The Impact Of Population Aging On China's Consumption

Since the reform and opening up, China has maintained rapid economic growth at the speed of nearly 10% each year. China's foreign exchange reserves currently ranks first in the world. Gross national savings'rate has always remained high levels. State revenue grows year after year. As a developing country with large population and is still in transition, China has made remarkable achievements in just 30 years. However, as an important promotion of economic growth, the consumption has always been inadequate. The sustainability of economic growth in China has aroused general concern of scholars home and abroad. Scholars have to study the causes of insufficient consumption.This paper analyzes the influence of population age structure on the consumption of China. After the definition of population aging, the paper makes a descriptive analysis on both the development status and the causes of population. Then the paper discusses the path on which population aging affects on both the consumption and the structure from theoretical view. And then the paper goes into the empirical analysis section. In the empirical analysis, this paper takes into account the impact of the aging of the population on the efficiency of consumption. Based on the classical theory and the relative income theory of consumption, the paper constructed the macro-consumption function containing the population age structure variables. Using the 1978-2007 data, the paper evaluates the influence of the aging of the population on the consumption of long-run equilibrium and short-term fluctuations under co-integration theory and error correction model. From the regression results, the aging of the population will affect on the absolute amount of consumption in terms of long-run equilibrium, and will also influence short-term fluctuations through the error correction mechanism. And the impacts are negative on both sides.