Contractions in Chinese Fertility and Savings: Long Run Domestic and Global Implications

46 Pages Posted: 16 Mar 2016

See all articles by Jane Golley

Jane Golley

Australian National University (ANU) - Faculty of Economics & Commerce; Australian National University (ANU) - Crawford School of Public Policy

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy

Date Written: March 14, 2016

Abstract

Following three decades of rapid but unbalanced economic growth, China’s reform and policy agenda are set to rebalance the economy toward consumption while maintaining a rate of GDP growth near seven per cent. Among the headwinds it faces is a demographic contraction that brings slower, and possibly negative, labour force growth and relatively rapid ageing. While the lower saving rates that result from consumption-oriented policies and rising aged dependency may contribute to a rebalancing of the economy, in the long run they will reduce both GDP growth and per capita income. Moreover, while an effective transition from the one-child policy to a two-child policy would help sustain growth and eventually mitigate the aged dependency problem, it would set real per capita income on a still lower path. These conundrums are examined using a global economic and demographic model, which embodies the main channels through which fertility and saving rates impact on economic performance. The results quantify the associated trade-offs and show that continuing demographic and saving contractions in China would alter the trajectory of the global economy as well.

Keywords: China, demography, imbalances, spill-overs, global effects

JEL Classification: F42, F43, F47

Suggested Citation

Golley, Jane and Tyers, Rod and Zhou, Yixiao, Contractions in Chinese Fertility and Savings: Long Run Domestic and Global Implications (March 14, 2016). CAMA Working Paper No. 12/2016 , Available at SSRN: https://ssrn.com/abstract=2747765 or http://dx.doi.org/10.2139/ssrn.2747765

Jane Golley

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

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