Beijing Games to be costliest, but no debt legacy
BEIJING (Reuters) - Beijing's Olympics will be far and away the most expensive ever, but the bill of about $40 billion is mere pocket change for the roaring Chinese economy.
Unlike previous hosts that dug themselves deep holes of debt, from Montreal in 1976 to Athens four years ago, China's capital can easily afford new stadiums, subways and roads.
And it may emerge an even stronger economy for all its lavish spending, analysts say.
"The majority of the money accounts for permanent infrastructure, stuff that we think, long term, will actually be productive for the Chinese economy," said Andy Rothman, an economist with brokerage CLSA in Shanghai.
Of the $34 billion in spending the Chinese government has announced, less than a quarter will be devoted to purpose-built Olympic venues such as the National Stadium, better known as the Bird's Nest, he said.
Still, the total cost of the Games, which analysts say should be around $40 billion because of losses from factory closures and unexpected costs, will dwarf the previous record of $15 billion paid by Athens in 2004.
But while Greek debt spiraled after the Games, China is close to a national budget surplus.
"The Chinese government is in very good financial shape," Rothman said. "They can clearly afford to spend all this money on the Olympics and on other infrastructure."
China's tax revenues have grown by 20-30 percent annually for the past few years and its fiscal deficit has shrunk from 3 percent of gross domestic product in 2002 to less than 1 percent last year.
Though a massive, modernizing city, Beijing is only a small part of the country that has been growing at breakneck speed. Olympic spending likely amounted to just 0.5 percent of total national investment over the past five years, Rothman said.
Beijing has also located many of the sports venues on the university campuses that dot the capital's northwestern corner, bequeathing state-of-art facilities to the China Agricultural University and the Beijing Science and Technology University, among others, after the Games.
"The city government has insisted that they have found uses for all things that they have built, apart from that very big, iconic stadium (the Bird's Nest). And every city has one that is not used so often," said Standard and Poor's credit analyst Kim Eng Tang.
Beijing could be in a position to repeat the success of Barcelona, which raised its appeal for tourists and businesses through its 1992 Games. Tang said the positive impact helped boost the Spanish city's credit rating.
A major unknown is how much Beijing's economy will lose because of dramatic steps to clean up its polluted air, from closing hundreds of factories to keeping half its residents' cars off the roads. Even Chinese officials can only guess.
"It is hard to get a specific idea of how much the losses will be. There is too little information," said Qi Jingmei, a think-tank economist under the National Development and Research Commission, a powerful state planning agency.