DEMOGRAPHIC SHIFT, POPULATION AGEING AND ECONOMIC GROWTH IN CHINA: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS

Using a computable general equilibrium (CGE) model and a given ageing profile of the population to forecast the growth path of China's economy during the twenty-first century, this study finds that: population ageing leads to declining economic growth as labour supply shrinks and the rate of physical capital formation declines; households' material living standards improve, albeit at a declining rate; falling domestic investment partially offsets declining national savings; and the resulting saving-investment surplus generates a current account surplus and capital outflows. Finally, the main force that can sustain China's economic growth against the backdrop of population ageing is productivity improvement.