The Effect Of Aging On The Structure Of Trade Of China

In the case of China, population growth rate has kept falling since the implementation of the family planning policy. After1990s, the aging trend of China sped up. It is reported that in2050, aged population in China could reach450million accounted for31per cent of total population. In2015, the population of the old could outweigh the population of children. It is6-year earlier than the expected time. In summary, the trend of aging in China will have adverse impacts on Chinese economy and becomes a big challenge for China.In this essay, it is the structure of trade which has been selected to study impacts of aging in China. On one hand, this could be a complementary study. On the other hand, considering the role of China in international trade, this topic could offer valid suggestions for China in deciding its demographic policies as well as trade policies.Though it has been years for people study the impacts of aging on trade structure,, there is not ample resources or studies for us to learn from. It is the difficulty of this topic but it also implies opportunities. By summarizing previous studies, life-cycle theory, and the gap model of saving-capital and comparative advantage are the most commonly accepted theories working as the foundation of the study. However, it is not sufficient to analyze in theories. Researchers in other countries have tried to explain the mechanism of how aging trend affects trade structure with the mathematic methods. However, this method is not commonly adopted in China. Moreover, it is still controversial in the empirical study that whether it is accurate to describe trade structure with proxy variables, such as employment, instead of trade variable. In this article, besides theoretical analysis, we introduce the mathematical method to show impacts of different population growth rate on factor prices and relative prices of goods. In addition, we select trade variables in the empirical study in order to get rid of bias of proxy variables.Moreover, this essay offers valid suggestions to policy makers. China has a huge population. Though the family planning policy successfully controls the total population, it also leads to the problem of aging. With the increase aged population, labor supply has decreased and the wage rate rise substantially. Trade structure will change due to the increase of labor cost. It will strongly affect the country like China which highly relies on its cheap labor. In this essay, we could find out distinct influences of aging on different sorts of tradable goods. Then change of trade structure will become clear. According to our analysis, policy makers would make adjustments when making demographic policies and trade policies.In this essay, we focus on impacts of aging on four different types of tradable goods:natural resources intensive goods, low-skilled labor intensive goods, high-tech intensive goods and human capital intensive goods. We follow the same framework in analyzing the four kinds of goods:literature review→theoretical analysis→empirical study→results analysis (see Figure1). We discuss impacts on four different sorts of goods as a whole in literature review and theoretical analysis by discussing the mechanism of how aging affects trade structure. But in empirical study and results analysis, impacts of aging on four types of goods are discussed separately. There are three tools adopted in our study:qualitative analysis, theoretical methods and empirical methods. In literature review, we could summarize the framework and conclusions of previous studies with qualitative analysis. When we come to results analysis, we could explain our results and find out economic implications through qualitative analysis. Theoretical methods are the main tool used in theoretical analysis. There are three technique tests applied in empirical study, including unit root test, conintegration test and error correction model. With the application of the empirical methods, we could test our hypothesis.By introducing the OLG-GE model, it is a complement for domestic study. And we make a creative change in selecting the topic, studying depth and empirical test. First of all, there are not many researches discussing the impacts of aging on trade structure. This topic we select is both challenging and forecasting. Secondly, there is no complete theoretical framework in most domestic studies. In this essay, by introducing the model created by Jelassi and Sayan (2004,2005)3, we make a complementary to the present studies in China. Thirdly, in China, researchers may not exclude either theoretical framework or empirical test. Thus the inclusion of empirical test will make the study more complete. Moreover, people who have done the empirical studies do not select direct variables to describe trade structure. With the adoption of trade variable in empirical study, we could get rid of bias of proxy variables. It is clearer and precise in discussing impacts of aging on trade structure.Following the classic framework of economic study, there are fives chapters talking about this topic.The first chapter is the prologue. In this chapter, we will describe the background of this essay and explain why we would like to select this topic. Moreover, there will be specific and detailed description of concepts of ’aging’ and ’trade structure’. The literature review is the summary of previous studies including both domestic and overseas researches. On top of that, innovations made in this essay and difficulties we confronted with when preparing the essay will all be presented in this part as well. In the end of this part, the framework of following contents are presentedThe second chapter emphasizes the theoretical analysis. First of all, we summarize six channels through which the aging could affect trade structure with different theories. And then, with mathematical methods, we present the OLG-GE model created by Jelassi and Sayan (2004,2005). According to the OLG-GE model, the relationship between population growth rate and factor price and the relationship between population growth rate and relative price of good have been revealed with a set of equations.The empirical study is the third chapter. On the basis of Chapter2, it is possible to construct a feasible regression model. By selecting variables, collecting data and testing hypothesis, we could get a bunch of results. In this part, three tools have been applied, including stationary test, cointigration test and error correction model. There are four sets of tests.The analysis of empirical test is the fourth part of this essay. By reviewing economic theories, we could explain the empirical results and unveil the economic implications. Moreover, by comparing empirical results and theoretical hypothesis, we could get more findings. Finally, we draw our conclusions.At last, there is a summary chapter of the article. Firstly, there is a sum up of this article. After that, we make some suggestions about demographic policies and trade policies. In the end, we list the deficiencies of our study and suggest the directions of future studies.