ABSTRACT
During the past twenty years, China has been one of the countries whose economic growth rate is the fastest in the world, and whose domestic savings rate (as a percentage of GDP) and domestic investment rate (as a percentage of GDP) are the highest. According to the statistics of the World Bank,2 the average GDP growth rates of the 1980s and the 1990s in China were respectively 10.1 percent and 10.7 percent, ranking second among the 206 countries and regions in the world (only second to Botswana, a naturally abundant African country) in the 1980s, and the first in the 1990s. In 1999, the domestic savings rate and investment rate in China were respectively 42 percent and 40 percent, the highest in the world, 20 percent higher than the average world level at that time. However, according to the World Bank Database, the cost of natural capital in China is also shockingly high. To a great extent, it counteracts the nominal domestic savings rate and investment rate, cutting down at least 20 percent of the genuine domestic savings rate in 1985, down to 4.5 percent in 1998, and reversed to 6.3 percent by 2001.3
Presently, the national economic accounts system, which is based on nominal GDP, has severe flaws. It does not take out the cost of natural capital, and puts the values of overexploited resources and energy, especially non-reproducible resources, into the GDP as additional value. This will exaggerate economic income at the expense of rapid consumption of natural resources and severe deterioration of the environment, and will inevitably lead to great reductions in real national welfare. Therefore, it is necessary to amend the current national accounts system.4
