Tuesday's new figures mean that China's mainland overtook Italy as the world's sixth-largest economy in 2004, behind France and the United Kingdom.
China would jump to No 4, after only the United States, Japan and Germany, if it included Hong Kong, which reports its economic figures separately.
The new Chinese output tally of 15.987 trillion yuan ($1.981 trillion) followed a survey which was meant to gather more accurate data on restaurants, retailers and other service businesses, which were previously under-reported.
Li Deshui, director of the National Bureau of Statistics, said the new figures should not affect China's policy towards the politically sensitive exchange rate of its currency.
"We still have a long way to go to catch up with the developed countries"
Li Deshui, director,
National Bureau of Statistics
China's trading partners complain that its government-controlled exchange rate is too low, giving Chinese exporters an unfair price advantage.
However, the data could have far-reaching effects on social and economic policymaking as the government plans investments and tries to create new jobs for unemployed workers.
Li said: "These new figures give us a clearer picture and a better way of understanding China's economy."
Sustained economic growth
"Based on these figures, we can have even more confidence in our long-term fairly fast and sustained economic growth."
The government will be revising economic growth figures back to 1993 using the new statistics, Li said.
He said Beijing would have to wait for this year's figures to be compiled before it could know how the economy was ranked now.
Economists have long said China's already stunning official figures, showing annual growth above 9% in recent years, understate the size of its economy due to old-fashioned data that focused on manufacturing and undercounted services.
The new estimate of China's economic output in 2004 was an increase of 2.3 trillion yuan ($285 billion) over the figure previously reported, Li said.
Service industries' share of economic output jumped from 31.9% to 40.7%, Li said.
He said the survey found smaller increases in output from manufacturing, farming and other economic sectors.
Despite the sharp upward revision of its gross domestic product, China still ranks below the top 100 countries in economic output per person, Li said.
China has achieved stronger than
"We still have a long way to go to catch up with the developed countries," he said.
Li defended his agency's earlier data, saying they "do not distort the size of the national economy" and did not mislead policy-makers.
"It would still reflect the general level and the trend in economic development," he said.
"We still can have a good picture of the basic conditions in China and its development. There is no fundamental change of the overall picture."