Will China Fall Victim to the Post-Olympic Jinx?

As we reach the mid-point of the 2008 Summer Olympics, it seems appropriate to review what hosting the Olympics has meant to China and what could be in store once the tourists leave and the athletes go home. Sure, there will be some snazzy, state-of-the-art venues left for the people of Beijing to enjoy for years to come, but they may first have to deal with the infamous post-Olympic Jinx.

Cities that have sponsored the Games face more than just a psychological and emotional letdown after the excitement around the Olympics subsides. After several years of single-minded purpose where the city – if not the entire country – seems to be geared towards outdoing the previous hosts, switching back to a “normal” life may seem rather dull by comparison.

However, it is the financial impact that should cause concern. Gone are all the jobs created to plan and build venues for the games; gone are the jobs created to house and feed thousands of tourists; and gone is all that tourist money.

China’s Bid for the Olympics

China has long sought to host the Olympics and really pulled out all the stops when preparing for the 2008 bid. Chinese authorities worked hard to assure Olympic officials that a massive building program would be implemented to provide facilities superior to anything constructed for previous Olympics. Commitments were also made to make improvements to Beijing’s notorious air pollution which some critics felt could actually be harmful to the athletes.

Much was also made of China’s rather spotty human rights record and concessions on this front were also offered, particularly around freedom of the press and the right to demonstrate. Events of Tiananmen Square in 1989 – with images of police and military vehicles attacking unarmed citizens – were still fresh in the minds of many people.

Despite the protestations of several victim rights groups, China emerged as the odds-on favorite to win the vote with Toronto and Paris as the only other cities realistically still in the running. On July 13th, 2001, IOC President Juan Antonio Samaranch confirmed that the City of Beijing would indeed serve as the host city for the 2008 Olympics.

The Great Construction Boom

While sports purists may decry the political overtones attached to the selection process and the games themselves, in reality, politics have been part of the Olympics dating back to the first games of the “modern era” held in Athens in 1896. While certainly not as overtly political as say the 1936 games used to showcase the Nazi regime, China is nonetheless fixated with “putting its best forward” as it were. Of course, this is no different from any other host country, but China has demonstrated an almost fanatical dedication to being the biggest and the best to emphatically demonstrate the nation’s arrival on the world stage.

China claims to have spent $40 billion USD preparing for the games; some experts meanwhile contend that the figure is actually much higher. Whatever the true costs, there is no doubt that China initiated a construction boom in Beijing that rivals even the reconstruction efforts immediately following the Second World War.^[1] Impressive new facilities for gymnastic and aquatics were built as well as an absolutely magnificent stadium and athlete’s village. Other projects including a subway system and world-class hotels have also been completed to ensure that the expected half million tourists see only the best of what China has to offer.

In order to find space in downtown Beijing to build these new facilities – as well as to make good on the promise to provide acceptable air quality – older sections of the city were completely razed resulting in the relocation of thousands of citizens. Factories deemed to be unacceptable polluters – such as mining operations and coal-fired generation plants – were forced to close prior to and during the Olympics resulting in both short-term and permanent job losses.^[2]

The Olympic Hangover

So, what happens once the athletes and guests have packed up and returned home? Literally overnight, hotels will go from being fully booked to having to now work to fill a great number of empty rooms, the restaurants no longer have hoards of hungry tourists to cater to, and hardly anyone is buying Olympic souvenirs. But surely other host countries have managed to shake the post-Olympic funk?

Actually, the track record of other cities adjusting to life after the Olympics suggests that the jinx is not simply a fanciful myth; a recent report produced by HSBC indicates that every Summer Olympics since the end of the Second World War has suffered a drop in GDP upon the completion of the Games. This drop is more pronounced in some cases, but examples include:^[3]

• South Korea (1988) – Prior to the Olympics, South Korea enjoyed a growth rate of just over 11% in the years immediately preceding the Games. This fell to 6.4% in the following year.
• Japan (1965) – GDP was approaching 12% before hosting the Olympics – it fell to just 5.8% in 1966.

Cities hosting the games often find themselves on the hook for accumulated debt with the Montreal Olympics being the prime example of how to lose money while hosting the Games. It took thirty years for Montreal (and the rest of Canada!) to pay off the 1976 Games. Other cities that have hosted the Games since then have faired better but still managed some staggering losses. These include:^[4]

• Barcelona (1992) – 1.4 billion USD
• Athens (2004) – Estimated 9 – 12 billion USD
• Sydney (2000) – Nearly half a billion USD

When you look at how much host countries spend to prepare for the Games, it only stands to reason that overall economic growth will fall somewhat once the Games end – the loss in jobs alone is partly responsible. Consider the number of people employed directly through the Olympics – from shuttle bus drivers to the aforementioned souvenir salespeople – that find themselves out of work once the crowds leave.

And what about the thousands of jobs connected to the construction industry? With the completion of the new venues, many of these workers are no longer needed. For those that relocated from parts of the country simply to get in on the great Beijing construction boom, things must seem rather dire just now. Sure, China will continue to grow and construction is still a major employer but it is unlikely any new phase of development can equal the construction kicked off in 2001 when the IOC announced Beijing as the host country.

Realistically, even a pronounced slowdown in Beijing will have only a small effect on the overall Chinese economy; it is just too large to be greatly affected by troubles in one city. However, growing concerns of an economic slowdown centered in the U.S. and Europe do have the potential to severally impact China’s export markets and this – together with a post-Olympic letdown – could be the beginning of more serious trouble for China.^[5]

Guess that’s why they call it a “jinx”.

Quick Beijing Construction Facts

1. 22.5% – the annual growth rate of China’s construction industry from 2001 – 2005

2. 4,000 billion yuan ($520 billion USD) – the amount of GDP generated solely through construction from 2001 – 2005

3. 10.7% – the percentage of China’s GDP comprised by new construction

References

1. ↑ Pageantry, Pyrotechnics Open Beijing Games – MSNBC, August 8th, 2008
2. ↑ Race to Improve Air Quality for 2008 Olympics – Inter Press Service News Agency, February 9th, 2006
3. ↑ Once the Gold Medals Leave, Will China’s Economy Remain Gilded? – CNN, August 5th, 2008
4. ↑ www.lightthetorch.net
5. ↑ China’s Economy Slows on Weaker Production, Olympics Closure – Bloomberg, August 16th, 2008