Summary of Key Points
This article focuses on two key indicators: GDP (Gross Domestic Product) and GNI (formerly GNP), clearly explaining the difference between them. GDP reflects the scale of production within a country's borders, while GNI represents the actual income of all Chinese citizens worldwide. It highlights that in the past, GDP was the optimal choice during China's catch-up development phase, but as the country enters a period of high-quality development, both GDP and GNI should be used together, as GNI better reflects the actual well-being of the people. The article also discusses the international use of GNI (such as by the World Bank for income classification and by the United Nations for determining membership fees) and proposes a path for statistical reform. It emphasizes the need to view these two indicators dialectically, avoiding extremes of focusing solely on either GDP or GNI, with the ultimate goal of enhancing the wealth of the people, improving their quality of life, and strengthening the nation's strength.
Detailed Explanation
1. GDP and GNI: One Measures the “Size of the Pie,” the Other Measures People’s “Pockets”
- GDP (Gross Domestic Product): This is like measuring the size of the “pie” within a country’s borders. Everything produced within China’s territory, whether by domestic or foreign entities, is included in GDP. For example, smartphones manufactured by foreign companies in China or buildings constructed by domestic firms are all counted towards GDP, providing an answer to the question of the total economic output.
- GNI (Gross National Income): This is about how much of the “pie” the country’s citizens can actually receive. It includes income earned both domestically and abroad (such as profits from Chinese companies overseas or income from Chinese workers working abroad), but it also subtracts the profits that foreign entities take back to their home countries. GNI is the new term for GNP; the former was sometimes misleading because it sounded more like a measure of output, so the United Nations changed it to GNI in 1993.
- Simple formula: GNI = GDP + Income of Chinese residents abroad - Profits remitted by foreign entities from China. For instance, if GDP in 2025 is 140.19 trillion yuan and GNI is 139.37 trillion yuan, the difference indicates that foreign entities earned more from China than Chinese citizens did abroad.
2. Why Focus on GNI Now? High-Quality Development Requires Measuring Real Income
In the past, when China was poorer, the main goal was to increase economic size, and GDP was a straightforward and easy-to-calculate indicator, suitable for a catch-up phase. However, with high-quality development, it is more important to focus on the actual income of the people:
- Overseas income cannot be ignored: Chinese companies rank among the top three in global foreign investment (3.58 trillion US dollars by the end of 2025). These overseas profits are not included in GDP but are part of the national income, which GNI accounts for. Relying solely on GDP can underestimate the true wealth of the people.
- Distribution issues become apparent: If GDP in 2025 is higher than GNI, it suggests that some of the domestic profits are being taken by foreign entities, indicating room for improvement in the distribution of wealth among the population. GNI helps identify such disparities.
- International standards are necessary: The World Bank and the United Nations use GNI as the primary indicator (for example, the high-income threshold in 2027 is set at $1,4375 per person). Meeting these international standards is crucial for accessing preferential treatments (such as lower loan rates and membership fees).
- People-centered approach: High-quality development should benefit the people, and GNI directly reflects income distribution, making it a more accurate measure of people’s well-being than GDP.
3. How Is GNI Used Internationally? It Is a Global Standard
GNI is a universally accepted measure:
- World Bank: It uses per capita GNI to classify countries into different income levels (low-income, middle-income, high-income), which affects loan amounts and policy preferences. For example, if a country does not meet the high-income threshold of $1,4375 per person in 2027, it may not be eligible for certain low-interest loans.
- United Nations: Membership fees are based on the proportion of a country’s GNI in the global total; the higher the GNI, the higher the fee and the greater the country’s influence.
- Developed countries: Countries like the United States and Germany release both GDP and GNI. GDP is used to assess overall economic size, while GNI is used to evaluate people’s well-being, reflecting a balanced approach that considers both economic output and welfare.
4. How to Advance Statistical Reform?
Reform should be gradual and well-planned:
- Solid data foundation: Relevant departments (customs, taxation, foreign exchange) already have comprehensive data on cross-border investments and income, making it possible to accurately calculate GNI.
- Adapt to national conditions: While following international standards (such as the UN System of National Accounts), China’s unique circumstances (a large amount of foreign investment and rapid overseas investment) require tailored regulations.
- Implement step by step: Start by reviewing historical data over the past decade to ensure consistency, then gradually incorporate GNI into regular calculations to avoid distortions.
- Avoid extremes: GDP is not to be discarded (it is the foundation for economic growth), but GNI should not be the only focus either, as it may overlook domestic industries.
5. The Core Goal: Don’t Let Indicators Dictate Development; Focus on People’s Real Welfare
Statistical indicators are tools, not ends. The article emphasizes three key goals:
- Balanced approach: Both the domestic economy (GDP) and overseas earnings (GNI) should be strengthened, with overseas profits contributing to the well-being of the people.
- Technology-driven growth: Use advanced productivity to increase the value of products (e.g., through high-end manufacturing and intellectual property), enabling Chinese companies to earn more in the global value chain and reduce the gap between GDP and GNI.
- Promote shared prosperity: Use GNI data (such as income disparities between urban and rural areas and distribution of cross-border earnings) to develop targeted policies that promote fairer economic growth.
In summary, whether using GDP or GNI, the ultimate goal is to improve people’s lives, increase their wealth, and strengthen the nation. Understanding the difference between these two indicators helps to better understand the direction of national economic policies.