: nadim.ahmad@oecd

1. China’s Input-Output Survey and Tabulation MethodComments13th OECD – NBS Workshop on National AccountsNovember 40- December 4, 2009Haikou, China Contact: nadim.ahmad@oecd.org

2. General Observation • IO and SU tables are extremely important components of the national accounts framework and on-going work and developments in China are welcomed and strongly encouraged.

3. Detailed Comments • Paper describes a number of survey sources used to populate the output, intermediate consumption and value-added cells in the IO table. • 52 questionnaires categorised by 3 types: • Census questionnaires • Focused questionnaires • Typical questionnaires

4. Detailed comments • Census questionnaires: • Investment composition of fixed assets:+30m Yuan • Composition of manufacturing costs of the large-sized industrial enterprises above designated size: + 5m Yuan – • Gross industrial output and sales volume and output of major industrial products • Investigation information of costs and expenses of industrial enterprises

5. Detailed comments • Points of clarification • Not clear which enterprises are included – all? or just manufacturing? • How are small and medium enterprises (<5 m Y) captured? • What use is made of the business register? And how are survey results grossed-up to the entire population? What percentage of enterprises (as a per cent of value-added or output are surveyed?) • How is the business register updated?

6. Detailed comments • Focused questionnaires – basic units of medium and small sized industrial enterprises above designated size of construction and service enterprises • Points of Clarification • Are these questionnaires for the construction and service industries? Or are they questionnaires that target expenditures on these activities by small and medium enterprises?

7. Detailed comments • Typical questionnaires – compositions of transportation expenditures and travelling expenses etc • Points of Clarification • More detail required on these questionnaires? It’s not entirely clear what they are and how they are used.

8. Commodity by commodity • Tables are produced on a C by C basis. • Questions • Given the information available to produce C by C tables it should be possible to produce corresponding SU tables. Is the reason they are not produced because it is assumed that IO commodity coefficients (cost structure) can be used to estimated the intermediate consumption and value-added of enterprises not directly surveyed (but which have been able to provide estimates of output)? • If this is the case, it is important to better understand at what level of industry classification it is applied; as it presupposes strong homogeneity in production processes – which is questionable when comparing large and small enterprises. • How is value-added allocated when secondary products are by-products?

9. General questions • Are estimates of own-account production made? (software, construction etc) • How is the informal economy (and unincorporated enterprises) measured? • How are estimates of margins on products derived? • How detailed are the tables (commodity classification)?

10. General questions • Are estimates of own-account production made? (software, construction etc) • How is the informal economy (and unincorporated enterprises) measured? • How are estimates of margins on products derived? • How detailed are the tables (commodity classification)?

11. Responding to NBS questions • Which level of the 5 levels of CPC should be used in commodity balancing for compiling accounts of goods and services and for balancing of further supply and use? Could we say the 4th or the 5th level of CPC must be adopted? • The SNA is not prescriptive in this regard. It depends entirely on the information available in a country. The general principle is that the compilation of tables (especially those that require assumptions based on observed coefficients in surveyed enterprises) should be as detailed as possible .The publication level of tables however need not (and rarely does) follow the compilation level. Generally these are less detailed depending on the quality of balancing, microdata and confidentiality constraints.

12. Responding to NBS questions • In US, information from economic census is very rich, with detailed output data of goods and services, and the complete output data by detailed commodity can be gathered. However, for countries where there is not economic census yet, or just part of establishments has been investigated, how are the complete output data by commodity compiled, or how are the complete output data by commodity imputed? • A business register is a pre-requisite. Most business registers will also provide an indication of size – either via turnover or employment. And this information can be used to stratify enterprises into different bands. But it is essential that at least some enterprises are surveyed in each of these bands. Tax/administrative records provide an additional useful source for compiling a BR.

13. Responding to NBS questions • In addition, must the objects of investigation be establishments? Could the enterprises be objects of investigation, while the industry to which the enterprise is attached is determined by nature of the enterprise’s central product? In other words, for better adopting the suggestions by SNA, what are the most essential requirements? • The SNA still prefers establishments. However in practice there is an increasing tendency to collect information from enterprises (and this forms part of the 2008 SNA research agenda). Many EU countries for example already compile their tables using enterprise information – which is useful for analytical applications such as productivity measurement, R&D, innovation etc.

14. Responding to NBS questions • How should auxiliary activities be captured? Are different questionnaires needed? How are auxiliary activities/expenditures allocated to commodities? • Para 5.9 of the 1993 SNA defines ancillary activities. The costs of these activities must be allocated to using establishments/commodities and these can be allocated on the basis of (preferably) value-added or output shares.

15. Responding to NBS questions • We’d like that you introduce us the main information used and compilation procedures in compiling supply and use tables through case studies of a developed country. How do you account the value added and its composition by industry when you compile the use table? Do you use investigation data of establishments to calculate the value added by production approach? Whether is the operating surplus derived by aggregate of value added minus the sum of the three components of compensation of employees, net taxes on production and depreciation of fixed assets? Or other calculation methods are adopted? • See the previous US BEA presentation.

16. Responding to NBS questions • When supply table and use table are compiled, which level of classification by industry and by commodity is used at least? • This varies enormously by country. It is important to note too that the level of detail used for compilation is usually different to that used for publication. In the EU countries are currently required to provide tables at the NACE 60 level but many produce tables at a more detailed level.

17. Responding to NBS questions • How the basic price, the producer’s price and the purchaser’s price are reflected in input-output accounts? Which kinds of taxes are included in each of them? • The 1993 SNA provides clear guidance here. In most countries IO tables are produced at basic prices and so will include other taxes and subsidies on production. Tables compiled at producers prices will additionally include any taxes/subsidies on products (e.g. VAT) that are not separately invoiced to the purchaser. • Purchaser’s prices include all taxes/subsidies on products. • Supply-use tables in theory should show value-added and output at basic prices and consumption at purchaser’s prices.

18. Responding to NBS questions • How do you deal with value-added tax? Is the sales tax added to the output in basic price, and the purchase tax added to the intermediate input? Or is the “value-added tax that should be turned over to the state” added to the output in basic price, while without consideration of the purchase tax in the component of intermediate input? • The answer depends on the valuation basis used for the tables. IO tables produced at basic prices should have a separate row for any VAT incurred by enterprises (which is rare for market enterprises but not for non-market and small enterprises). In other words for IO tables at basic prices output should not include VAT neither should any of the transactions between industries/commodities.

19. Inter-relationship between China’s IO estimation, production-based GDP and expenditure based GDP13th OECD – NBS Workshop on National AccountsNovember 40- December 4, 2009Haikou, China Contact: nadim.ahmad@oecd.org

20. General Comments • Recommended reading – 8th Workshop on National Accounts: • 5.  Accounting frameworks for constant price measures- GDP Balancing in Constant and Current Prices, Mr. AHMAD Nadim, OECD • > Paper in English (PDF)> Paper in Chinese> PowerPoint presentation

21. General Comments • Recommended reading – 11th Workshop on National Accounts: • Supply-use tables; techniques for consistent estimates of missing data - AHMAD, Nadim (OECD) - PPT doc. english