Will Beijing?

  • SumoMe

beijing_oly.jpgSpeculations are rife about the economic aftermath of the Olympic Games in Beijing. Being the host city, the 2008 games have changed the face of Beijing, ranging from the rise in real estate prices, a booming stock market to improved infrastructure. What, thus, becomes important is; will this upward looking growth trajectory continue or will it decline post the Games?The two alternative positions or arguments being presented for Beijing are the “Barcelona Effect”- where the city incurred significant cost overruns and debt in 1992 but recovered relatively quickly through increased investment and tourism, or the “Montreal Effect,” after the Canadian city that was plunged into such a financial slump after the 1976 games that it only finished paying off the debt in 2006. All previous Olympics hosts, including developed cities such as Los Angeles, Sydney and Athens incurred huge amounts of debt. However, Beijing begs to differ since it is a developing city and increased investment will only boost its current economic status  Economists are predicting a drastic fall in real estate prices in the aftermath of the Games. Beijing, contrary to previous examples, presents a different case since it is the only developing city after Seoul, 1988, to host the Olympics games. Even in this case, China is a much larger economy as compared to South Korea; hence inter country comparisons and estimations are not always justified. Development of real estate has other direct consequences liking development of roads, means of transport and other public conveniences. This infrastructural development along with housing construction is solving the problem of congestion within the main city and facilitating the movement of residents from downtown to suburban areas. The increasing demand for housing is, thus, now being met in the wake of the Olympics. Consequently, it follows that property prices will not plunge once the shows over, as much as in the cases of previous hosts like Athens, Barcelona, Sydney or Atlanta (since these cities did not have any previous demand for property). Another sector that has been affected as a result of the games is the Chinese stock market, which is experiencing a boom. Investors and analysts have a dual take on the post- Game scenario. Some predict a continuing boom while others predict a drop in share values once the Games come to an end. Firstly, they will boost tourism in Beijing. Secondly, China’s current growth rates are as high as 11.5%p.a. And finally, once the Games are over, the share prices are likely to be influenced by the success of the Summer Olympics – a successful performance will boost share prices, since it works in instilling faith in the economy of the country. Thus, these three factors will play an important role in determining the share prices in China’s stock markets. Unlike real estate prices and booming stock market, the Olympics are an unambiguous boon for the city in the realm of environmental concerns. Almost 7 billion US$ have been allocated for improve the environment which includes ecological projects such as, forestation in the outskirts of city, massive urban forestation, beautification projects, and relocation of industries within the city to the surrounding areas. The action plan for environment also includes shifting to cleaner sources of energy like compressed natural gas (CNG) and liquified natural gas (LNG), improving facilities to treat and dispose domestic waste, sewage systems and urban waterways.  The Olympics seem set to put Beijing on the road to economic development. However, the magnitude of effect is currently only speculative. As has been said by Wang Zhuo, an economic analyst , “The impact of the Olympic Games on the host country depends on the size of the economy of the country. “Given that China is a huge economy, it is only a matter of time till the real long term effects of the Game come into play. Charulata Somal

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[Image courtesy: http://www.flickr.com/photos/chijs/533266226/]

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