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Will China see “Post-Olympic Effect”?

-By Shanshan Lu- This month, 2008 Beijing Olympic Games is one of the hot topics on the annual conference of…

By Shanshan Lu , in 2008 Beijing Olympics Blogs , on January 22, 2008

-By Shanshan Lu-

This month, 2008 Beijing Olympic Games is one of the hot topics on the annual conference of the Finance Magazine, a major financial magazine in China nationwide.

Will China see “post-Olympic effect”? (more on post-Olympic effect on Chinese media…)

“Post-Olympic effect” refers to the phenomenon that the host countries of Olympic games will encounter economic downturn upon finishing the games.

On the conference, Min Zhu, deputy president of Bank of China, delivered a detailed speech on “post-Olympic effect”, with analyzing the data the bank collected. The causes of “post-Olympic effect” are: investment leap before Olympics, consumption leap due to the jamming travelers in the host cities, and the considerable amount of maintenance fee of the construction.

In history, fast economic growth before Olympics is widely witnessed, whereas, economic downturns are always unavoidable.

According to Zhu, as one of the major sponsors of Beijing Olympics, Bank of China has reviewed the Olympic effects in the past 12 years since 1960. For eight years among the twelve, economic growth during eight years’ preparation of Olympics is faster than the previous eight years. GDP growth rate is around 0.3 per cent to 2.5 per cent. In nine years of twelve, the economic growth during the eight years of post-Olympics is slower than the previous eight years. The economic growth rate is around 0.4 per cent to 2.5 per cent. Therefore, it is expected that the economic growth during Olympics is fast but economic downturn during post-Olympics is unavoidable.

Further analysis shows that this phenomenon mostly happens in small countries, not in big countries. Exceptions are America in 1996, Russia in 1980 and German in 1972.

Zhu then concluded that there is correlation between the economic growth rate of a country and the country scale. The economic scale of big countries is big. The Olympics’ impact on big countries is relatively limited. And the “post-Olympic effect” will not necessarily occur in China.