Impacts of the 2008 Summer Olympics on Beijing
Klaus Koehler, Managing Director, Klako Group

From the 8th to 24th of August, 2008 the city of Beijing will host the Summer Olympic Games under the slogan "One World One Dream". The Olympic Games have always been known to improve not only a city but also a country's economy. Such a mega-event requires considerable investments in infrastructural developments, sports venues, and other types of industries. It will induce short- as well as long-term positive effects on the national economy and China's publicity as long as everything goes well. The three concepts that have been adopted for the Olympic Games, namely, the Green Olympics, the High-tech Olympics and the People Olympics, will hopefully enforce this trend.

Beijing Today

Since the free-market economic reforms of the 1990s were implemented, Beijing has made rapid advances and has experienced a steady economic growth with a great influx of foreign capital and technology. Today Beijing ranks second, after Shanghai, in industrialization, with highly developed machinery, textile and petrochemical sectors, contributing greatly to China's foreign trade. In addition, Beijing is home to a variety of corporate headquarters, political and banking institutions. It has developed into a political, educational and industrial centre of the country with an estimated population of 15 million people.

Beijing's Economy

In 2007 Beijing reached the height of its economic boom, with the highest documented economic growth rate of 12.8 percent, a gross domestic product (GDP) per capita of USD 6,331, and the fixed assets investment of USD 3.527 million. Based on the criteria issued by the World Bank, Beijing's socio-economic development is graded on a world ranking in the range of the upper-middle level, recognizable for example by the increase of the average annual wage of 109.4 percent from 2001 to 2007.

Olympic Economic Growth

With the significant investments being made in Beijing to host the Olympic Games, the city will have the advantage of having large and lasting economic benefits. The "Olympic factor" refers to the direct investment of USD 16.65 million for hosting the Games. This amount will be spent on transportation, communication, and environmental improvements, which will indirectly provide social benefits to the Chinese. Reportedly, 3.6 million new jobs were created thanks to the Olympic related investment projects. Sectors such as construction, high-tech, manufacturing, logistics and social service industries are the major job providers. For example, the construction industry alone will provide 430,000 extra jobs, followed by the retail and wholesale industries, which will generate 130,000 new jobs.

According to estimates by the Beijing Tourism Administration, an additional two million tourists will be arriving in Beijing for the Games. Consequently, the additional visitors will be spending an estimated USD 963 million, which will be generated through the hotels and hospitality industry, as well as transportation, entertainment and other service sectors. The input provided by the Olympics will also have an impact on the city's Gross Domestic Product (GDP). Beijing's GDP grew 12 percent annually over the past five years, increasing from RMB 433 billion (USD 60 billion) in 2002 to RMB 900 billion (USD 125 billion) in 2007. To be specific, the new investments added 1.14 percentage points in 2007 and will presumably add 0.85 percentage points in 2008.

Infrastructure Projects

According to the Beijing Olympic Action Plan, Beijing's total investment in Olympic-related projects is expected to reach USD $180 billion and is divided into three different elements. While the first portion will be exclusively injected into the Olympic competition venues and the related facilities, the second will be spent on the city's infrastructural development. The third part of the investment is for such projects as environmental protection and transportation, which has been integrated into the 10th Five-Year Plan and is considered as an indirect investment.

One of the most impressive projects is the enlargement of Beijing's international airport that is expected to become one of the world's top five busiest airports during the Olympic season. In order to meet the high demand of air transportation a new terminal is being constructed amounting to a value of USD 2.1 billion, which will be the world's largest terminal with a direct connection to the downtown area in 15 minute intervals. With the Number 3 Terminal being completed in February 2008, the three terminals of the airport will have a future total annual handling capacity of approximately 82 million passengers.

Transportation and Traffic System

Beijing authorities claim that the traffic and congestion on Beijing's roads, especially during the rush periods, will become a thing of the past come the 2008 Olympics as the city is spending USD 700 million on upgrading its public transportation system. Several projects are under construction in order to solve the traffic congestion and to ensure Olympic tourists an easy, fast and safe travel from one sporting event to another. The Beijing-Tianjin-high-speed train will enable travelers to pass over Beijing's main roads. Six new expressways will link the downtown area and the airport as well as other cities of China. Six new subway and light railway lines will allow for better travel connection. Additionally, several bus lanes have been introduced whereby, during rush hour, all vehicles except for public buses must keep clear. All construction sites will be using environmentally friendly technologies and measures. All old buses will be replaced with new ones that possess updated catalytic converters for example.

Competition Venues and Related Facilities

An estimated 10 percent (approximately USD 1.87 billion) of the capital investments will be spent on thirty-one sports venues and also the Olympic Village. Of these, 12 are being built, 11 are renovated buildings and eight are temporary venues. The two biggest projects are the newly built Wukesong Indoor Stadium (which is an investment of USD 282.65 million) for basketball and baseball and the National Stadium (USD 246.71 million) for athletics and football, also known as the Bird's Nest. All Olympic venues are strategically built in order for them to have a long-term use after the Games for national and international sporting events as well as for cultural and entertainment events.

Telecommunications and High Technology

Under the concept of a "High-tech Olympics" Beijing will emphasize on the technological sector, in particular communications. Beijing will upgrade its scientific and innovative capabilities, boosting the industrialization of high-tech achievements and popularizing their use in daily life.
As an example, the Beijing Organizing Committee for the Olympic Games (BOCOG) contracted several research institutes and hi-tech companies to provide an urban transportation system. This system consists of a control centre and automatic monitoring sites surveying real-time traffic conditions in order to provide better services for the athletes and tourists, and to coordinate the traffic situation in a more effective way. As a consequence of this new system, the wholesale and retail sectors, along with computer services, software, communications and computer equipment manufacturing, will further cement these industries as China's pillar industries in the years ahead. It is not only the domestic companies that are influenced by the Olympic Games, but also foreign investors can bid or supply accessory products and services.

Tourism and Hospitality

According to the Beijing Municipal Bureau of Statistics a minimum of two million people are expected to visit Beijing during the Games, including 300,000 from outside the mainland. In order to accommodate all of the Olympic tourists, an extra 100 star-rated hotels are currently being built, bringing in an additional 20,000 rooms. The BOCOG predicts that a total of 800 hotels with 130,000 rooms will be placed at disposal until 2008.

All of the Olympic contracted hotels are expected to ensure exceptional standards of food and safety. Furthermore all hotels are due to meet the 'green' criteria assuring water and energy saving provisions. There are accommodation facilities for all standards and requirements, from the five-star Grand Hyatt Hotel for approximately USD 1,200 per night, to the traditional-style courtyard guesthouse in Beijing's "hutongs" for approximately USD 13 per night. These additional tourists will greatly contribute to increasing net exports. Each overseas visitor is expected to spend USD 1,050 while expenditure of domestic travelers will average USD 148 per person, generating a total revenue of nearly USD 950.1 million.

Sustainable Development

In order to host a "Green Olympics", Beijing is aiming to provide a cleaner and greener city. Beijing has its challenges in air and water quality, wastewater and solid waste management and transportation. One of the outcomes of this initiative is that Beijing has introduced cleaner fuel standards for gasoline and diesel that will reduce sulphur dioxide emissions and consequently improve the air quality. It is a requirement that all main buildings, temporary facilities, sites and affiliated services are all using clean technology, renewable and recyclable materials.

A solar power system has been installed in Beijing's Olympic Village to power streetlights and provide hot water for athletes. One of the most notable projects is the installation of a 130-kilowatt photovoltaic system at 12 entrances of Beijing's National Olympic Stadium. The system will supplement the venue's conventional power supply and make the stadium the world's most environmentally friendly sporting arena.

Nevertheless heat and air pollution concerns may prompt the Olympic Committee to postpone or even close some sporting events. Though Chinese authorities plan to shut down factories and take cars off Beijing's streets during the Olympics, some marathon runners are considering skipping the races due to medical concerns.

Olympic Marketing

The Games offer a global marketing platform providing opportunities for a company's sales, brand recognition, internal rewards, and community outreach programs. The Olympic marketing platform is composed of four main program areas, which are television broadcasting, Olympic Games ticketing, corporate sponsorship and Olympic licensing. This marketing platform provides for sponsors unparalleled returns on their investment, as a great international audience and a diversified target group are guaranteed. However, support from the business community helps the athletes and the teams promote the Games. In addition, many sponsors' products, services and expertise are essential to the staging of the Games.

The Beijing 2008 Olympic Sponsor Program has already attracted 64 companies since its launch in September 2003. The sponsorship program provides foreign companies, such as Schenker, General Electric or Johnson & Johnson, the opportunity to further develop their brand awareness as well as to deepen their globalization strategy in China.

For Chinese enterprises, such as Lenovo, Air China and China Mobile, the Olympics marketing platform offers a great chance to showcase their company's worldwide competitiveness in products, research and development and even corporate culture. Thus, they have great expectations on the Olympics to lift their brands onto the international market.

For smaller companies and entrepreneurs it is a great opportunity to benefit from the stimulated economy to expand their business and customer network. However, top Olympic Sponsorship can be a very costly business, especially when it is ineffectively performed. The sport brand Adidas for example is spending USD 180 million and has commissioned a specific Olympic marketing team to leverage successfully the positive vibrancy of the event.

People's Olympics

The Olympic Games is an occasion for Beijing to spread modern Olympic ideas, while displaying its historical and cultural heritage. Under the concept of the "People's Olympics" the Chinese government intends to encourage cultural exchanges to deepen trust and friendship among the people of different countries, and to promote the political relationship with other nations.

Beijing provides special organizations for Olympic education and to further the existing education system. Workers in the tertiary sector, in particular taxi drivers, are prompted to attend training courses for better manners and to learn English. At all sport colleges and sport departments of universities, courses on Olympic knowledge have been scheduled, including lectures, seminars and exhibitions in order to advocate a culture of "sports for all".

Beijing's Future

The economic impact originated by a successful Olympics can also include longer-term benefits sometimes referred to as the "Olympic Legacy". This legacy effect derives from positive publicity from the Games, including an increased tourism after the Games, attraction of business investment, and infrastructure developments that improve the urban environment. The Olympics reach a worldwide audience and offer perhaps the best stage upon which a city can make the claim to global status. It is hoped by all that Beijing will take the opportunity not only to present the best Olympic Games, but also to show the world a more open, modern and civilized China.

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All information in this report is verified to the best of our ability and is assumed to be correct at time of release; however, Klako Group does not accept responsibility for any losses arising from reliance on the information provided within.