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An Asian Development Bank technical assistance project to improve statistics-gathering in the Chinese service sector began on Friday in Beijing.

The project, scheduled to be completed within three years at a cost of US$750,000, will play a key part in improving the official estimates of output and value added benefits within the service sector, said Lin Xianyu, deputy commissioner of the National Bureau of Statistics.

The development bank will pay US$450,000 of the cost, with the government funding the remainder.

Since the government initiated its reform and opening up policies in the late 1970s, the nation's service sector has expanded rapidly, Lin said.

Its contributions by the service sector to the entire gross domestic product (GDP) rose from 23.7 per cent in 1978 to as much as 33.6 per cent in 2001, he said.

However, the contribution by the sector to the GDP is still lower than that of developed countries, he said.

"The lower contribution by the service sector suggests that China's service industry needs further development,'' Lin said.

It also suggests the service sector's impact on the economy may well be underestimated, due to incomplete coverage by analysts and underreporting of service sectors such as housing, public schools and public transportation, he said.

Bishnu Pant, the development bank's principal statistician, believes the "underestimation is a major constraint in accurately estimating China's gross domestic product.''

Strengthening the bureau will improve estimates of national accounts to bring the sector into line with international standards, Pant said.

Bruce Murray, country director of bank's China Resident Mission, said there is no doubt that China has made great strides in improving its national accounting estimates.

Milestones include revising the GDP upward to better reflect the contribution of service businesses, participating in the IMF's General Data Dissemination System, producing quarterly national reports by industries, and revising end-of-year estimates to reflect data that become available in the following year, he said.

``Periodical economic censuses will begin in 2004,'' he said.

The project will help the bureau of statistics better measure rapidly growing sectors, Murray said.

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