|Photo shows the promotional campaigns in China's real estate market. (File Photo)|
Since 2011 the saying that the total land value of Beijing has surpassed the GDP of the U.S. has been frequently cited by media. However an expert at Institute of Quantitative & Technical Economics of Chinese Academy of Social Sciences explained that land value and GDP are two different indexes that can’t be compared with.
Media has compared the total land value of Beijing in 2010 and in the first half of 2013 with the US GDP of the same periods. “The average land price of Beijing in 2010 was about 1,307 U.S. dollars per square meter (calculated under the dollar’s current exchange rate against Yuan of 6.21, figures below are the same), and Beijing has a total land area of about 16.41 billion square meters. If we multiply them we can get the total land value of Beijing, which is about 21.2 trillion U.S. dollars. While the U.S. GDP in 2010 was about 14.5 trillion U.S. dollars which is less than the total land value of Beijing.
In the first half of 2013 the total revenue of Beijing’s land has reached 10.8 billion U.S. dollars, and the area of land sold in Beijing is 8.1 million square meters. Based on these facts we can calculate that the average price of Beijing is 1334.4 U.S. dollars per square meter. If Beijing sells all its land out the total market value of Beijing is now as high as 21.8 trillion U.S. dollars. On Aug. 2 the US Department of Commerce issued the US GDP data of 2012 which was 16.3 trillion U.S. dollars. Simply comparing these figures we can draw the ‘conclusion’ that the total value of Beijing’s land has exceeded the annual GDP of the U.S.
Some netizens have doubts about the conclusion, saying: “The two figures have different meanings. The land value is a stock index while GDP is a flow index. And the two has nothing to do with each other”. ”Different areas have different land price. We can’t get the result by a simple calculation”. “It can be comprehended as that the annual GDP of the U.S. is almost enough to buy Beijing, the capital of China.”
In order to get the real answer of this question, reporter with People’ Daily Online called the institute of Quantitative and Technical Economics of Chinese Academy of Social Science. Researcher at this institute explained that land value and GDP were two totally different indexes and the comparison between was not proper.
He said that if you wanted to explain that the land price of Beijing was too high and there was bubble in it, this comparison was acceptable. But in terms of fortune, they can’t be compared with as GDP is a flow index which reflects the fortune that our society creates while land value is a stock value, which is created by calculation. Therefore it is natural that land value is higher than GDP.
Edited and Translated by Yao Chun, People's Daily Online
Read the Chinese version: 学者：“北京总地价超美国一年GDP”说法并不严谨, source: People's Daily Online