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?

Photo: Philippe Leyroyer (flickr)

After all the protests during the U.S. and European legs of the Olympic Torch Relay, I figured a call to boycott Chinese goods may follow. Instead, it's the Chinese who are rallying behind a boycott.

The Financial Times reports on an online appeal asking Chinese consumers to stop buying French goods. Targeted brands include Louis Vuitton, Givenchy and L’Oréal.

I found one Chinese blogger who called the boycott appeal "immature" but nonetheless criticized Olympic protesters:

Olympics is like the Wedding Ceremony of PEOPLE in China, not the government. Imagine your reaction if someone try to ruin YOUR wedding, instead of your governor's wedding? Now the wedding of 13 billion people started to be ruined. Its not the government official who are not happy, it is everyone in the country who feel being hurt. Please understand the difference, and think about what is going to happen.

It remains to be seen whether such a boycott will gain popularity or have lasting effects on French companies. However, it's worth noting that France isn't even among China's top 10 trading partners, and that the same Financial Times piece notes that "a campaign against Japanese companies three years ago had little lasting impact."

On the contrary, a Chinese boycott of French goods, says Stratfor, a global intelligence service, "could come back to bite Chinese brands — potentially those of corporate Olympic sponsors."