The development of the national income accounts system in China can be divided into three stages.
The first stage during the period 1952-1984 is characterized by the introduction and development of the Soviet type MPS (Material Product System) with its emphasis on collecting output data in physical terms. During this period, the Chinese economy was centrally planned and MPS conformed to the economic structure and level of social development of the era. However, it should be noted that with the introduction of economic reforms in the late 1970s efforts began to gradually introduce conceptual changes in the national accounts system. Starting in 1981, China Statistical Yearbook became a regular publication.
The second stage, from 1985 to 1992, featured the coexistence of MPS and SNA (the System of National Accounts). During this period, national income was calculated in terms of MPS while GDP was calculated in terms of SNA. In its official statistics reports, the State Statistical Bureau of China (SSB) made public both national income at MPS base and GDP at SNA base. The methodology explained in The Guideline for Measuring GDP and National Income (SSB, December 1992) can be used to calculate both SNA-based GDP and MPS-based national income. Both systems were also used to calculate input-output tables for the Chinese economy. Moreover, the indicators of the two systems were compatible while the national accounts in China during this period retained MPS as its core. This coexistence of the two national accounts systems conformed to the concept of "planned market socialism" of that period.
The third stage, from 1993 to the present, saw the adoption of SNA as the sole basis of the national accounts system of China in order to reflect the country's transitional characteristics. At this stage the national income accounts of China reached international standards, which in turn reflected a rapid development of marketization of the Chinese transitional economy.
MPS (Material Product System) is primarily a system of balance tables the major components of which are "The balance of production, consumption and accumulation of the gross social product," "The balance of production, distribution, redistribution and final use of the gross social product," "The balance of labor resources," and "The balance of fixed assets." The functions of MPS seem to be the same as those of SNA while there are essential differences between the two systems.
MPS classifies the economic activities into spheres: the sphere of material production and the sphere of non-material services. Only the former creates national income while the latter consumes that income. The main indicators of MPS entirely rely on this assumption. The sphere of non-material services is often referred to as the non-productive sphere or the sphere of non-material production.
In the MPS framework, industry (mining and manufacturing), agriculture and construction are fully included in the sphere of material production while transportation, communications and commerce (distribution) are only partially included in that sphere. The parts included are freight transportation, communication services supplied to producers, social catering services and distribution activities continuing the production process such as state procurement of agricultural products and centralized deliveries of machinery and intermediate materials. Passenger transportation and communication services to individuals are included in the non-material sphere. During the MPS period in China hotel services were also regarded as non-material services.
In MPS accounts, the following three sectors occupy the major part of the sphere of non-material services: (1) education, sciences, culture, health and social welfare; (2) housing and public utilities; (3) banking, insurance and administration. However, in the MPS era the sphere of non-material services was neglected. In China from the 1980s, estimates were made for non-material consumption for households and balance calculations were made for non-material services, and both were added in with the non-material balance tables at MPS and the tables for material assets for households and non-material service consumption. However, these calculations are independent of the material product calculations, and not organically integrated with them. This situation reduced MPS's role in providing consistent calculations as a tool to solve the problems of national economic development in a well-designed systemic manner.
The totality of spheres of material production and non-material services essentially conforms to the coverage of economic activities in SNA. The major difference between the two systems is that the separation of non-material services from material production constitutes the basis of economic analyses in MPS methodology.
From the initial stage of the establishment of the People's Republic of China to the initial stage of economic reforms, China's national economic accounting system was MPS, which was also used by the former Soviet Union and the communist East European countries. The key concept of the accounting system in China was NMP (Net Material Product), or so-called NI (National Income). The process of conducting historical estimates of GDP for 1952-1978 involved converting national income at MPS to GDP at SNA base, and adjusting and supplementing past statistical data based on national income indicators.
There are three methods of calculating both GDP and national income: production approach, income approach, and expenditure approach. In both the production and income approaches, GDP is the respective sum of value added of all the resident units (institutional sectors), and national income is the respective sum of the net material product value of all the resident units (institutional sectors). In the expenditure approach, GDP and NI are the respective sums of their final demand items. We call GDP and NI (national income) in the production and income approaches simply GDP and NI. In using the expenditure approach GDP is termed GDE (Gross Domestic Expenditure), or expenditure approach GDP, while NI by the expenditure approach is termed NI used, or expenditure approach NI. Below we would like to introduce basic means of collecting materials and compiling estimates for historical analysis of GDP and GDE.