Economic significance of Beijing Olympics
By S.M. Naseem
They have also provided China the opportunity to showcase the hybrid political and economic system it has evolved in the last three decades, which with all its faults, remains the envy of the rest of the developing world, notwithstanding the disparaging term used to describe its system as “authoritarian capitalism”.
China has surprised and even piqued many of its Western economic competitors how quickly it had adapted to the free market economic system, at least in its dealings with the external world and often beat them at their own game. Its entry into international organisations, including the most demanding in terms of adherence to strict rules, the World Trade Organisation (WTO), had been fairly easy and the western world relied on its fairly moderate stance on the negotiating table.
The holding of a mega-event such as the Olympics is a huge financial gamble. Most countries and cities holding them have ended up paying for them until years after they were held.
Montreal, for example, needed more than 20 years to pay off the cost of hosting the 1976 summer games. Although initially a country hosting the Olympic games can experience an up tick in its GDP growth rate due to heavy expenditures on the building of infrastructure and the income from broadcast leases, sponsorships and ticket sales, as well as the jump in tourism receipts in the Olympic year, the growth rate slows down after the completion of the event.
According to a study conducted by the Bank of China analysing 12 previous Olympic events, nine experienced a significant dip in GDP growth rate following their respective games.
After the Tokyo Olympics in 1964 and the Seoul Olympics in 1988, both the Japanese and South Korean economies, which — like China — had experienced double-digit GDP growth in the years previous to the holding of the games, slowed by more than two percentage points.
In the case of Beijing, the estimated 430,000 jobs created by construction for the games will be lost when the projects are completed, diminishing what had appeared to be a huge surge in employment.
The direct economic benefits to the Chinese economy have been far frominsignificant. Besides creating more than two million jobs, the games boosted tourism in China well before they began, and a half-million more visitors are expected to travel to Beijing in August.
Overall, the Olympics are likely to have contributed significantly to China’s 2007 GDP growth of 11.4 per cent —the nation’s highest in over a decade. As explained, Chinese growth is likely to slow down after August, 2008.
Among the new infrastructure projects undertaken in Beijing a new subway system and new highways, the expansion of its airport, and improvement of its sewage system, besides the construction of the ultra-modern Bird’s Nest (which is coincidentally also the name of a favourite Chinese soup), stadium are the most costly.
The total cost of the Beijing Olympics is estimated at a hefty $20 billion, with the sparkling new Beijing National Stadium costing about $420 million and information technology and communications another $400 million.
However, one of the main benefits of the Games was the promotion ofcommercial interests, both of the Chinese and multinational corporations. Some of the biggest corporations in the world, such as McDonald, Coca-Cola, Samsung, General Electric, Google and IBM were sponsoring the Beijing Olympics. Their main motivation was to get a foot in the vast Chinese market by creating ties to the Olympics. Essentially, the Olympic Games are a massive TV show which provide an unrivalled vehicle for advertising commercial products, which in turn are the main sources of income of the organisers of the Games, as also augment the incomes of some of the top athletes chosen to sponsor the products.
One of the industries that has most profited from the Beijing Olympics is the global homeland security industry, whose worth since 9/11 has grown to more than $200 billion globally. The Olympics have helped China set up a brand new surveillance system, called the “Golden Shield’ which includes 300,000 security cameras and an estimated 100,000 security officers on duty in Beijing.
The Chinese are estimated to be spending $30-40 billion on their homeland security system, which is being used, in addition to providing security to the Olympics, for monitoring and controlling many other domestic concerns, such as “anti-state” activities.
American high-tech surveillance firms have been able to circumvent the US ban to sell police equipment to China imposed after Tiananmen Square two decades ago, under the cover of providing security to the visitors of the Olympics, which included the US President, along with 80 other dignitaries.
Most developing countries’ aspirants for future Games will have to think twice and learn from the Chinese example of turning a huge challenge into an enormous opportunity for future development before making a bid.