Impacts of population ageing on China's economy: labor force, savings and consumption
thesisposted on 28.03.2022, 10:32 by Xianling Zhang
China has been experiencing profound changes in its population due to the three-decade implementation of the one-child policy, including imbalance in sex ratios, low fertility rates, and population ageing. This thesis focuses on the growing significance of population ageing in China and the impacts of ageing on labour force supply, savings and consumptions in the economy. China would witness an accelerating ageing process in the next three decades, even though the government has implemented the new fertility policy in 2016. Using the simulation model based on the data from the Chinese 2010 census, this thesis first examines the changes of fertility rates under sudden policy adjustment – the abolition of its decades-long one-child policy and the implementation of a two-child policy. The results show that the two-child policy makes a significant but temporary effect on fertility rates and annual births in China, which marginally affects the demographic future in the country. The labour force supply in the future would be confronted with a declining in the size and proportion, an ageing process, and increasingly growing costs, which further weaken the competitiveness of the economy in international trades. The thesis also investigates the impacts of ageing on the declining in labour force participation rates using the standardization method, indicating a contribution of 24% to the overall decline in labour force participation rates during 2000-2010. Based on both macro-level data from provincial statistics and micro-level data from the China Family Panel Studies 2011, the study also explores the effects of ageing on savings and consumption. The findings suggest that ageing affects household economic behaviours through two mechanisms, one of which negatively affects savings and consumption through an ageing population structure, and the other of which positively increases savings and consumption by supporting elderly parents in the family. These findings deepen the understanding of the relationship between population ageing and the economy, and extend the application of related theories in the case of China. The thesis provides evidence-based analysis that will contribute to the evaluation and formulation of further economic reforms under a rapidly ageing demographic condition in the country.