China’s response to Olympic protests can make or break the economy
digg it!
Facebook
del.icio.us
Seed Newsvine
Fark It
Reddit
By DON LEE/Los Angeles Times
SHANGHAI, China — The annals of Olympic venues are rife with financial horror stories. All but one of the last 11 host nations had an economic hangover of sorts after the Summer Games ended, according to investment banker Morgan Stanley.
Most Chinese and Western analysts say China, the world’s fourth largest economy and a key driver of the global growth today, will not meet the same fate.
Despite having spent a record $43 billion to prepare for the games that start today, Beijing accounts for only a speck of the country’s economy and population. In that sense, experts liken the Beijing Olympic experience to that of Atlanta’s on the United States after the 1996 Olympics, when there was no economic fallout.
That depends on whether the Beijing Olympics are successful, many economists say, and on this measure there is one big point of difference from Atlanta and most other host cities.
Success won’t be gauged by how well organized the events are or whether there’s little doping among athletes. Rather, in the view of some analysts, it is what will happen in terms of protests and, most significantly, Beijing’s response to them.
“We are very concerned about how the (Chinese) authorities will handle the protests that will inevitably take place,” said Andy Rothman, a China economist for CLSA Asia-Pacific Markets in Shanghai.
Mishandling of demonstrations would tarnish China’s image and carry broad economic repercussions, including more difficulties ahead for China’s sovereign wealth fund to invest overseas and the potential for Western consumers to boycott Chinese goods.
Protests have been a part of the Olympics since the first modern-day version took place in Athens in 1896. But criticisms of China’s authoritarian government, its human rights record and intolerance of dissent, have set this year’s demonstrations apart.
Beijing has designated three public parks as “protest zones” for people to vent their grievances, although they will have to get permission in advance from the government.
“I don’t remember any other (host cities) having such areas of protests,” said Karl Lennartz, an Olympic historian from Cologne, Germany, who arrived in Beijing this week. “I’m not sure it’s a good idea.”
The Beijing Olympics are seen by many as a coming-out party for the rising nation, just as the Tokyo (1964) and Seoul (1988) games were for Japan and South Korea.
More than those countries, China’s economic ascendance has come hand in hand with globalization and its opening up to the world. Foreign investments have flooded into the country over the last three decades, albeit an interlude following the government’s bloody crackdown of demonstrations at Beijing’s Tiananmen Square in June 1989.
“If the Olympics are successful, the perception of political risk will continue to be lowered even more,” said Erik Bethel, managing director of ChinaVest, an investment and advisory company with offices in China and San Francisco. “Foreigners will be interested in moving more money or setting up in China.”
China’s economy has been slowing in recent months amid rising costs, tougher regulations and a global downturn. But rather than take a further hit from the winding down of the Olympics, Bethel thinks China could actually get a bounce soon after the Games. The reason: an end to measures that clamped down on businesses and travel in the lead-up to the Olympics.
To try to make the skies clear and blue for the Games, Beijing ordered a temporary shutdown of hundreds of factories, power plants and coal mines over a large swath of northern China. To tighten security, officials applied stricter visa and customs procedures, severely hampering the movement of goods and people.
The visa restrictions, along with the Sichuan earthquake and tensions in Tibet, cut China’s inbound tourism by 50 percent in the first half of this year, said Ge Wanjun, general manager of Shanghai Jinjiang Travel Co.
“Many of our raw materials are the type that would be affected by these environmental clean-up measures,” said the general manager of Shenzhen Dengcanya Shoes Co., rattling off rubber, plastics, leather, color threads and strings as examples. “Everybody is saying that the situation would be better after the Games.”
Chinese manufacturers also can expect to get a little more help from Beijing, which appears to be re-orienting its economic policies. For the last year, officials, preoccupied with inflation, moved to restrict bank lending and curb exports and the nation’s swelling trade surplus. But last month, after announcing a modest slowdown in both economic growth and consumer prices, officials signaled that they would ease up on the bank tightening and boost tax rebates for exporters.
“Beijing is increasingly fearful that growth will slow to a level which will not create sufficient new jobs to fuel the rapid rise in living standards,” said Donald Straszheim, a China specialist at Newport Beach, Calif.-based Roth Capital Partners. He called the shift “the biggest policy change in five years.”
Post Your Comment
Standards and RulesYour posted comment will appear after it has been approved.
Frequently asked questions about story commenting.