Stock Markets, FDI and Challenges of Sustainability
Advances in Chinese Economic Studies series
Edited by Lilai Xu
Chapter 3: China’s Changing Demographics and their Influence on Financial Markets
K.B. Oh, Xuebin Chen, Jianmei Wang, Geoffrey R. Durden and Nicole El-Haber INTRODUCTION This chapter reports the findings of a study into the recent growth and development of the Chinese financial services market. More specifically, it explores and analyses the relationship between recent demographic changes, pertaining to household income, savings patterns, economic growth and wealth creation, and demand for personal and household financial services. The Chinese economy has experienced a remarkable transformation since the implementation of its ‘open door’ policy in 1978. Since 2003, China’s economy has grown at an average annual growth of 10.3 percent per annum. The nominal gross domestic product (GDP) was US$4.8 trillion in 2009, making it the world’s second largest economy after the USA. However, China’s per capita nominal GDP in 2009 ranked number 98 in the world at US$3678. China is currently experiencing a high level of inflation driven by high economic growth fueled mainly by the higher prices of food. The consumer price index (CPI), a main gauge of inflation, rose to 3.1 percent year on year in May 2010, exceeding the government target of 3 percent. CPI rise is becoming demand and cost driven rather than demand driven as earlier. The price pressures stem from excess liquidity because of the lag impact of 6–12 months from the four trillion yuan (US$585 billion) stimulus package in 2009 in response to the global economic slowdown, which prompted a record surge in loans of 9.5 trillion yuan (US$1.5 trillion). In...
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