Abstract. 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.JEL classification: J14; J21; C30.

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Using adjusted 2000 population census data, this paper conducts China's population projections to 2050. Three fertility and four mortality scenarios yield 12 sets of results. Despite the below-replacement fertility, China's population will continue growing for many years. However, there are substantial differences among the twelve scenarios. The maximum population could range from less than 1.4 billion to more than 1.6 billion. One of the notable trends is the rapid population ageing. By the end of 2050 more than one-fifth to one-third of China's population would be aged 65 and over. Demographic dividend is expected to continue in next 10 to 20 years depending on future fertility which in turn is determined by the changes in China's one-child policy. The Chinese government should be aware of all possible situations of population changes and particularly population ageing in the first half of the century and well prepared for all possible challenges they may arise.