Page last updated at 07:54 GMT, Monday, 16 June 2008 08:54 UK

Will China's economy perform at Games?

By Bill Wilson
Business reporter, BBC News

A Chinese salesgirl shows Olympic badges and souvenirs on sale at an official outlet in Beijing
There is not expected to be huge growth from souvenir sales

With China's economy running, leaping and jumping ahead, it seems logical to assume that hosting the Olympic games in August will provide another commercial stride forward.

Thousands of tourists will flood into the country for the games in Beijing. Hotels will be filled and millions will be spent on tickets, consumer goods and souvenirs.

Experts also predict that the Olympic Games could kick-start other economic sectors, including those of tourism, finance, culture, exhibition and sports.

Tourism boost

Chen Jian, secretary general of Beijing Olympic Economy Research Association, predicts the 2008 Olympics will also continue to benefit the country's tourism industry for about a decade after the event.

The proportion of the Chinese economy tied to the Olympics is actually quite small
Tim Burroughs, China Economic Review

His association forecasts 600,000 foreigners will pour into the capital for the games. Some 4.5 million foreign tourists are expected to come to Beijing this year, spending a total of $4.8bn to $4.9bn.

But for every success of the type experienced by Seoul, which brought its brands to a world market, or Barcelona, which boosted its tourist profile, there are the more recent examples of Sydney and Athens, which both saw post-Olympic economic slowdowns.

So, despite the impressive pre-game statistics, will the Chinese economy be gold-medallists or also-rans come August?

Visitors in front of the Olympic Games countdown clock in Tiananmen Square in Beijing (4 June)
Thousands of tourists will flock to Beijing this summer

According to Tim Burroughs, editor of Hong Kong-published monthly business magazine China Economic Review, the situation will be somewhere in between.

"The proportion of the Chinese economy tied to the Olympics is actually quite small," he observes.

"If you take the games in Atlanta in the US in 1996, the percentage of the Beijing games as part of the national economy is comparable to the situation back then."

He adds: "But there are other considerations - it is all about the symbolism.

"We have a lot of Chinese companies that two years ago were not looked upon when it came to wider brand investment, and are now."

Brand hopes

Computer maker Lenovo and other brands have looked at it as a way of projecting themselves both at home and abroad.

Lenovo is the only Chinese firm that is a topline partner for the 2008 games - that is, a global partner - and the games offer a chance for its name to be seen around the world.

Beijing has spent a lot on infrastructure, including sports and other facilities
Tim Burroughs, China Economic Review

And other brands, looking to increase sales at home, will be spending money to be associated with the Olympics.

The two biggest dairy firms IN China have spent 1bn yuan on Olympic marketing to get people to eat their yoghurts and other products.

"If you look at the demand for tickets, the public enthusiasm is tremendous, but whether that translates into great revenues for firms that have tied themselves to the games remains to be seen," says Mr Burroughs.

Badminton medal hopeful Xie Xingfang of China
The sportskit sector could expand in China after the games

Some of the biggest beneficiaries of the games could be sports kit makers.

As well as the giants of Adidas and Nike there is also Li-Ning, the top Chinese sportskit maker, which is looking for a boost from the Beijing games.

"If you get enthusiasm for participation and enthusiasm for sport, that would kick-start it as an industry."

But Mr Borroughs points out that the sale of games-related merchandise - such as T-shirts, badges and other souvenirs - will have a minuscule effect on the economy.

'Slight decline'

However, while analysts have noted a post-Olympic downturn following previous games, because of its smaller proportion of the greater economy, this may not be an issue in China.

After the dramatic increase in investment in the pre-Olympics stage, accompanied by a boom in consumption and revenues, investment and consumption traditionally shrink in the post-Olympic stage.

There are special features that are likely to mute the magnitude of this[post-games] slowdown
Morgan Stanley

There is also the burden of maintenance cost for idle Olympic venues, as well as potential downturn in use of new games-related infrastructure.

"Beijing has spent a lot on infrastructure, including sports and other facilities," says Mr Burroughs.

"But a question remains about whether these facilities will get proper use after the games have gone.

"The transport system will, I should think, with several new underground lines.

Beijing Olympic mascots
Any Beijing slowdown may be offset by other parts of the country

"But the hotel industry is going to experience a slight decline, although all the major chains say they will get over it. There will definitely be a slight oversupply of rooms after the games."

According to Stephen Jen and Luca Bindelli, authors of a report for Morgan Stanley looking at post-Olympics: "There are special features that are likely to mute the magnitude of this slowdown [in China]."

They say China's economy is bigger and more diverse than many previous hosts.

Any that any slowdown in spending in Beijing may be offset by growth in the rest of the country.

'Macro-economic growth'

But Mr Burroughs says: "What everyone is talking about is what is going to happen in the fourth quarter.

"Corporate profits are going to go down in China. In the past year, they have reported high income, because in the past companies have been investing in the stock market and done rather well.

Chinese investor stares at stock market board
Chinese investors are looking towards company results post-Olympics
"But their earnings this year will not be as high as a year ago.

"Profits are as much tied to China's macro-economic growth, for firms domestic and overseas, as they are to the hosting of a sporting event."

Meanwhile, the Beijing Olympic Economy Research Association hopes the games will be a major boost to China's service sector, which currently accounts for 30% of the nation's GDP, compared with 65-75% in developed nations.

And it believes a booming service industry after the games can increase job opportunities and improve living standards in China.




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