The new National Stadium, also called the "Birds Nest" was built especially for the games at an estimated cost of US $423 million. Photo: Noel in the Bahamas (flickr)

What does hosting the Olympics mean for China’s economy?

Spending $43 billion on large-scale infrastructure projects like hotels, public transportation and sports arenas certainly creates jobs and economic activity. It also will help draw tourists. But hosting the Olympics doesn't always result in long-term financial gain.

Before China, Greece held the title for the biggest Olympic spender at roughly $12 billion U.S. After the 2004 Athens Games, Greece’s budget deficit hit 5.3 percent, or 50,000 Euros per household. Citizens unable to afford tickets to the ceremonies essentially ended up financing the games through higher taxes.

While Australia’s government claimed that the 2000 Sydney Olympics would not be a drain on taxpayers, four years later the state was still paying to maintain underutilized stadiums and facilities built especially for the 2000 Games to the tune of about $40 million U.S. a year. The government does not expect to break even on the Games until 2010.

Of course, hosting the Summer Games hasn't always been an economic drain. In 1988, South Korea’s economy grew by 10 percent and the 1996 Atlanta Games added a 2.5 percent boost to the U.S. economy. The 1992 Summer Games in Barcelona coined the phrase the Barcelona effect, which referred to the ability of Spain to reap increased tourism and tourist dollars after hosting the Summer Games.

So how will China fare? Wang Yiming, an expert with the think tank under the National Development and Reform Commission, says the Games "will not become a watershed of China's economic development, as the fundamental factors that have supported China's economic progress in the past 30 years are not to change markedly."

Another website pointed out that "heavy-handed security and restrictions on business visas led many buyers and inspectors to cancel visits and orders," and that empty hotel rooms and a decline in airline reservations don't bode well. Then again, Beijing's entire economy accounts for less than 5 percent of China's GDP.

It's too early to gauge the ultimate financial impact of these Games. But considering the economic juggernaut that China is today, maybe the more relevant question for China is, Does it really matter?