Closure Development and Forecast Simulation from 2020 to 2030

This chapter provides a comprehensive explanation of how to develop a closure for forecast simulation, an integral part of baseline development, with a focus on the Chinese economy. Additionally, we illustrate how to take into account possible future changes that may cause the Chinese economy to deviate from its historical growth path. Compared with the historical period 2012 to 2019, the key features of the forecast simulation results for the period 2020 to 2030 include: (1) Real GDP growth in the forecast period is lower than in the historical period mainly due to the negative growth in the labour force and the consequent lower growth in capital stock; (2) China has to rely on productivity improvement to sustain its economic growth; (3) Real wage will keep growing at a higher rate reflecting the continuous strong technology improvement and declining growth in the labour force; and (4) growth of imports will be higher than that of exports, therefore China’s trade surplus will further decline.