Tuesday, August 19, 2008

a blip on the radar

Amid the smiles and the fanfare, the gold rush that has lifted China to the top of the Olympic medal mountain, questions are being asked about the value of Beijing 2008. How much, for instance, is a gold medal worth to a Chinese Olympic champion?

The Games have cost about $50 billion (£26.8 billion) to stage, but what impact they will have on the leviathan that is the Chinese economy is open to doubt. The expected 500,000 foreign visitors seems a fairly meaningless figure, given that 130 million overseas tourists visited the country in 2007. The Olympics' overall economic impact is likely to be just a blip on the radar.

In a week's time, it will be back to business as usual for China and after the Olympic torch is extinguished, its policymakers will face perhaps their most critical balancing act in a decade as they guide the economy between inflation and slowing growth. Industrial production plunged sharply in July and exports have begun to shrink under the mounting pressure of a global slowdown. Chinese inflation may have dipped in recent weeks, but at 7.5 per cent, the average inflation for the first seven months of this year has been far above the Government's target.

Once the glamour and fireworks of the Olympics are over, the authorities will not only have to tackle slowing growth and rising prices - they will have another equally daunting task at hand, the job of establishing the sort of social, medical and financial infrastructure that China needs to secure its future. It is a huge task and once the athletes have packed their bags and medals and have returned to their home countries, it seems clear that they will leave behind a China that is heading towards a period of uncertainty, unobscured by the glamour and excitement of the Olympic spectacle.

-Market analyst-

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