fïi5ïït
T T Shu f œ ^ O
iiK
o Ymæjm Ü M iim r
Chang-jie Zhao
he “Post Olympic Valley Effect” is the phenomenon
that occurs when economies are hit by a post-Olympic
economic downturn. The main cause of the phenomenon
is a dramatic increase in investment at the pre-Olympic
stage allied to excessive social and psychological expec­
tations. This will lead to a low use frequency of infra­
structure and sports facilities, decline of real estate prices
in the Olympic host city, a fall in the stock market, and
economic downturn to a greater of lesser degree after the
Olympic Games. Starting with the concept analysis of the
Post Olympic Valley Effect, this paper conducted a com­
prehensive review of the reasons for the phenomenon.
Research shows that since the 1984 Olympic Games, the
Post Olympic Valley Effect has ocurred four times. The
total investment in Olympic preparations and infrastruc­
ture in the host city and the relative economic maturity of
the host city, host region and host country all contribute
to the Post Olympic Valley Effect.
T
16
The source of the Post Olympic
economic downturn issue
The Post Olympic Valley Effect (POVE) has been a major
focus for academic research in recent years. The Beijing
Olympics offered added impetus to studies. Key aspects
are the under use of Olympic infrastructure and sporting
installations, decline in real estate prices within the host
city and a degree of economic decline. Some scholars
have categorized this phenomenon by considering four
areas of risk: the economic risk caused by excessive
investment at the pre-Olympic stage and reduction after
Olympics; the investment risk stems from the low use fre­
quency of infrastructure and sports facilities; the danger
of a bubble bursting as a result of overdevelopment before
and after the Olympics; and the risk of change to the struc­
ture of the city as a result of the the dispersed construc­
tion layout.1The POVE emerges with the gradual expan­
sion of Olympic scale. Its emergence is closely related to
J o u r n a l o f O ly m p ic H is t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
this growth in the Olympics and coincides with greater
investment in the Olympics. Take the 1976 Montreal
Olympic Games for example, the organizing committee
was heavily in debt after the Olympics: the main stadium
built for the Olympic Games was not used; the signature
automatic roofing structure of the stadium has only been
used for five times in 30 years due to expensive main­
tenance charge; the newly-built autodrome, considered
as a work of art, cost 86.5 million Canadian Dollars. It
was however rarely used by the eighties and even less
frequently since then. The charge of maintaining it out­
stripped the rent with the result that the Montreal Tax
payers were saddled with the debts incurred by the
games for for 30 long years. As the Montreal Olympic
Games accrued debts of more than 900 millions, they
also gave researchers into sport economics a new term,
the “Montreal Trap”. At the Moscow Olympics which
followed , an investment of over eight billion dollars
caused similar problems for the economic viability of
the games.Such debts meant that countries were afraid to
offer to host the games. The huge Olympic related inverstment intensified the budget deficit of the former Soviet
Union. The POVE has even been inevident since the suc­
cessful 1984 Olympics in Los Angeles. At these games
Organising Committee chief Ueberroth created a wonder
in the marketing history of the Olympics and made the
games profitable for the first time in recent history. Even
so a high unemployment rate after the Olympic period
was still a problem. In order to successfully host the 1988
Seoul Olympic Games, the Korean government had to
bring forward the execution of their 6th Five-Year Plan.
The economic take-off in short time was accompanied by
a large number of bankrupt enterprises. Research shows
that the financial crisis in the mid and late 1990s was
directly related to an economic imbalance as a result of
1988. After hosting the 1992 Olympic Games, the per­
formance of the hotel industry in Barcelona fell nearly
60% in the following two years. This was a phenomenon
which reflected the oversupply of the hotel market; to
balance the books, the two stadiums at the 2000 Sydney
Olympic Games needed to stage 200 events per year. In
fact, by 2003 they had staged less than half the projected
number.2Since the expenditure of 2004 Athens Olympic
Games (10 billion euro) considerably exceeded the budget
(4.6 billion euro), the 2004 financial deficit of Greece
increased and remained at more than 3% of its GDP. The
deficit exceeded the stipulations of the European Union
Stability Pact. The huge overspend had an ever-increas­
ing influence on the post Olympic economy of Greece.
By 2005 economic growth had fallen to the lowest point
in nine years. Dukas, the vice finance minister of Greece,
made it clear that the cost of hosting Olympic Games was
impossible to cover in such a short time, and the Greece
might have to bear these debts for the next ten years.
The history above clearly recorded the process that
POVE was the twin of the Olympic Games. Varying in
scope and intensity, the POVE has always cast a shadow
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
over the sound economic development of the post-Olym­
pic stage. As a result, many economists consistently
advocate warning for POVE.
The Post-Olympic economic
downturn in Olympic History
The Los Angeles Olympics 1984
These Games were a watershed in financing an
Olympic Games. The successful marketing operation
of this Olympic Game hauled the international Olympic
Organizing Committee out of economic difficulty. The
sheer cost and scale of the undertaking had discouraged
cities from bidding for the games but the Olympic Games
now became an attractive proposition for major cities
once again. The investment in 1984 Los Angeles was
over 500 million dollars and Los Angeles showed a profit
in excess 215 million dollars. The Olympics also brought
thousands of temporary jobs to the state of Southern
Califormia. However, the Olympics did not effectively
promote the macro economy. Examined from the per­
spective of investment, the Los Angeles Olympic Games
were free from large-scale construction as the games
were totally operated by private enterprise which made
extensive use of existing public facilities and the numer­
ous local stadiums. Only three venues were built for the
Olympics: a velodrome, a temporary aquatics centre and
a temporary shooting gallery. The other stadiums were
existing facilities. Large numbers of volunteers took part
in these Olympic Games,and worked in almost all parts
of the Organizing Committee. For example, the ratio of
employee to volunteer in financial department was 120
to 450. During the Olympic Games, all doctors in the
Medical Center were volunteers, and they looked after
the national teams and senior officials of the International
Olympic Organizing Committee. As a whole, the Los
Angles Olympic Games did not cost a huge amount in
monetary terms. While appreciating Ueberroth’s success­
ful operation of Olympic economy, we have to admit that
POVE was out of sight. O f course, this phenomenon could
not be separated from the large economic aggregate of
California and the U.S at large. Comparing the Olympics
profit with the economic aggregate of California, the
trivial 500 million dollars investment was less than
1% of the California GDP in that year (See Fig. 1).
Fig 1: The GDP of C alifornia at Pre-O lym pic and Post-O lym pic stage
Source o f data: B ureau o f E cono m ic Analysis, the un it is m illion
dollars.
17
12. 00«
Seoul Olympics 1988
The preparation stage of the 1988 Seoul Olympic Games
l l.00«
fell in the period of Korea’s 5th Five-Year Plan. In order
1 0 . 00 «
to host the Olympics, the Korean government decided to
bring forward the execution of the 6th Five-Year Plan.
5. 00 «
Korea was small in territory and lacked resources. The
8. 00«
“New Rural Movement” in 1970s promoted the real
7. 00 «
estate businesses in major cities such as Seoul, and
accelerated the development of satellite cities surround­
6 . 00«
ing Seoul. The 1988 Olympic Games added fuel to the
5. 00«
flames and real estate in the city sky rocketed. Public
4 . 00«
facilities in Seoul were far from sophisticated in 1988,
13 8 6
13 8 7
1388
1383
13 3 0
1331
13 3 2
which was one of the reasons that Seoul Olympic Games
spent a lot on infrastructure. The investment in these
[—"—■ ■ ■ A nnual Growth R a te o f Korea. GDP
‘""‘A nnual Growth R a te o f S e o u l 0DP~j
Olympic Games included direct investment and indirect
Fig. 2: A nnual GD P Growth Trend of Korea and Seoul from 1986 to
investment. The former included the essential facilities
1992 Source o f data: International M on etary F u nd (IMF) a n d Korea
statistic bureau, ba s ed on 1993 SNA standard.
of hosting an Olympic Games, such as stadium construc­
tion, training field renovation and maintenance, and cul­
tural facility construction. The investment of International
Broadcasting Center was an example. To host the Seoul
Olympic Games, Korea Organizing Committee built
nine new stadiums, renovated 21 and utilized 72 exist­
ing physical education centre and public stadiums for
training fields. The indirect investment included facility
construction such as building an extension to the inter­
national airport, constructing the wide area network
and so on. A total amount of 2382.6 billion WON was
spent on the Olympic Games. The government sub­
sidized 1285.4 billion WON (53.9%), 605.2 billion of
Fig. 3: A nnual GD P Growth Trend of Spain and Catalonia from 1988
which came from central government, and 680.2 billion
to 1995
from the local government; the Olympic Organizing
Committee collected 589 billion WON (24.7%), and the
private agencies paid 508.2 billion WON (21.3%).3 It is
noteworthy that the investment in the Olympic Games
came mainly from 1982 to 1988, the spending for which
was only 1.6% of the contemporary domestic investment.
59.1% of Olympic projects had been finished by 1986.
The Seoul Olympic Games were widely credited with the
globalization of domestic Korean businesses and the pro­
motion of the Korean tourist industry. The economy of
Korea continued to grow in the post-Olympic phase and
□ Gross GDP ■ erossinvestment in Olympic Year unit:100 million dollar I
the 1988 GDP, which was 11.6%, was a record high in
Fig. 4: The area chart of Georgia Gross GDP versus 1996 Olym pic
Korea.
Gam es Investm ent Source o f data: B ureau o f Econom ic A nalysis
The POVE of the Seoul
Olympic
Games
has
always
been
ignored
by
Barcelona’92
Los A ngeles’84
Seoul’88
researchers.
However,
Million
Million
Million
%
%
%
the effect was in evi­
Dollar
Dollar
Dollar
dence after 1988, and was
26.2
1,467.853
46.5
2,460.855
Direct expense
522.436
100
reflected mainly in the
slow down of the GDP
478.204
15.2
1,361.156
14.5
Operation expense
450.394
86.2
growth, the fall in real
31.4
989.649
1,099.699
11.7
Direct investment
72. 42
13.8
estate prices and the drop
6,915.274
73.8
N/A
N/A
1,687.423
53.3
Indirect investment
in the value of all stocks.
Total investment
According
to statistics,
100
9,376.129
100
522.486
100
3,155.276
of the Olympic Games
the GDP growth rate of
Table 1: The econom ic effect o f O lym pic Gam es Source o f data: data from the IOC, SO O C a n d COOB
Korea remained over 11 %
18
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
jlSO H '|
INTERNATIONAL SOCIETY OF
OT YMPTP HTSTORI ANS
for the three years before hosting the Olympic Games.
However, growth speed slowed down significantly from
1989 to 1991 (see Fig. 2), and fluctuated between 5% and
9% in the period to 1997. There were three satellite cities
of Seoul before the Olympic Games. With the increase
in urbanization and sharp rise of a mobile population,
real estate prices rose exceedingly fast. The number of
satellite cities reached five after the Olympic Games.
Real estate prices rose in the central region but dropped
sharply in the suburbs4. The Korean stock market also
experienced historical changes between 1985 and 1995.
Before 1986, the trend was for the stock market to remain
on a plateau. After 1986, stock began to rise frenziedly as
a result of the revaluation of the WON and amid growing
anticipation of the Olympics . The stock went up 5.25
times at the beginning of 1989, in particular, insurance
and banking stock reached 19.33 times and 10.08 times
respectively. The “winter” for the Korean stock market
arrived half a year after the Olympic Games as stocks
dropped rapidly.The main share index in Korea dropped
from 900 points to 700 points, and even dropped to the
“freezing point”, 480 points, in 1992. The steady fall was
mitigated in 1992 when the Korean government intro­
duced the QFII. The Stock market rose steadily from
1992 to the end of 1995.
Barcelona Olympics 1992
The POVE that the 1992 Barcelona Olympic Games suf­
fered was relatively significant. The total investment was
more than 9.376 billion dollars, the direct and indirect
investment of which were unusual compared with pre­
vious Olympic Games (see table 1).
The unusual feature of Barcelona Olympic Games
was also reflected on the expected gross economic
impact. According to the TOK 2000 data, the gross econ­
omic impact of Barcelona Olympic Games was 16.6
billion dollars, while the impact of the Seoul, Atlanta
and Sydney Olympic Games were 2.6, 5.1 and 4.3 billion
dollars respectively.
The investment spent on stimulating the construction
of infrastructure and real estate for the 1992 Barcelona
Olympic Games reached 8 billion dollars, which pro­
moted the economic recovery of coastal regions, but
also laid a huge economic burden upon Catalonia. The
European economic situation only made things worse for
Catalonia in the years which followed.. Economic growth
dropped sharply in the first half of 1993 (see Fig. 3), and
even turn to negative growth in the second half year5. The
POVE of the 1992 Barcelona Olympic Games was also
mirrored by real estate prices. Since the commercial resi­
dential building market of Barcelona had not yet reached
a sufficiently mature condition, the price of real estate
was affected greatly by the Olympic Games. According
to statistics, property prices in Barcelona and the periph­
eral area of the Olympic Village went up 300% and even
325% respectively from 1986 to 1992. However, in 1993
it soon returned to the pre-Olympic level in 1993 . The
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
POVE also had a serious on the market for commercial
premises in Barcelona. The economic growth between
1986 and 1992 accelerated the construction of business
premises, 850,000 square meters of office space and so
on were built in CBD region for the Olympic Games.
After the Olympic Games, the market was flooded and
rental rates dropped sharply. They plummeted 50% in
1993 and did not return to a more balanced state until
1995.
Atlanta Olympics 1996
The inconspicuous POVE of the 1996 Atlanta Olympic
Games was closely related to the gross economy of the
state of Georgia. The gross GDP of Georgia in 1996
was 215.2 billion dollars, which was as much as that of
Spain in 1992. As a further comparison, the gross GDP of
Greece was over 210 billion dollars in 2004. In addition,
the decision to host the Olympic Games in the private
sector also saved costs. In order to save expense, the
organizers of Atlanta Olympic Games used student apart­
ments in Georgia Institute of Technology as Olympic
Village, which freed the organizing committee from one
major money-burning construction project. The Institute
was able to accommodate the Olympic competitors
because the student body was away on summer holiday.
By making a full use of existing stadiums and campuses,
the organizing committee was able to reduce the amount
of large-scale engineering construction. The organiz­
ing committee of this Olympic Games improved the
transportation, entertainment facilities and public areas
notably a Centennial Olympic Park in the downtown area
of the city. Over 85% of the capital came from sponsor­
ship by Coca Cola. The electro-communication infra­
structure, a major cost to the Atlanta Olympic Games,
was the largest fibre web ever built for the Olympic com­
munications. The infrastructure web, “SONET,” involved
450000 meters of fibre cable and connected the Atlanta
International Broadcasting Center with 36 Olympic com­
petition locations in nine cities. The web was built by
private investment and was put to extensive use after
the Olympics. Atlanta’s exhibition industry went from
strength to strength and witnessed a Golden Age in PostOlympic period. Atlanta’s home state Georgia was the
cradle of Coca cola. Since the commercial and residen­
tial property markets in Atlanta were relatively mature,
only the hotel industry was affected by a drop in demand.
As a result, the POVE never existed.
Sydney Olympics 2000
Samaranch has always regarded the Sydney Olympic
Games as the most successful Olympic Games in history.
These Olympic Games greatly promoted the economy, in
particular the tourism industry of New South Wales. Bao
Mingxiao estimated that booming tourism brought 6.3
billion dollars profit to New South Wales and Australia
at large. The main stadium built for the Olympics had
a capacity of 110,000, a record. Infrastructure invest19
ment was massive, 350 million dollars in the extension GDP of Greece between 2000 and 2004, and 25 billion
of Sydney International Airport; 500 million dollars euro to the GNP from 2004 to 2008, several factors
for the construction of a highway which connected the drove the economic into a valley rather than a fast lane.
new international airport and the Olympic Village; and These factors include: 1) the relative economic weak­
the building of a highway which started at the center ness in comparison with the previous five host countries;
of Sydney and connected the airport and Eastern area 2) the huge investment needed in infrastructure (up to
of the CBD. These investments greatly accelerated the five billon US dollars) including transportation system,
economic development of Sydney. However, the rate competition venues , the Olympic village, and com­
of growth of the New South Wales GDP began to drop munication network; 3) the total cost for volunteers and
slightly in the six months following the Olympic Games staff members of the organization committee exceeded
and had not recovered until 2003. The negative growth of 2 billion US dollars; 4) and AN additional security bill
real estate GDP, employment, and real estate consump­ of 1.5 billion US dollars after the 9/11 attack. The total
tion emerged at the post Olympic stage (see table 2). As expenditure of the Athens Olympic reached 16 billion US
investment reduced, the real estate industry of Sydney dollars despite a budget increase from 2.3 billion euros
experienced a corresponding drastic decline. Between to 7 billions by the government of Greece. Such a huge
1993 and 1999, house prices steadily increased annually cost directly led to an annual deficit rate as 6.1% in 2004,
by more than 10%. Moreover, property prices in the areas which was more than double of the 3% standard of EU.
surrounding the main stadium had grown nearly 40% As shown in Fig. 5, a comparison of the economic indi­
annually, and had doubled after three years. Real estate cators before and after the games reveal witnessed a sig­
market declined sharply soon after the Olympic Games. nificant change.
It can been seen from Fig. 6 that with the exception
The Olympic village has subsequently been dubbed a
“ghost city” because no-one lives there. This depression of a change of export and import, major economic indi­
lasted more than two years and seriously influenced the cators including GDP, private consumption, govern­
ment consumption and the investment index all reached
sustained development of economy .
Table 2 shows that three phases of Olympic Games the peak value at the year before the Olympic Games,
suffered different impacts in different years. In the pre- and followed by a drop at Olympic year, during which
Olympic period, investment was mainly spent on real the decrease of investment growth was the largest. The
estate investment but not consumption, with no impetus POVE of the Athens Olympics was significant, reflecting
towards increase in price. It was the result of high level huge risk for a country with a small economic aggregate
investment and trade balance. It also resulted in the over and the existence of such an effect in both mature econ­
consumption of real estate. At the Post-Olympic stage, omic system like Australia and less-developed economic
0.03
negative growth
Phase
emerged in the real estate
Change of percentage
GDP of New South Wales,
In Olympic
Post-Olympic
Pre-Olympic
whereas in Australia as a
0.90
-0.03
-NSW
0.40
Real Estate GDP
whole it was 0.01 percent.
0.39
0.01
-Aust
0.16
In employment, NSW
0.89
-0.06
-NSW
0.37
experienced a 0.06 negative
Employment
0.41
0.00
-Aust
0.16
growth while there was no
0.00
-NSW
0.46
0.91
change nationally. There
Capital Share
0.01
0.16
0.39
was 0.05 negative growth
-Aust
in the NSW real estate
0.63
-0.05
-NSW
0.25
Real Estate Consumption
market compared with
0.32
-0.02
0.11
-Aust
0.02 percent in the whole
0.01
1.18
0.71
-NSW
nation. As a result, we
Realty Investment
0.37
0.48
0.03
-Aust
could reach a conclusion
0.04
0.08
-0.13
-NSW
that the POVE of Sydney
Real Estate Deficit ($b)
-0.03
0.00
-Aust
0.00
Olympic
Games
was
significant.
0.16
0.08
0.25
Volume of Exports
Athens Olympics 2004
The POVE for Athens was
significant. Although the
Alpha Bank predicted that
the hosting of Olympic
Games would contribute
10 billion euros to the
20
Volume of Imports
0,24
0.54
0.10
Trade Balance
-0.05
0.77
0.23
consumer price index
-NSW
0.02
0.21
0.11
(CPI)
-Aust
0.05
0.13
0.11
0.04
0.10
0.03
Native Real Estate
Amount
Table 2: The im pact of the Olym pic G am es on N SW and Australia
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
| iso h ]
INTERNATIONAL SOCIETY OF
m.YMPTr HISTORIAMS
systems such as Korea in 1988 and Greece in 2004.
To sum up, four of the six Olympic Games since 1984
have experienced the influence of post Olympic econ­
omic valley effect. In 1988, a major contributor was
the rapid migration of the agricultural population to the
satellite cities surrounding Seoul. The newly built sta­
diums and the complete facilities in the Olympic vil­
lages were all positive factors in increasing the price of
real estate before the games, but afterwards the rapid
development of satellite cities led to a pie shaped expan­
sion of Seoul, causing a drop in real estate value in the
suburbs. In 1988, Korea was not fully developed from
an economic perspective, which can be proven by the
high dependence on foreign capital, the large share of
the investment in Olympic Games in GDP excluding
the foreign capital, the democratic reform before the
games producing a short term impact on the economy,
and the overestimation by Koreans as to Olympic bene­
fits. These factors combined together contributed to the
valley effect. In 1992, the valley effect of the Barcelona
Olympic was associated with over investment, which
reached 9.4 billion US dollars. This stimulated a short
term economic development; however, the absence of
a consistent stimulus, with the immaturity of the real
estate market of Barcelona, caused a sharp decrease in
real estate value. Over expectation also played a role, for
example the exposition industry was faced with a lack
Fig. 5: C hange o f m ajor econom ic indicators between 2000-2005
Source: CHEN, Jlan: R eport of post-O lym pic eco nom ic research.
W ebsite o f O lym pic e co nom y seminar.
Fig. 6: Th e annual grow th rate of the c onsum er retail price of Beijing
and C hina
of interest after the game. Mistakes had a devastating
effect on the economy of Barcelona. In 2000, the cause
of the valley effect after Sydney’s Olympics was more
complicated. The most important reason is related to the
total population and the geographical location. Before
the Olympics, the Australian Tourist Bureau launched a
large scale campaign in the media, which led to a sharp
increase in the number of tourists. This produced a huge
demand on the local hotel industry. In order to solve this
problem, the government built a number of major hotels
and a large Olympic village. After the games the number
of tourists dropped dramatically especially in Sydney. As
a consequence, demand for hotel accommodation fell off
especially in Sydney itself. The Olympic Village had been
built on a 760 hectare area of deserted brick factories and
marsh, providing 20000 apartments which would accom­
modate 50,000.Australia is a huge country and the resi­
dential market does not drive the market in real estate.
Instead it is driven by the sector as multinationals seek
office space. So the facilities around the Olympic Village
seem surplus to requirements for Sydney, a middle scale
city with a population of about four million . So it is not
surprising that the Olympic village should have become
a “Ghost Town”. In 2004, the POVE for the Athens
Olympic was caused by the impact on the economy of
Greece by the huge scale of investment, a result of under­
estimation in the early years and the need to pour money
into the project in the later stages. This suggests that it is
not advisable for a country with such a small economy
to hold such an event. Moreover, the lack of experience,
indicated by the delay in construction projects, was also a
factor In a word, reasons for the production of POVE are
complicated, but mostly related to the amount of invest­
ment, original structure of industry, consumption, infra­
structure of the host city, and the economic maturity and
aggregate of the host nation and host city.
Analysis of the post Olympic economic
downturn of Beijing Olympic
The investment and consumption during the prepara­
tion and holding stage of the Olympic Games generally
experience a significant increase, and the relevant indus­
tries come through a rapid development. Under such con­
ditions, the overall economy shows a tendency to rise .
However, in the following two to three years, as invest­
ment reduces and the facilities are less in demand, the
burden on the local economy and the maintenance costs
for the sport facilities gradually kick in. The host city is
going to have a local surplus of production and a short­
fall in effective demand, leading to local or even regional
economic depression, that is, the temporary valley effect.
Year
2000
2001
2002
2003
2004
2005
2006
2007
entire country
9.70
9.16
11.98
9.10
13.30
12.90
13.70
16.80
Beijing
9.90
10.41
9.50
14.55
14.32
10.51
11.37
16.00
Table 3: The annual growth rate o f the c o nsum er retail price of Beijing and China Source: Calculated from the statistics relea s e d b y the
N atio n a l Statistics B ureau a n d Beijing Statistics B ureau
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
21
To some degree, the greater the stimulating effect of the
Olympic Games on the local economy, the greater the
possibility of a valley effect after the games with a more
significant effect.
The 2008 Olympics brought a great opportunity to
show a new Beijing to the World. The growth of invest­
ment, consumption, and the unusually fast development
of relevant industries are the major forces that pushes the
economy of a host city, but they are also the factors that
contribute to the post Olympic economic valley effect.
To counter this an insightful analysis and corresponding
plan should be established to avoid a negative impact.
Perspective of investment
Generally speaking, an increasing percentage of invest­
ment by the the host city in the total investment for the
Olympic Games will lead to a more serious shrink­
age after the event and a more significant valley effect.
Compared with other major host cities, the total invest­
ment in Beijing ranks highest, with a budget of more than
38 billion US dollars, assingned mainly to transportation,
environmental protection, construction of stadiums and
other facilities. The investment in transportation systems
took up nearly 40% of the total investment. From the
Eleventh Five Year Plan for the Economic and Society
Development of Beijing, it can be seen that the fixed asset
investment of Beijing during this period was estimated to
be above 118 billion RMB, and the investment in the two
years after Olympic Games was to take up 45% of the
total. The annual fixed asset investment in 2007 reached
over 388 billion RMB. Even if the Olympic Games were
not taken into consideration, the scale would still reach
above 330 billion RMB, which means the investment
into the Olympic Game does not take a large share in the
total investment of Beijing. The major investment of the
Beijing Olympic Games was raised from the market by
employing various channels and multiple funding struc­
ture, like the so called ‘PPP mode’ based on the collabor­
ation among government, citizens, and enterprises, the
‘business development and operation mode’, ‘BOT mode
for finance’, and ‘operation mode of profitable projects
integrated with the sports facilities’. The market-domi­
nated finance channel incorporated the market operation
pattern, which can increase the efficiency of capital man­
agement and considerably ease the financial burden.
Because of the construction of the Olympic stadiums,
the number of infrastructure construction projects in
Beijing was reduced correspondingly. However, after the
Olympic Games, these projects were to be put restored to
the schedule; so it was not anticipated that the the scale of
investment in infrastructure projects would be reduced.
Year
2000
Beijing
Entire Country
Since a large amount of investment in the early stage of
Olympic Games went to the construction of infrastruc­
ture, this will have a positive impact on the sustainable
economic development of Beijing from a long term per­
spective. As a result, the POVE caused by the fluctu­
ation of investment should not happen in Beijing after
the Olympic Games.
Perspective of consumption
Consumption is the important force in driving economic
growth, and therefore the hosting of Olympic Games can,
to some degree, stimulate the local consumption and con­
tribute to the economic growth. Based on the analysis of
consumer retail price of both Beijing and China, a com­
parison was conducted on the growth rate between 2000
and 2007, which can be seen from the Fig. 6 and table 3.
From the comparison, it is clear that the national con­
sumer retail price has maintained a stable rapid growth
since 2000. Beijing was in accordance with the national
growth rate, without any drastic increase due to the prep­
aration for the Olympic Games, and the growth rate is
even below the national level. That means the preparation
of Olympic Games does not bring a significant stimu­
lation effect on consumption. So, we can conclude that
although a short term puUc-likc increase may appear, the
consumption level of Beijing may still rely on the orig­
inal driving force, which means the POVE of Beijing will
not come into being after the Beijing Olympic Games
from the analysis of consumption perspective.
Perspective for relevant industries
From the industry of tourism, the economic cycle of
Olympic usually leads to a considerable increase of tourist
numbers, pushing the rapid development of the tourism
industry, in an Olympic year when the development
is already an explosive one. From the Beijing tourism
figures for these years, it can be seen that the growth rate
of income from international tourism reached 14.20%,
11.22%, and 13.8% in the years from 2005 to 2007
respectively, lower than the average level of the nation,
which were correspondingly set as 13.82%, 15.88%, and
23.5%.In the same period, the growth rates of income
from tourism were 13.54%,14.05%, and 18.3%, while
the national growth rates reached 12.21%, 17.86%, and
24.70%. From the comparison of statistics, the growth
rates of tourism of Beijing are not significantly different
from those of the whole nation, and in some years they
are lower than national levels. We can deduce from this
that the Olympic effect did not pose a significant impact
on the tourism of Beijing during the preparation stage.
During the Olympic Games as the number of tourists
2004
2005
2006
2007
2001
2002
2003
23.87
50.12
26.23
21.54
22.52
3.51
12.78
16.04
21.47
27.29
22.81
30.33
29.59
20.91
22.86
30.15
Table 4: Investm ent growth rate of real estate industry in Beijing and China (unit: %) Source: Calculated from the statistics relea s e d by the
N ational Statistics Bureau a n d Beijing Statistics Bureau
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J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
were regulated the figures did not show a considerable
increase. It was unlikely that the POVE would be caused
by a drop off in tourism.
The real estate industry has recently been an import­
ant economic growth engine for both Beijing and China,
maintaining an extraordinary growth speed. The Olympic
Games played a role as an important catalyst for the rapid
expansion of the real estate industry of Beijing, but it was
not a key role. Compared with the national picture , the
investment in real estate in Beijing increased at a 50.12%,
which is considerably higher than the average level of the
nation, indicating a significant influence of the Olympics.
However, after 2002, the growth rate stayed at the same
level as nationally and reduced after 2005. From the stat­
istical comparisons, the Olympic effect could be seen
in 2001 but became insignificant thereafter.(see table 4)
Therefore, the development of the real estate industry of
Beijing was not determined by the Olympic factor but
was an inevitable consequence of economic development.
As the government tightened financial expenditure , an
unprecedented difficulty has been met by the real estate
industry, and the capital bubble is facing a danger of
rupture. The depression of the national real estate market
is becoming clear, especially in the major cities, where
the turning point of development in real estate market has
been confirmed. As a result of the Olympic factor, real
estate market in Beijing survived the hard times, but the
support is, to some degree, a psychological effect which
is incapable of changing the final choice of the market
power.
The benefit of Olympic Games on transportation indus­
try was evident. To prepare , Beijing invested more than
100 Billion RMB in transport. Key projects included a
subway system, train system to the airport and urban train
transportation system.This was an unprecedented devel­
opment for Beijing. The city had significantly improved
transport which would benefit its sustained future devel­
opment. However, since the projects are constructed in
the same period, the following investment is unable to
maintain the level of investment, so the decrease of the
industry which is of a negative effect is expected.
The science and technology industry has become
an important part of the industrialization of Beijing, in
response to the slogan “Digital Olympics”. Beijing sup­
ports the digital TV, mobile communication, IC card
and electronic identification technology, and computer
industry in order to accelerate the development of these
industries. The result of such support is satisfactory. The
science and technology industry has such potential that it
will receive long term support from the government. This
means that the sustainable growth of such an industry
will not slow in the years after the Olympics. In accord­
ance with the philosophy of a ‘humane Olympic’, the
culture and sports industry has been considered as a pillar
for the blueprint of city development. During Olympic
Games, the cultural and sporting industry was stimulated
by the spotlight but since the scale of the culture and
J o u r n a l o f O ly m p ic H i s t o r y 1 8 ( A p r i l 2 0 1 0 ) N u m b e r 1
sports industry is so small that it will not have a signifi­
cant impact on the economic of Beijing before and after
the Olympics.
From the analysis of the industries, it can be seen that
the economic development of Beijing in recent years has
been mainly driven by the domestic market, which is
benefited from the health of the macroeconomic environ­
ment of China, and the effect of the Olympics was less
significant. After the Olympics, the major industries were
unlikely to witness an economic valley effect, while a
few industries like construction and sports industry
would experience a slow down in development, but the
scale of these industries is too small to pose a significant
effect on the economic wellbeing of Beijing.
To sum up, hosting the Olympic Game provided an
important opportunity for the development of Beijing
and China. This valuable historical chance had to be be
seized and directed to serve the sustainable and healthy
economic progress of China. From the analysis above, it
can be concluded that against the the background of the
development of the whole nation, Beijing will continue
to maintain the original path for development and be able
to avoid the POVE.
The final goal of hosting the Olympic Games was to
take advantage of the chance to promote the economic
development of China. Therefore, Beijing should clarify
the path for future development, according to which the
economic structure and the distribution of industries
should be adjusted in time, like encouraging the devel­
opment of hi-tech industries and service industry, with
the purpose of continuous improvement of the economic
structure. ■
Notes and References
1
CHEN, J.: 2006. Research R eport o f Olympic Econom ic . Beijing
Press.
2
REN, H.: Consideration about B eijing post-O lym pic Valley Effect,
D ata o f Olympics a n d B eijing O lympic International forum . Oct.
5, 2003.
3
1988 Olympic Official Report, IOC
4
Econom ic statistic yearbook o f Korea, 1989
5
CHEN. J.: Report o f post-O lym pic econom ic research. Website o f
Olympic economy seminar
Additional Reading
REN Hai: Encyclopedia o f Olympics. Encyclopedia o f China
Publishing House. 2000.
REN Hai: Consideration about B eijing post-O lym pic economic
downturn, Data o f Olympics and Beijing Olympic International
forum. Oct 5, 2003.
REN, Hai: Research sum m ary o f Olympics. N ational scientific
sports convention. 2004.
BAO Xiaoming: “W ho will be the winner o f Olympic Games?
China Business”, in: China Econom ist, Staffers. July 9, 2001
TANG Mingxin: D evelopm ent history o f Olympic Games. Olympic
Organizing Committee o f Taiwan, China. 1996.
23
]lSO H |
INTERNA TION A L SOCIETY OF
OLYMPIC HISTORIANS
CHEN, J.: Research R eport o f Olympic Econom ic Econom ic 2005.
Beijing Press 2006.
HOBERM AN, John: The Olympic Crisis, New York, Aristide
D.Caratzas, 1986.
LIU Qi: Econom ic Research o f B eijing Olympic Games. Beijing
People Press. 2003.
GIRGINOV, Vassil & PARRY, Jim: The O lympic
Explained, London and New York, Routledge, 2004.
Olympic Charter. International Olympic Organizing Committee.
Olympic Press. 2001.
JEFFERSON LENSKYJ, Helen: Inside the Olympic Industry,
Albany. USA, State University o f New York, 2000.
One hundred years o f International Olympic
Committee. International Olympic O rganizing
Translated by Liang Lijuan. Olympic Press. 1998.
Organizing
Committee.
MADDEN, John R: The Econom ics o f the Sydney Olympics,
CREA Computer Documentation,Centre for Regional Economic
Analysis, University o f Tasmania.
ZHAO Changjie: The developm ent o f O lympic Games. Beijing
Sport University Publication. 2004.
G.M.P SV/ANN: “W hen do Major Sport Events Leave a Lasting
Economic Legacy?”, 2001,DRAFT,3
Games
1984 Olympic Official Report, IOC
1988 Olympic Official Report, IOC
Note by the editors
1992 Olympic Official Report, IOC
1996 Olympic Official Report, IOC
2000 Olympic Official Report, IOC
2004 Olympic Official Report, IOC
Any reader interested in this subject should not miss the follow­
ing book: CASHM AN, Richard: The Bitter-Sw eet Awakening: The
Legacy o f the Sydney O lym pic Games 2000. Walla Walla Press,
Petersham 2006.
BALE, John & KROGH CHRISTENSEN, Mette: Post-Olympism.
New York 2004.
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