A series of adjustments have been made in the new consumer price index (CPI) weighing system, including an alteration to the base year, weighing the CPI basket, expansion of sources of data collection and adjustments in representative items, according to the National Bureau of Statistics (NBS).

The new method is meant to better respond to China's economic development and changes in consumption by urban and rural residents, said the NBS. The CPI reweighing will also make the index more scientific and accurate.

The NBS also made the statistical reform to improve the reliability of the CPI as the average overall home prices for 70 major cities failed to reflect sharp price gaps among different localities. The data collection system has been changed from data reported by real estate developers and sellers to figures based on transaction records from city-level housing departments.

More realistic

The CPI grew 4.9 percent year on year in January 2011, 0.3 percentage point higher than in December 2010, the NBS said.

The CPI basket is reviewed every five years on the basis of household surveys. Since January 2011, the Chinese CPI calculations have begun using 2010 as the base year, which is the second regular change for the base year since 2001.

The adjustment of the base year will make the comparison easier, since a more recent reference base will have a better point of comparability, said NBS spokesman Sheng Laiyun.

Relevant alterations have also been made in the weighing components of the CPI. Although food still weighs heaviest in the CPI basket, the revised basket reduces the value of food by 2.21 percentage points and increases the weighing of housing-related expenditure by 4.22 points to reflect the country's changing economic landscape, according to the NBS.

The change made the measurement of the CPI more reasonable, since the proportion of income the Chinese people allocate for food purchases fell and housing-related costs surged because of rising home prices, said Sheng.

According to the NBS, food prices rose 10.3 percent year on year, followed by housing prices, which rose 6.8 percent in January.

"The truth is that housing-related consumption took up a higher and higher percentage in the CPI basket while food began to decrease. The NBS adjusted the CPI basket to reflect these changes," said Sheng.

The bureau said it also added 13,000 data collection locations—including department stores, supermarkets, grocery stores, franchise stores, shopping malls and rural markets—bringing the total to 63,000.

In addition, the representative items are also updated in accordance with the new spending level and habits.

"This will ensure the CPI reading reflects the consumer price changes more efficiently," said Sheng.

Is the CPI reweighing responsible for January's lower-than-expected reading? The bureau insisted in an online statement that the new method will serve only to improve the accuracy of calculations, dismissing speculation that the new method was meant to artificially lower the CPI figure. China's CPI growth in January under the new weighing was 4.942 percent, while the growth by the old weighing was 4.918 percent, according to the NBS.

Zhu Jianfang, chief economist at CITIC Securities, said the new CPI weighing system lives up to the latest changes that took place in the spending structure and price changes, and will not drag the CPI down.

"In this sense, the adjustment is reasonable and will have a positive impact on the market," said Zhu.

More accurate

On February 20, the NBS released sales price figures for residential buildings in 70 large and medium-sized cities in January on its official website, the first under the revised measurement system.

Compared to the same period of 2010, prices of newly constructed buildings in 68 cities rose while only those in two cities fell, the NBS said. It added that home prices in 10 cities rose by at least 10 percent in this period.

Since January 2011, the NBS started to implement the Survey Program on Sales Price of Residential Building. The program has made considerable adjustments on data resources, indicators selecting, calculation methods and other factors that may impact on indicators' calculation.

Four major changes have taken place in housing price measurement, said Pang Xiaolin, Director of the Urban Social Economics Survey at the NBS.

First, since January 2011, the data of newly constructed residential buildings in 53 cities started to be calculated based on online transaction records instead of data reported by real estate developers; second, the calculation method has changed; third, the data are categorized based on floor space; and fourth, sales price indices of buildings in each of the 70 large and medium-sized cities will be provided, rather than the average number.

The data of the other 17 cities will be calculated according to the floor spaces sold and sales values in each item in the real estate development reports.

The new housing price calculation scheme is much more reasonable and scientific than before in that the data provided by housing developers are in question, said Zhang Dawei, an analyst with Centraline Property, a leading real estate agency headquartered in Beijing.

Yang Hongxu, an analyst with the Shanghai-based Eeju Property Research Institute, also said the new housing price reading gives a more accurate number.