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Will China's economy perform at Games? Will China's economy perform at Games?
(about 18 hours later)
By Bill Wilson Business reporter, BBC NewsBy Bill Wilson Business reporter, BBC News
There is not expected to be huge growth from souvenir salesThere 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.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.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.Experts also predict that the Olympic Games could kick-start other economic sectors, including those of tourism, finance, culture, exhibition and sports.
Tourism boostTourism 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.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 ReviewThe 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.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.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?So, despite the impressive pre-game statistics, will the Chinese economy be gold-medallists or also-rans come August?
Thousands of tourists will flock to Beijing this summerThousands of tourists will flock to Beijing this summer
According to Tim Burroughs, editor of Shanghai-published monthly business magazine China Economic Review, the situation will be somewhere in between.According to Tim Burroughs, editor of Shanghai-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."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.""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.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.""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 hopesBrand hopes
Computer maker Lenovo and other brands have looked at it as a way of projecting themselves both at home and abroad.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.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 ReviewBeijing 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.And other brands, looking to increase sales at home, will be spending money to be associated with the Olympics.
The two biggest dairy firms have spent 1bn yuan on Olympic marketing to get people to eat their yoghurts and other products. 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."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.
The sportskit sector could expand in China after the gamesThe sportskit sector could expand in China after the games
Some of the biggest beneficiaries of the games could be sports kit makers.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.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.""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.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''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.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.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 StanleyThere 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.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."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."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."The transport system will, I should think, with several new underground lines.
Any Beijing slowdown may be offset by other parts of the countryAny 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.""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]."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.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.Any that any slowdown in spending in Beijing may be offset by growth in the rest of the country.
'Macro-economic growth''Macro-economic growth'
But Mr Burroughs says: "What everyone is talking about is what is going to happen in the fourth quarter.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."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 investors are looking towards company results post-Olympics"But their earnings this year will not be as high as a year ago.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.""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.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.And it believes a booming service industry after the games can increase job opportunities and improve living standards in China.