Jörn-Carsten GOTTWALD

Clearly China, perhaps the world’s hottest market, does not need a major sports event to catapult an ailing economy back into growth mode, as was the case with the 2006 FIFA World Cup in Germany. On the contrary, the Chinese government will host the Olympic Games amid rumors of an overheating economy (growth accelerated to more than 11 percent in the first quarter of 2007). China possesses the largest foreign reserves of any country in the world — the government can spend lavishly to produce ultramodern stadiums for the games and to upgrade Beijing’s infrastructure.

However, officials estimate that the 2008 Olympic Games will add 0.8 percent to Beijing’s annual growth rate between 2004 and 2008, adding $13.2 billion to the capital’s economic output and 1.82 million jobs. Tourism, infrastructure, finance and insurance, retail, and wholesale are among the economic sectors that will profit most from the games. Investments in hotels are running high because Beijing expects an additional two million tourists, 300,000 of them from overseas, to visit in 2008, spending an average of $150 (domestic tourists) and $1,050 (overseas tourists).

However, assessing the impact of a single event on the macroeconomic development of an economy is difficult, and in most cases the ex-post analysis of costs and contributions to economic development has had to be revised considerably. Some observers even argue that there is no proof of long-term economic benefits at all from large-scale sporting events.

The official budget for hosting the Olympics is a state secret too sensitive to be revealed even to the National People’s Congress, formally the highest state organ in China. Some of the investments are disappearing in the labyrinthine bureaucracy of China’s two-tier economy and are impossible to quantify; in any event, statistics on China’s record-breaking economic development over the last twenty-odd years have a remarkable history of academic doubts and ex-post corrections.

The Olympics as Civic Boon

Cities the world over mount energetic and elaborately detailed plans in order to win the approval of the International Olympic Committee to host the Olympic Games. Such campaigns are underpinned by various motivations: civic and national pride and prestige, political gain, economic benefit. The quest by Los Angeles to host the Olympic Games provides an early example. A desire to promote the City of Angels as a tourist and vacation mecca, as a climatically healthful place in which to live, and as an area of great economic potential through the investment of capital for handsome dividends prompted Los Angeles to bid for the Games of 1920. Pierre de Coubertin’s intent to hold the 1920 (Antwerp), 1924 (Paris), and 1928 (Amsterdam) Games in Europe stalled the Los Angeles bid. But the persistence of William M. Garland and his Los Angeles colleagues finally paid off and the city received the Games for 1932.

By the eve of the Games of the Tenth Olympiad, the United States, indeed much of the world, was in the midst of a devastating economic Depression. Despite this, the Games went on, and, it might be argued, in glorious fashion. Funding much of the festival from a $1 million state appropriation gained through a public referendum, the main events were held in the relatively new Los Angeles Memorial Coliseum. An Olympic Village was built for the first time, but only for men; the women were accommodated in the Chapman Hotel in downtown Los Angeles. Were the expectations of California’s tourist and land speculators realized as a result of bringing the great world sporting spectacle to Los Angeles? One has only to gaze on the City of Los Angeles and the State of California today to arrive at the answer.


Tourism and Construction

The most obvious economic impact of the 2008 Olympics is on two major sectors—construction and tourism—but even in those sectors, quantifying the direct impact of the games is difficult because both sectors have experienced continuous growth in recent years. Reports of 10,000 hotel beds added in Beijing appear impressive, but then, China is considered to be a hot spot for hotel investment anyway, having become a must-see destination. More important, the lack of qualified service personnel is said to remain unresolved in spite of efforts by the municipal and central governments. Undoubtedly the campaigns to introduce international standards in behavior and communication and to widen the spread of English among taxi drivers, restaurant staff, shop owners, and so on will have lasting effects on the development of Beijing’s service sector if the campaigns result in a sustained and sustainable improvement in human capital.

The boom in the construction sector has been a double-edged sword for China’s long-term economic modernization. Overall investments in 2002–06 reached a level that caused concern among economic analysts and policy makers alike, but the central government’s attempts to rein in growth through economic measures such as hikes in interest rates and political measures such as pressure on local and regional leaders has had only limited success.

A Positive Influence or a Negative One

Although the modernization of Beijing’s infrastructure and municipal buildings is definitely an asset to the people living and working in China’s capital, the contributions to gross domestic product are, as mentioned above, hard to estimate because no one can know how much money would have been invested in Beijing without its successful bid for the Olympics. Then too, the benefits accruing from the Olympics are at least partly countered by the potential harm that may be caused by a real estate and investment bubble—for example, residents of Beijing have found that affordable apartments are harder to come by in the run-up to the Olympics.

Most investors agree that the Chinese government has done everything in its power to prevent a financial crisis during the run-up to the Olympics. One of the most striking features of China’s financial markets is the dominance of the state as a central actor who owns most of the shares of most of the companies, controls nearly all of the brokerages, governs the exchanges, and limits the market entrance of foreign firms. However, although from a social perspective the prevention of a financial crisis is one of the most important tasks of any government, in the case of China, efforts to prevent such a crisis may mean the delay of desperately needed reforms for the sake of public appearance.

Sports Media in China

Newspapers in both developed and developing nations dedicate some 15–20 percent of their editorial space to sports reporting for the simple reason that sports draws readers. On the whole, coverage focuses on the sports of most interest to educated, middle-class readers, and it varies dramatically from country to country and even region to region. The world of sports media also includes magazines, television, radio, and the Internet.

Sports coverage in China, naturally, focuses on the country’s most popular sports, and ranges from national and international competitions to information about various national fitness program. China Sports Daily, the first leading sports newspaper, is an official publication of the General Administration of Sport. Other more specialized newspapers have appeared, as well, including Sports in the South and Football, and there are more than one hundred sports magazines in China — not yet rivaling the U.S. or some European countries, but still a large number with considerable popular influence.

Almost every radio station in China broadcasts sports programs, ranging from news and competitive events to fitness exercises, but televised sports programs are broadcast mainly by CCTV-5—the most important and popular sports channel—as well as by regional and international satellite sports channels. Many sports fans now also go to the Internet to read sports news, watch matches, and play electronic sports.

Media at the Games

In the 2001 bidding procedures for the 2008 Games, Beijing assured the International Olympic Committee “that there will be no restrictions on media reporting and movement of journalists up to and including the Olympic Games.” The Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG) established a media operations department four years before the start of the Games to serve the foreign journalists covering the events and the more than thirty foreign television networks broadcasting the Games around the world.

The presence of so many foreign media representatives—estimated at over 20,000—may well have an effect on Chinese media professionals and the companies focusing on sports, as Chinese reporters have a unique opportunity to interact with and learn from their Western colleagues.

QIU Xiaohui

Transparency and Accountability

The lack of transparency and accountability within China’s socialist market economy hinders analysis of the economic impact of the Beijing Olympics. When a Beijing newspaper quoted a government document that cited an increase of about $700 million on the original estimates of $1.34 billion for the cost of the games, the newspaper was censored. Pressure from the National People’s Congress on the Chinese leadership to disclose to it the budget for the games led to nothing. In official statements, the Chinese government reiterates its position that total expenditures remain close to those of the 2004 Olympic Games in Athens ($1.4 billion planned, $2.2 billion spent).

Calling for improved transparency and accountability, though, was hardly an act of defiance by the Congress. The Chinese leadership under HU Jintao 胡锦涛 sacked a number of high-ranking Communist Party officials, among them the mayor of Shanghai and the vice secretary of the Beijing Chinese Communist Party, who headed construction work for the Olympics, referring to their embezzlement of public funds and to massive corruption.

Publicly acknowledging party officials’ corrupt behavior in the last few years serves several political purposes: it is an attempt to stem the illegal transfer of state assets into private bank accounts, and it also addresses one of the most urgent grievances in the everyday lives of the people of China.

Questions Remain

During the preparations for to the Olympics, the whole world has seen Beijing’s remarkable economic success. Whether the investments in Beijing’s infrastructure would have occurred without the games and whether these stimuli truly add .8 percent to Beijing’s growth rate are of secondary significance. Obviously China does not need the Olympics to add dynamism to its incredible socioeconomic transformation. The more urgent question is the impact of hosting the games on China’s emerging socialist market economy. Raising public awareness, introducing measures to improve the sustainability of the economic boom, battling corruption, and improving the working conditions of foreign journalists all may contribute to an increase in transparency and accountability in China’s policies—and if transparency and accountability increase, then the economic impact of the games will be tremendous.

Source: Gottwald, Jörn-Carsten. (2008). The economic impact of the Olympics. In Fan Hong, Duncan Mackay & Karen Christensen (Eds.), China Gold, China’s Quest for Global Power and Olympic Glory, pp. 109–112. Great Barrington, MA: Berkshire Publishing.

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