The impact of population aging on per capita consumption in China

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University of New Brunswick


Chinese economy has grown rapidly since the “Reform and Opening up” policy beginning in 1978. However, in 2014, the aggregate consumption of Chinese residents was only $2,150 (US), far below the world average consumption of $5,750 (US). Meanwhile, population aging is a global problem; China ushered in the era of population aging in 2000. The purpose of this report is to examine the impact of Chinese population aging (old dependency ratio) on resident’s consumption by using China’s provincial panel data (30 provinces) from 1997-2014 and fixed effect regressions. The results show that the old dependency ratio has a positive impact on resident’s consumption in China. This means resident’s consumption will increase with population aging in China. Furthermore, results also show that Chinese resident’s consumption was influenced by internal policy change and external shock. In particular, when 2005 and 2009 used as dummy variables for analyzing the impact of China access to the WTO and the global financial crisis on China’s resident’s consumption, we found that China’s accession to the WTO has positive impact on Chinese resident’s consumption, while the global financial crisis has negative impact on Chinese resident’s consumption.