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Peggy Sito

International investment banks have offered widely differing predictions on the degree to which Beijing's hosting of the 2008 Olympic Games will contribute to China's gross domestic product.

Forecasts by global bulge-bracket banks range from 0.05 per cent to 0.3 per cent annual Olympic-related GDP growth until 2008.

On Friday, Beijing secured the right to host the 2008 Games.

Beijing has already announced an ambitious US$20 billion spending plan to modernise the city's infrastructure and facilities and to improve its notoriously polluted environment in time for the Games.

Economists agree that Beijing will be transformed by the investment.

However, they disagree on the likely economic impact of the Games on the country as a whole.

Goldman Sachs Asia has made one of the more aggressive forecasts, predicting that the Games will increase China's GDP growth by 0.3 per cent annually between 2002 and 2008, citing service sectors such as tourism, transportation, information technology services and logistics as the areas for the greatest growth.

In contrast, JP Morgan said the event would increase GDP by no more than 0.05 per cent per year.

'The divergent views are due to different assumptions,' said Huang Yiping, an analyst at Salomon Smith Barney.

Salomon Smith Barney estimated that the Games would contribute 0.1 per cent growth to China's GDP this year.

Mr Huang cited tourism revenues as an example of the differing interpretations.

Based on the experience of previous host cities such as Seoul and Los Angeles, Mr Huang said Salomon Smith Barney expected tourist arrivals to China to increase 20 per cent by 2008 and that the sector would see significant revenue growth. However, JP Morgan predicted that tourism revenue would increase by just 2 per cent annually, increasing GDP growth by a mere 0.02 per cent annually.

Other investment projects would stimulate 0.03 per cent annual growth until 2008, said JP Morgan.

Mr Huang said JP Morgan's predictions were based on conservative interpretations of the data, but that Goldman Sachs' forecast was too aggressive.

Mr Huang said predictions for the annual GDP growth that would be spurred by China's accession to the World Trade Organisation had hovered at between 1 and 2 per cent.

Compared to this, a prediction of a 0.3 per cent annual increase from the Olympic Games was too optimistic, he said.

Morgan Stanley Dean Witter chief China economist Andy Xie said the economic impact of the Games on China's GDP would be insignificant.

Mr Xie predicted that almost half of the investment would be ploughed into environmental protection projects, with the remainder used for hotel, infrastructure and other development projects.

Graphic: bj16gbz



Games economic forecasts over growth fluctuate wildly