The Impact Of Demograpllic Structure Changes On The International Balance Of Payments Structure:Theory And Empirical Test

Many scholars are attaching increasingly more importance to researches about relationship between demographic structure changes and economic development and growth. These researches, however, mainly focus on how demographic structure changes affect economic growth rate and saving rate of a country. Few of them focus on how demographic structure changes affect international balance of payments, especially international trade and international capital flow. Moreover, most of such researches stay in theoretical derivation with lack of detailed and comprehensive empirical research. Along with the fast economic growth in China in the past more than30years, Chinese demographic structure is changing fast, with the characteristics of remarkable fall of fertility, nearly stagnant growth of labors and increasingly more obvious trend of aging. In such a new moment for population change and economic development, it is essential to research how to evaluate the impact of demographic changes on economic growth model in a country, especially in China, a country that depended on exporting and investment to grow for a long time.With a view to the relationship between demographic structure changes and economic growth and development, I chose a detailed entry point in this paper, namely how demographic changes affect external equilibrium of a country, especially the international balance of payments structure. I tried to investigate how demographic structure changes affect international trade structure and international investment structure with theories and evidences, thus to know more directly and clearly about detailed impact on economy and future development of Chinese demographic structure changes, and to provide to decision-making level as policy for reference.Based on a comprehensive study on relative documents, I analyzed the theoretical impact mechanism of demographic structure changes on international trade structure and international investment structure. For empirical studies, detailed impact of demographic changes on trade structure and investment structure has been comprehensively and systematically investigated through empirical checkout of all samples, samples of developed countries and samples of developing countries, with acquirable data and methods of difference generalized moments and systematical generalized moments. Main research conclusions are as follow:I. In all samples, samples of developed countries and samples of developing countries on relationship between demographic structure and international trade structure, we found from the empirical results a positive relationship between children’s dependency ratio and international trade export structure, and a negative relationship between children’s dependency ratio and international trade import structure. It shows that countries with higher children’s dependency ratio will export relatively more labor-intensive products and import relatively more capital and technology intensive products. The greatest difference between the samples of developed countries and developing countries lies in that in developed countries, higher old-age dependency ratio leads to relatively lower labor-intensive products import while in developing countries, higher old-age dependency ratio leads to relatively higher labor-intensive products import and export. The reason is related to the stage where most developing countries are. Most developing countries have not been in real aging period. Thus although their old-age dependency ratio is becoming higher, they still have relatively enough labors. The country, which has the fastest old-age dependency ratio growth, is the one owning fastest economic growth. For export-oriented countries, such a country exports relatively more labor-intensive products.Ⅱ. The result based on the total sample analysis of the demographic structure and international direct investment relationship tells that the higher the old-age dependency ratio is, the higher outlows and inflows of the international direct investment are. Seeing from the ratio, the outflows of overseas direct investment is under a deeper influence. This conclusion has also been demonstrated by the subsample of developed countries, which however is not proved by the developing countries’. On the contrary, in the developing countries the higher the old-age dependency ratio is, the lower the outflow of international direct investment becomes. In addition, compared distinctively with the empirical conclusion in the international trade structure, children’s dependency ratio has no clear relationship with the international direct investment.Ⅲ. From the inspection result of the relationship between demographic structure and international private capital flows, we find that there is no significant correlation between the old-age dependency ratio and the international private capital inflows, neither between children’s dependency ratio and the international private capital inflows. The result represents that demographic structure and its change has little effect on the international securities investment inflows. In other words, the inflows and outflows of the international securities investment are not influenced by the country’s demographic structure or supply of work force, which contrarily more depend on the country’s overall economic and investment environment.Ⅳ. The general changing trend in the relationship between the demographic structure and international balance of payment structure in China is that:with the larger aging population and the lower children’s dependency ratio, on the one side, the export of the labor-intensive product is decreasing in China’s international trade export structure while in the import structure, the import ratio of the labor-intensive product becomes relatively higher. On the other side, the inflows and outflows of the international direct investment will both grow so that private capital flow will increase thereupon.Since China is under a particular period with its demographic structure changing, economic structure adjusted and social development transformation, this article has also proposed three policy suggestions after carefully thinking:First, the strict population control policy should be released with no delay so as to slow down the population change process, to relieve the effect of demographic structure’s dramatic change on economy and to reduce the impact of demographic structure change on the international balance of payment structure.In addition, as China can hardly change its export-oriented economic growth model by now, one of the important solutions is looking for new competitive export product, especially developing the advantage and export market of capital-intensive and technology-intensive product.Last but not the least, because of the anticipated increasing foreign direct liquid investment, especially the overseas direct investment growth deeper influenced by the aging population, China should consider storing overseas investment knowledge and fostering the risk management and control capacity so that it can better lead and help national capital flow to international market.