Someone once described the Olympics as an event that not only changes a person, but also an enterprise, a city, and even a country.

The 29th Olympiad, the Beijing Olympic Games, starts this week and China, a mysterious country with 5000 years of history, will become center of the world’s attention. The enormous changes that took place in this old country over the past 30 years have given people of the world more imagination and expectation about China. But the more interesting question to those foreign enterprises and investors who pay close attention to the future of the Chinese economy is how the Olympics is going to affect the Chinese economy. In other words, what economic benefits the Olympics will bring about in China? Or, Will the Olympic Games become a booster to the Chinese economy?

An authoritative report shows that the 1984 Olympics brought 3.29 billion USD in earnings to South California; the 1992 Barcelona Olympics helped Catalonia earn 26.048 billion USD; the 1996 Atlanta Olympics acquired 5.1 billion USD for Georgia; the 2000 Sydney Olympics secured 6.3 billion USD for New South Wales and Australia.

Then, what will the Olympics bring to the Chinese economy and China’s stock market?

On July 13, 2001, Beijing was awarded the right to host the 29th Olympiad. 4 days later, the State Statistic Bureau spokesman, Ye Zhen, indicated that the success in bidding the Olympics will bring about an average 0.3% to 0.4 % annual growth in China’s GDP in the following 7 years. A day later, Beijing Statistic Bureau announced that Beijing Olympics will help Beijing secure an annual 2% plus increase in annual economic growth.

As Beijing Olympics begin, experts predict that during the Olympics, the stock market in China is going to be relatively stable. Since the Chinese stock market is strongly affected by the government’s policies, and stability is the key to the success of hosting the Olympics, the Chinese government will keep the stock market stable by issuing stabilizing policies.

In the last 6 Olympic Games, there had been an average 8.18% increase in all hosting countries’ major stock indexes in the 12 months period prior to the Olympics due to investors’ optimism in the positive impact the Olympics would have on the hosting country’s economy. However, there had been an average decline of 0.16% in the 6 months period prior to the Olympics in major stock indexes of those hosting countries. Barcelona alone had a decline of 16.24%. The reason behind the Spanish stock market decline was the economic recession of the European Union in the 1990’s. The reasons of the decline in other hosting countries are as follows:

• The Macroeconomic standing of that period was not looking good.
• Investors thought that the impact of the Olympic Games on the economy would be over and “valley effect” might appear, therefore the capital market reacted earlier.
• The Olympic-induced opportunities split the flow of capital for traditional business investments. Those hosting countries showed different stock index performances, demonstrating different opinions on the effect of the Olympics economy.

However, in the 6 months after the Olympic Games, there was an average 19.12% increase in those hosting countries stock indexes. In the 12 month after the Olympics, the stock indexes had a strong 26.14% increase. The reasons for the increases after the Olympics are as follows:

• Investors showed confidence in domestic economic growth;
• Investments in traditional business during the Olympics returned to the capital market.

The above-mentioned two factors caused the increase on the stock market 6 months after the sporting event. The infrastructure construction, system establishment, and environmental protection among others for the Olympics gave a lasting boost to the hosting countries’ economy. Therefore, although GDP growth in those hosting countries showed a certain degree of slow-down, generally speaking, the hosting countries’ economy maintained a relatively high speed of growth. What’s more, the reduction of bubbles in the post-Olympics capital market ensured steady and benign growth.

History clearing indicates that the lasting winner of the Beijing Olympics will be the Beijing economy.