Demographic Factors'influence Mechanism On Trade Balance:An Empirical Analysis

China's trade surplus has been lasted for seventeen years long and caused widespread focus and debates in the international community and the educational circles. China's ongoing and large trade surplus has once again become a hot topic and even the object of criticism in the international community since the eruption of the international financial crisis in2008. Some foreign scholars have even holden the opinion that the imbalance of the global economy is caused by China's over-exporting. In this situation, the voice of calling for the appreciation of RMB has been louder and louder in the international community and trade protectionism is coming back in some countries. From a domestic perspective, the government is facing external pressure in terms of making macroeconomic policies and the imbalance between internal and external economy has hinder the industrial upgrading. Both the international and domestic situation requires us to conduct an in-depth analysis on the causes of China's trade surplus and to pay close attention to the trend of China's trade balance.Many scholars has studied on China's trade surplus from the perspective of the international division of labour, foreign exchange rate and foreign direct investment. In recent years, some scholars tried to find the demographic factors'impact on trade surplus. However, they only focused on one aspect of demography, resulting ineffective policies. The impacts of the main three aspects of demography, the he population age structure, labour mobility and human capital, on trade balance were studied in this paper. The analysis was not only concentrated on the forming process of China's trade surplus but also its trend.Based on international industrial transfer theory, comparative advantage theory and othe related theories, the impacts of the population age structure, labour mobility and human capital on trade balance since the reform and opening up were discussed from the macro and micro level. The results showed that the demographic factors promoted export largely and tended to cause trade surplus. Since the reform and opening up, the comparative advantage of China's foreign trade has been low labour cost which is provided by the population age structure and strengthened by the labour mobility. With the change of population age structure and the growth of human capital, the current comparative advantage will be replaced by a new advantage based on human capital. The new advantage may form a new foreign trade structure which might help to reduce the imbalance of China's foreign trade. However, the export impetus from demography are still existing, so China's trade surplus would be lasting.An empirical analysis was also carried out in this paper using the VAR model based on the data from1979to2009. Cointegration analysis showed that the population age structure, labour mobility and human capital respectively had long-term equilibrium relationship with the trade balance, and the trade balance also had a long-term and stable equilibrium relationship with the above three variables. Based on vector error correction model, the empirical results showed that the above three variables had the uncertaint impact on trade balance in the short term. Granger causality test showed that the short term the above three variables were granger reasons of trade balance and the trade balance was coefficient result of the six selected variables. However, the impulse response and variance analysis showed that labor mobility influenced the trade balance a lot in the short term.After the above-mentioned analysis, a summary was conducted and policy suggestions were proposed. Finally, further research was pointed out.