## Spillovers from Migration and China's Transition

_IMF News, September 27, 2016_

## Source details

**Canonical URL:** [Spillovers from Migration and China's Transition](https://www.imf.org/en/news/articles/2016/09/26/am16-na270916-spillovers-from-chinas-transition-and-migration)

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## Bibliographic details
- Published: September 27, 2016

---

### Overview and key finding
- Publication date: September 27, 2016
- Key finding: "1 percent increase in migrant share in adult population results in 2 percent higher GDP in the long run."

### Spillovers from China's transition
- Channels of international influence:
  - Trade: countries exporting machinery and raw materials to China face reduced appetite for their products and commodities; Asian suppliers are particularly affected.
  - Commodity prices: lower Chinese demand can reduce prices due to China’s large share of global consumption of metals and oil.
  - Financial channels: reactions of asset prices in other countries to events in China can amplify spillovers.
- Implications:
  - A well-managed transition to lower but more sustainable growth would reduce risks of a more disruptive adjustment later.
  - A bumpy or incomplete transition could exacerbate negative ripple effects.

### Policy recommendations for China and its partners
- For China:
  - Accept the slowdown and communicate policy intentions clearly.
- For China’s trade partners:
  - Adjust to a permanently lower Chinese demand.
  - Use available resources to tweak growth models.
  - Encourage trade through new global and regional agreements.
- For commodity exporters:
  - Use buffers where available.
  - Rearrange economic plans toward new revenue sources.
- For low-wage, labor-rich countries:
  - Potentially benefit from China moving up the production value chain by taking up higher-value manufacturing and production.
- Global recommendation:
  - Avoid protectionism, which would be detrimental to trade over the long term.

### Migration: macroeconomic effects and mechanisms
- Long-run effect on host-country GDP per capita:
  - A one percentage point increase in the share of migrants in the adult population could increase GDP per capita in host countries by about 2 percent in the long run.
- Skill composition effects:
  - High-skilled migrants contribute positively to host economies.
  - Lower-skilled migrant workers can raise productivity growth indirectly (for example, enabling high-skilled local women to return to or spend more time at work).
  - In the long run, host economies can benefit from migration of both high- and low-skilled workers.
- Demographic benefits:
  - Migrants, predominantly of working age, can offer some relief for an aging population.

### Challenges in countries of origin
- Consequences of emigration:
  - Departure of the young and the educated can take a toll on long-term growth.
  - Loss of human capital translates into lower productivity, worsening of skill composition, and dampened tax revenue.
- Mitigation:
  - Some losses can be mitigated through remittances and diaspora networks.
  - Ultimately, origin countries should tackle the triggers that drive outmigration.

### Challenges and policy responses in host countries
- Social and political challenges:
  - Arrivals can provoke social tensions, security concerns, and political backlash.
- Short-run fiscal implications:
  - Policies to facilitate integration are costly in the short run and can add fiscal pressure.
- Integration policies and benefits:
  - Swift labor market integration is key: improved labor market policies, access to education, and support to migrant enterprises help migrants obtain and keep jobs and increasingly contribute to fiscal accounts.
  - Better social integration can reduce tensions with mainstream society.
- Labor market effects:
  - Labor market integration is complex due to language barriers and lack of recognition of work experience and skills.
  - The study finds migrants do not affect labor conditions of native workers significantly.
  - In the long term, migrants increase labor productivity, which raises income levels for all.

*IMF News — Spillovers from Migration and China's Transition (September 27, 2016).*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Research](https://www.imf.org/en/news/search)
- [http://www.imf.org/external/pubs/ft/weo/2016/02/index.htm](http://www.imf.org/external/pubs/ft/weo/2016/02/index.htm)
- [new study](http://www.imf.org/external/ns/cs.aspx?id=29)
- [IMF spillover reports](http://www.imf.org/external/ns/cs.aspx?id=316)
- [China’s rebalancing explained (blog)](https://blog-imfdirect.imf.org/2016/09/06/chinas-rebalancing-explained-in-6-charts/)
- [Migration in Europe (blog)](https://blog-imfdirect.imf.org/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2016/09/26/am16-na270916-spillovers-from-chinas-transition-and-migration_