Olympic games and Chinese economy - Essay Example

The Economic Impact the Olympic Games Will Have on the Host Nation China in 2008 For many countries which have not won a single gold medal in thehistory of the Olympic Games, the quest for an Olympic gold is a major challenge, a gargantuan task towards national recognition and excellence. But for a few countries which have consistently excelled in the quadrennial Games, there is a more lofty ambition for them than just winning the gold -- that is to be chosen as official venue of the world's biggest sporting event in modern times. Next year, that distinction belongs to Beijing, an ancient city north of China, which is in the forefront of China's surging economy and the center of its political power. In the history of the Olympic movement, China is only the third Asian country - after Tokyo in 1964 and Seoul in 1986 - to host the prestigious Games. The International Olympic Committee chose Beijing over several other aspirants that included Toronto, Paris, Istanbul, and Osaka. The cities of Bangkok, Cairo, Havana, Kuala Lumpur, and Seville also submitted bids to host the Games, but failed to make the shortlist in 2000. (2008 Summer Olympics, Wikipedia) Beijing is the fourth city - after Berlin (1936), Mexico City (1968), and Moscow (1980) -- under authoritarian rule to host the games. Its officials welcome the selection as an opportunity to showcase its newfound economic prosperity and to project a more positive image to the rest of the world. While economists believe Beijing is certain to achieve its grand objective of showcasing its vibrant economy and projecting a more positive image in the eyes of the world, they are in disagreement over the Games' immediate impact on its economy. Soon after the announcement was made on the choice of Beijing as the next Olympic site, (Beijing Olympics 2008) the Chinese government announced that it will earmark $20 billion to modernize the city's infrastructure and facilities to improve its woefully polluted environment in time for the Games. That announcement alone is enough assurance that the Olympic Games is bound to spell a dramatic transformation for Beijing, although this figure has already doubled as of the latest count. It is commonly assumed that the scale of an Olympic event and the scale of the preparations for it will create large and lasting economic benefits to the host city. Economic impact studies confirm these expectations by forecasting economic benefits in the billions of dollars. Goldman Sachs Asia has made one of the more aggressive forecasts, predicting that the Games will increase China's GDP growth by 0.3 per cent annually between 2002 and 2008, citing service sectors such as tourism, transportation, information technology services and logistics as the areas for the greatest growth. On the other hand, JP Morgan said the event would increase GDP by no more than 0.05 per cent per year, a figure that hardly makes a difference in China's impressive double digit annual economic GDP growth. "The divergent views are due to different assumptions," said Huang Yiping, an analyst at Salomon Smith Barney. Those who are unmoved by the Games' economic drawing power claim no evidence of positive economic impacts from mega-sporting events even remotely approaching the estimates in economic impact studies. In a study of the impact of Super Bowls on local economies, (Robert A. Baade and Victor Matheson, 1999) found "no measurable impact on spending associated with the event." Their explanation is that capacity constraints in the hotel industry cause room prices to increase with no change in occupancy rates. Higher rates contribute to the crowding out of regular traffic and net spending in areas other than hotel rooms changes little, if at all. The same report claims that longer term sports programs, usually involving stadium subsidies to attract or keep professional teams, have also failed to deliver on projected economic benefits. Even for cities that usually are considered success stories for sports development strategy, such as Baltimore and Indianapolis, empirical research does not find evidence of statistically or economically significant positive impacts, although "the promise of worldwide exposure and economic gain has made hosting these major and regularly scheduled sporting affairs a lucrative goal for aspiring cities around the world." (Robert Baade, p. 320). The report is likewise unimpressed over the immediate economic impact of new infrastructures, but it accepts the mercantilist premise of economic impact studies that the path toward wealth is through increased foreign trade. Expenditure associated with the sports events is merely likely to be switched spending, which offers no net economic stimulus to the community, and it should not be counted as economic impact" (Baade, p. 26). By elevating the importance of exports over the local consumption critics have embraced the notion that only projects that generate exports are valuable as there are no substantial economic benefits from local consumers. Apparently, China is unperturbed, if at all, by such claims and so are the other countries who continue to aspire to be chosen as an Olympic site for the prestige and honors it brings. London, which recently won the honor to host the Olympiad in 2012 over Madrid, Moscow, New York, and Paris, has started embarking on a massive preparations to host the Games, while several more cities - Chicago, Los Angeles, Tokyo, Prague, Madrid, Milan, Rome, Rio-de-Janeiro, and the relatively unknown city of Bacu from the former soviet republic of Azerbaijan --are locked in battle for the right to host the Summer Games in 2016. (Jeffrey Owen, 2-3) The same report concedes that the more pronounced benefits or economic impact of the Olympic Games is its longer term benefits, oftentimes referred to as "Olympic Legacy." These legacy effects, derived from positive publicity from the Games, include increased tourism after the Games, more business, and infrastructure investments that improve the urban environment. Legacy impacts are generally not incorporated into the economic impact numbers, but rather offered as an additional, unquantifiable benefit. While there are some who undermine the immediate and direct economic impact of the Olympic Games, there are others who see in the Games not just prestige, but an actual economic windfall. London, which had also hosted the Games in 1908 and 1948, envisions an economic windfall of $7 billion from the Games. Some of those bidding for the right to host the 2016 Olympic Games had previously hosted the event in the past - Rome (1960), Tokyo (1964), and Los Angeles (1984). Chinese officials said they are happy to breakeven, but are prepared to spend whatever it takes to make the Games a success. In a report to the Chinese Congress, Chinese Premier Wen Jiabao said Beijing will spend an extra $5.2 billion on schools, hospitals, crop subsidies and other programs to help the poor countryside, home to 800 million people, and others left behind by China's economic boom. China is also spending lavishly on Olympic preparations. A considerable investment is going toward new subways and other infrastructure improvements that will benefit Beijing long after the games. About $2.4 billion is going toward construction of Olympic venues alone and another $35 billion to $40 billion on urban renewal. Projects range from new power, water and sewage treatment plants to the world's largest airport terminal. These new infrastructures are designed to improve mobility within the city, house athletes and guests, and provide comfort to everyone coming for the Games, yet they are also meant to be used long after the Olympic flame is extinguished as new housing facilities for Beijing's growing population, offices for government personnel, improved mass transport system for local commuters, etc. Moreover, they are also the same necessary infrastructures that foreign investors need for their foreign expansion plans. Despite China's conservative assessment, every Olympic game since 1976 has made a profit. If things go according to plan, Beijing may gross up to $300 million as surplus from 2008 Olympics. (Nick Hopkins) It has gotten the full support of the Australian Trade Commmission, the Australian group responsible for the largely successful Sydney Olympics in 2000, to ensure that its financial targets are met. Apart from the venues, Beijing has taken a massive undertaking on improvement and expansion of city's infrastructure to handle influx of more than half a million athletes, sports officials, and tourists expected during the event. Beijing will have a capacity of more than 130,000 star-rated rooms in addition to many service apartments being constructed in Olympic village to house the participants. Four new subway lines spanning 300 km is under construction and should be ready before the Olympics. This would mark one of the fastest expansion of underground subway system seen anywhere in the world. Apart from this, money is being poured on the construction of 600 km of highway around the city to make travel more efficient. The Beijing airport is being renovated and the capacity expanded to handle 60 million passengers every year making it one of the biggest airports in the world. As much as 95% of city rubbish has been given pollution-free treatment and Beijing will complete planting of a 533-hectare forestry project near the airport and Olympic venues by the end of this year. Two water-recycling plants will also be built. The Beijing Olympics in 2008 will generate 1.8 million new jobs in the host city, says the Beijing Municipal Statistics Bureau. The investment made is forecast to raise the city's gross domestic product by an average of 0.8 percentage points per year. (Nick Hopkins, CNN World) The Beijing 2008 Olympics will trigger a flood of investment from major international corporations in China, analysts say. The chance to use the world's highest profile sporting event as a marketing platform in the world's most populous nation promises investment above and beyond the up-front investment required to stage the Games. A great deal of attention has also been given on softer side of hosting such an event, with more than half a million local residents signing up as volunteers to support the event and are being trained to speak other languages, particularly English. A conscious effort has been undertaken by local police and taxi drivers in learning conversational English. CONCLUSION Since July 13, 2001, when China was awarded the right to host the biggest sporting show on earth, the Beijing Organizing Committee Olympic Games (BOCOG) has been working tirelessly for its success. While much of its work is focused in ensuring the Games' success, an equally important part of its function is to ensure that the necessary support facilities, infrastructure, and environment are in place. For China, the Olympics Games is not just an ordinary event; it is not just a major sporting event with far-reaching business possibilities. It is its first major "coming out" party after years of isolation as a "sleeping giant," it is its biggest opportunity to meet the world as a gentle friend and host. The cost to host the party is a staggering $40 billion, perhaps even more. But the entire amount is not to be taken out of its coffers. There are corporate sponsors who are just too willing to ride on the goodwill of the Games and are willing to shoulder part of the tab. About half a million athletes, sports officials, tourists, and businessmen are expected to watch the games and will stay in hotels, dine in restaurants, and explore the city for souvenirs and other bargains. They, too, will help shoulder the cost of staging the Games with their purchases. Chinese organizers expect to recoup their expenses and, at least, breakeven at the end of the Olympic frenzy next year. This is a conservative estimate by any standards because every Olympic Games since 1976 has made a profit. So far, Beijing has attracted more than $1 billion in sponsorship compared to $685 million made by Athens in 2004. Independent analysts believe Beijing can pull the most profitable Olympics ever, surpassing the surplus of $224 million made by Los Angeles in 1984. Beijing had agreed to use the surplus in the games revenue, if any, to set up an Olympic Friendship and Cooperation fund for financing sports undertaking in developing countries, a commitment that Beijing officials are expected to pursue if target are not met given their vigorous efforts to raise their profile internationally and project a better image. After all, Chinese people are generally warm and friendly, but have been projected otherwise because of the bitter "cold war" of the past. Works Cited: Periodicals Owen, Jeffrey G. "The Fall." Industrial Geographer 2005: 2-3 "Beijing Aims at Lively, Cultural 2008 Olympics." People's Daily April 7, 2007 "The Beijing 2008 Olympic Bid." Coyne & Blanchard, Inc. May 14, 2006. "Programme of the Games of the XXIX Olympiad Beijing 2008." International Olympic Committee May 15, 2006. Work Cited: Electronic Robert A. Baade and Victor Matheson. Bidding for the Olympics: Fool's Gold Nick Hopkins. Business Eyes Olympic Gold in Beijing. 13 July 2001. CNN World. Beijing Olympics 2008. 19 July 2001. Official Web site of the Olympic Movement. Read More