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Economist: Olympic hangover impossible

By Yan Xianpu (China Daily)
Updated: 2008-08-04 11:41

As China gears up for the upcoming Beijing Olympics, economists are weighing the economic consequences of the Games, with some of them worried about an "Olympic hangover".

There are basically three opinions regarding the economic impact of the Beijing Olympics. One is that unlike previous profit-making Games, the huge investment in the Beijing Games will incur losses.

The second is that a substantial economic downturn will occur following the Olympics.

The last view is that the favorable social and economic impact of Olympics would be enormous and long lasting.

In my view, the Olympics would not lead to an economic hangover and instead will benefit China's economic restructuring.

Seen from experiences of the host nations of the past eight Olympic Games, six of them recorded accelerated growth in the year of the Games.

Moreover, given the different development phase of the host nations, the impact of the Olympics is different.

For example, the economic scale of Greece, host of the 2004 Athens Olympics, was $185 billion while that of Australia, host of the 2000 Sydney Olympics, was $390 billion. China's economy is about 16 times that of Greece and eight times that of Australia.

The ratio of the Olympic-related investment to the overall economy, therefore, would be much smaller. And the large scale of the Chinese economy means the fluctuations some other Olympic hosts had suffered may not be that drastic in China.

After the Olympic Games, some Olympic-related industries may hit the skids, but the Olympic effect would benefit some other sectors, such as information, sports, travel, culture and exhibition, which are combined to serve as the new growth points of the national economy.

Experts estimate that the Games would produce a total of $71.7 billion in revenues during the 2003-10 period.

The Games will leave some unique Olympic heritage for the host city, which will help it promote local travel, exhibition and sports industries. The boost for the city's exports and internal trade, for example, may surface within three years after the Games.

Beijing could also take advantage of the Games to continue its urban development and promote higher value added industries, such as hi-tech and services.

The Olympic Games provides an opportunity for China to show the world what it is like and the enhanced understanding will promote China's foreign trade and cooperation.

Regarding investment, despite the rising labor costs, China still has its advantages. It is the fastest developing economy in the world in the past three decades and boasts advanced infrastructure and industrial networks.

Consumption, which has replaced exports to become the No 1 driving force of economic development, is expected to continue to grow after the Olympics.

The hosting of the Olympic Games would mainly benefit eight industries, including travel, commerce, real estate, construction, transport, sports, information and telecommunications, helping to increase investment in those sectors.

The main beneficiary is the travel industry. It is estimated that there may be 800,000 tourists from abroad and 2 million from within the country. They will contribute to Beijing's travel revenues.

Meanwhile, the number of tourists in Beijing for the Olympics only accounts for 0.168 percent of the total travelers in this country last year, which means the industry will not suffer a sharp downturn after the Games.

The sports and leisure industry is also growing rapidly, thanks to the Games. It is estimated that the overall investment in this industry has amounted to 200 billion yuan, with an annual turnover of 60 billion yuan.

The Olympic Games would also bring in extra retail sales. It is estimated that during the 2002-07 period, the directly produced retail sales in Beijing amounted to 53.9 billion yuan.

The real estate industry is Beijing, meanwhile, may not encounter the bottleneck other host cities had met. From a historical perspective, many countries had seen housing prices drop in the host cities. In Beijing, however, the strong demand would not lead to a drastic correction in the real estate market.

The Olympics will also promote development of IT, construction and clean-fuel cars.

The Games, therefore, would definitely push economic growth.

Experts estimate that the Games will bring an extra 105.5 billion yuan to Beijing's GDP during the 2004-08 period.

Nationwide, the overall economic benefit, including both direct and indirect benefits, of the Olympics would be about 600 billion yuan.

The author is a senior expert with the National Bureau of Statistics. The views expressed in the article are his own.