China: World's third-largest economy

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BEIJING (Reuters) -- China on Wednesday revised up the country's gross domestic product growth for 2007 to 13% from 11.9%, leapfrogging Germany in the process to become the world's third-largest economy.

The revised growth rate, announced by the National Bureau of Statistics, was the fastest since 1993, when the economy expanded 13.5%.

The statistics office had already updated its estimate of 2007 growth last April from an initial reading of 11.4%. In a statement on its Web site, it said this second revision would be the final one.

Sherman Chan, an economist at Moody's Economy.com, said the strong number was unlikely to shake sentiment in the market, which is penciling in a marked moderation in growth this year.

"First, the change in GDP estimates for two years ago will not alter the economy's near-term outlook. The only effect is perhaps negative, as a stronger 2007 would make the 2008 slowdown more upsetting," Chan said in a report.

"For 2009, a further slowdown is projected, as the global economy remains in a dismal state, hurting China's export-related businesses, which have been the bread winner for the country," she added.

The NBS is due to announce 2008 GDP data next week.

Forecasts of economists polled by Reuters center on growth for the fourth quarter of 7% from a year earlier, which would be a nine-year low.

Still, the updated 2007 figures give China the right to brag that only the United States and Japan now have bigger economies.

Using the World Bank's official estimates of the size of economies, China was already snapping at Germany's heels before Wednesday's revision.

The World Bank uses Gross National Income (GNI) converted to dollars using the Atlas method, which takes a three-year moving average for the exchange rate.

China now estimates that the total value of goods and services in 2007 was 3.1% higher than previously thought.

Applying this increase to the World Bank's published rankings gives China a GNI of $3.218 trillion for 2007 compared with $3.197 trillion for Germany -- a modest lead, but one that will have widened considerably in 2008.

GNI takes into account all production in the domestic economy plus net flows of income from abroad such as profits and wages.

China might have a big economy, but it is still a relatively poor country. On the Atlas methodology, the United States had income per head of $46,040 in 2007, while China's was just $2,360.

Before the latest revisions, the World Bank put it in 132nd place in its global income tables per capita.

Taking account of Wednesday's revision leaves China slightly better off than Cape Verde but poorer than Guatemala.

The World Bank argues that measuring the value of output using purchasing power parity, rather than market exchange rates, provides a better measure of relative standards of living.

By this yardstick, too, China is still poor, with per capita income in 2007 -- prior to the latest revisions -- of $5,370 compared with $45,850 in the United States.

The NBS revised upward its estimate of output in all sectors of the economy in 2007.

Based on the new data, Chan at Moody's Economy.com calculated that industry and construction grew by 14.7% in 2007, services by 13.8% and agriculture by 3.7%.

The overall value of Chinese GDP in 2007 was 25.73 trillion yuan, according to the NBS, up 777.6 billion yuan from its previous estimate.

That is equivalent to $3.765 trillion at today's exchange rates, or just under $2,900 per head of China's estimated population of 1.3 billion.