Economic implications of relaxation of China's one-child policy -a dynamic general equilibrium analysis

China has experienced rapid fertility decline since 1970 in response to various social, economic and policy factors. The fast fertility decline combining with the increase in the life expectancy has created a dramatic change in China’s population age structure. According to UN’s medium variant population projection, the proportion of population aged 65 and over will increase from10.5% in 2015 to 11.7% in 2020 and further to 23.9% in 2050. Meanwhile its working age population aged 15 to 64 declined at 2015 and will continue to decline. To respond to anxieties regarding to labor shortage and rapid population ageing, the Chinese government finally eased its unpopular and decades-old one child policy in the early 2014. Couples who are either from one-child families are allowed to have a second child. This policy has been further relaxed in the early 2016. Couples who currently have one child can have second child. Any such policy change will affect the fertility rate with implications for the future demographic structure and population size. Both changes in population structure and in population size have wide-ranging economic implications. This paper will explore the economic implications of this new population control policy. First, two sets of population projections from 2016 to 2050 will be conducted: Scenario one - population projection with old one-child policy; and scenario two – population projection with new population control policy. Then, a dynamic CGE model of the Chinese economy- CHINGEM model will be used to analyze the economic effects of the relaxation of one-child policy.