The effect the Olympic Games have had on the political, social and economic facets of each host country is something to which people around the world have always paid close attention.
For example, South Koreans gained a strong sense of national pride when the Olympics were held in Seoul, with the event bringing democratic advances and an increased openness in the country.
On the other hand, when the Olympic Games returned to its historic home of Athens, Greece incurred great financial losses as a result.
China has spent vast amounts of money in preparing for the Olympics and therefore, many people are watching to see how the Olympics will affect the country, especially its economy.
Recently released information from the Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG) shows that 13 billion yuan (US$1.9 billion) has been spent on the Olympics this year and a total of 280 billion yuan has been spent on urban construction in Beijing over the past seven years.
However, these estimates do not take into account the funds spent on the other co-host cities — Tianjin, Shanghai, Shenyang, Qinhuangdao and Qingdao. The Beijing Olympics is a major international sporting event that represents an opportunity for Chinese people to proudly showcase their country and themselves to the rest of the world.
Combined estimates show that direct and indirect expenditure on the Olympics could be as much as 500 billion yuan. This figure does not include the economic losses incurred by more than 120 businesses in Beijing, Tianjin and Hebei who have had to stop or reduce production to improve Beijing’s air quality during the Olympics.
For Beijing, the huge amount of money spent on the Olympics has not just been restricted to the construction of the 31 stadiums for use during the Games. More importantly, as it was preparing for the Olympics, Beijing improved its subway system, freeways, airport, communications infrastructure as well as the service industries that go along with these. This has given Beijing the conditions and environment to evolve into a truly modern international metropolis.
In political terms, few believe that one major international sporting event will produce significant changes in the Chinese Communist Party’s (CCP) authoritarian regime. However, the transparency of information the Olympics requires coupled with the strong concern the CCP has of its own image could slowly change its authoritarian rule of China.
In social terms, we should also pay close attention to the way in which Beijing’s grand opening ceremony, coupled with the medals won by Chinese athletes, will increase nationalistic pride and confidence, bringing the Chinese people in China and around the world closer together.
In an economic sense, the Olympics increased Beijing’s GDP by 1.14 percent last year and will increase it by another 0.85 percent this year.
Many people inside and outside China have held a generally pessimistic view of the Chinese economy over the past few years. This is mainly because they are looking at China’s financial expenditure while ignoring many of the internal and external factors that are influencing the Chinese economy.
Expansionary fiscal policy has been the main macroeconomic method used by the CCP to regulate the Chinese economy in recent years. From 1998 to 2002, the Chinese government adopted a policy based on increasing domestic demand and issued a total of 660 billion yuan worth of public debt to encourage investment and help resolve the inflationary pressures China was facing. In the financial year of 2003, during the SARS epidemic, government funds were invested in various ways to help the struggling economy.
Since 2004, although the Chinese government has carried out tighter fiscal controls on steel and iron, cement, aluminum and real estate, the money spent on Olympic construction has accounted for a great deal of government expenditure. It is well worth noting, however, that the money spent on Olympic construction has been less than the money spent on policies aimed at increasing domestic demand during the late 1990s.
In addition, while the Olympics have had a beneficial effect on Beijing’s economic growth, the Beijing economy is much smaller than the economy as a whole. Therefore, the effect of the Olympics on the Chinese economy has not been as high as originally expected.
There are many factors that have deeply affected the Chinese economy in recent years, such as increases in prices and the impact of excess liquidity on the stock market, a 21 percent appreciation of the yuan within three years, soaring international energy and raw materials prices, as well as changes in the Chinese investment environment, rising land costs, rising wages, the introduction of contractual laws for laborers, the levying of business income tax and lower export tax rebates to avoid an over-accumulation of foreign trade surplus.
China is facing a number of complex economic difficulties. For example, tens of thousands of privately run businesses may shut down this year in Guangdong Province alone. In order to solve these economic problems, the CCP is now focusing its economic policy on controlling increases in the price of goods while also maintaining steady economic growth.
Since Aug. 1, export tax rebate rates on textiles, clothing and products made from bamboo were increased again to lower the export pressure on these traditional manufacturing industries and to avoid too much impact on the economy.
It is obvious that the CCP is carefully considering the internal and external factors that the economy is now facing in its efforts to control the growth of the Chinese economy.
Wei Ai is director of the Center for Cross-Strait Political and Economic Affairs at National Chengchi University.
Translated by Drew Cameron
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