How Chinese Mega-events helped stimulate the Chinese Economy

Hello everyone,

I have conducted my research on the impact of the 2008 Beijing Olympics and 2010 Shanghai International exposition and their economic impact on China and how it acted as a springboard to stimulate China’s economy.

For those who haven’t seen the video, I’ve posted both below for reference and my research will be followed after.

“Mega-Events as Economic Drivers”

As China’s Performance culture continues to develop and flourish, its economy grows with it. These magnificent performances in China can no longer be viewed as a means for self-expression or entertainment, but as a way for China to utilize these performances to stimulate tourism business, increase consumer expenditure, and create employment opportunities that would ultimately stimulate the economy.  In order for this to happen, the government put on mega-events such as the 2008 Beijing Olympics and 2010 Shanghai International Exposition, which provided value-adding opportunities that improved the overall economic state of China and placed China as a global business leader amongst other international countries in the modern world.

The 2008 Summer Olympic Games was a major international multi-sport event that took place in Beijing, China from August 8th to August 24th.  There were a total of 10,942 athletes from 204 different national Olympic committees that comprised of 28 different sports, resulting in 302 events.  China was the 22nd national to host the Olympic Games and was only the 3rd time it was held in Asia, after Tokyo in 1964 and Seoul in 1988[i].  But some may wonder, why were the 2008 Olympics so important to China?

Some claim that the 2008 Olympics was a “big coming out party” as a way to say “we have finally made it”.[ii]  But it was much more than that to China.  Instead, the importance of the 2008 Olympic Games circled around the ability to leverage the event as a way to boost their economic growth to an even higher degree.  Taking a look pre-2008, China’s economic activity was at a stable growth rate.  According to the National Bureau of Statistics from China’s Statistical Yearbooks, there was steady growth of around 2,500 GDP RMB billion related to current prices every year from 2000 to 2007.  But looking at the GDP change from 2007 to 2008, there is a significant jump of 24,661.9 to 31,404.5 RMB billion, a growth rate of 27% compared to 15% from 2000-2007.[iii]  This jump can be largely attributed to the 2008 Olympics because the event created opportunities that stimulated economy through increased tourism business, consumer retail activity and employment opportunities.

As a result of winning the 2008 Olympic Bid, Beijing Tourism director, Zhang Huiguang, stated that the Olympics was an “opportunity to stimulate Beijing Tourism”.  Because of the anticipated number of tourists coming in, Zhang was responsible for remodeling the “Bird’s Nest, “Water Cube”, “The Olympic Park” and many other Olympic venues related to the event.[iv]  Post Olympics, statistics show that in 2008, Beijing had 42.4 million tourism visits, compared to just 3.8 million in 2006.[v]  These numbers speak for themselves and show how significant the 2008 Olympics were for the tourism business.  Hypothetically speaking, let’s say each tourist spends an average of $1000 US dollars when they visit China.  Take the difference between tourist visits from 2006 to 2008 and multiple that by $1000 and account for fixed and variable costs, we see an approximate increase of $20,000 million dollars dedicated purely to tourism.[vi]  From that we can conclude and say that the 2008 Olympics boosted the tourism business which ultimately stimulated the Chinese economy.

Consequently, an increase in tourism also lead to an increase in consumer expenditure.  Looking at the 2008 Retail sales value on month-on-month, we can see that consumer expenditure in the month of August in 2008 was up nearly 25% compared to other months in 2008.[vii]  Given that the Olympic Games were from August 8th, 2008 to August 24th, 2008, the increase in consumer expenditure can be attributed to the Olympic event.  This is extremely significant because it goes to show how a mega-event like the Olympic Games can be the reason consumer expenditure rises by nearly 25%, which ultimately increased economy activity and attributed to China’s GDP growth in 2008.

This graph represents the consumer expenditure in the year 2008. Take a look at August and notice the spike in consumer expenditure.

Moreover, as more and more people visit, the more people spend, which ultimately requires more labor.  According to the IOC Marketing Media Guide, McDonalds alone in Beijing had to bring in an additional 1,400 employees just to serve the anticipated stream of consumers attending the Olympics.[viii]  Furthermore, according to the Analysts of the Beijing Olympics, the Olympics provided over 430,000 jobs for construction workers, over 130,000 jobs for retail and wholesalers, and over 1.8 Million jobs across the financial, insurance, IT and telecommunications industries affiliated with the Olympic Games.[ix]  This is extremely significant because it shows that the 2008 Olympics played a huge role in helping the unemployed become employed.  Consequently, their awarded income led them to more spending, and overall stimulating the Chinese economy.

Although there were many economic benefits that sprung from the 2008 Olympics, some believed the games showed a lack of human rights.  For example, when thousands of citizens were evicted from their homes to make way for construction of Olympic venues, the government promised protest zones that failed to ever happen.[x]  Additionally, the government promised journalists “unfettered access” which resulted in authorities revoking those promises and limiting web usage.[xi]  Although these internal issues are very important, I personally feel the many benefits from the opening ceremony outweighed these empty promises.  For example, Beijing’s air was blue, something that hadn’t been seen for a while and the increase in economic activity due to the increased foot traffic in China didn’t hurt.[xii]  In the end, the benefits outweigh the negatives from a holistic perspective and the decision by China to allow for this mega-event was a great way to improve tourism business, increase consumer consumption, and offer employment opportunities to its citizens; ultimately stimulating the economy and fueling China’s growth.

Much like the 2008 Olympics, the 2010 Shanghai International Exposition had similar ripple effects on the Chinese economy.  The 2010 Shanghai International Expo was held on both banks of the Huangpu River in the city of Shanghai from May 1st 2010 to October 31st 2010.  It had the largest number of countries participating and had the largest World’s fair site at 5.28 square km.[xiii]  By the end of the Expo, over 73 million people visited – a record attendance – and 246 countries and international organizations had participated.  On October 16th, 2010, the expo set a single-day record of over 1.03 million visitors, the most at any international expo.[xiv]  By looking at these statistics and seeing the previous success of the Beijing Olympics, it’s evident that mega-events were beyond just showcasing China’s culture.  Instead, it was an attempt by the government to leverage the mega-event as a means to further stimulate China’s economy.

If we look post-2008 and pre-2010, the average profit (per 100 million) Yuan was about 1.85 from 2005-2009 according to the 2010 Shanghai yearbook.[xv]  But looking post-2010, we see that total profits (per 100 million Yuan) jumped all the way up to 4.02, a near 100% increase in total profits.  Furthermore, tourism pre-2010 averaged 362,121 travelers to Shanghai compared to post-2010 where records show an increase to 575,200 tourists, showcasing an increase of 59% in tourists visiting Shanghai.[xvi]  From these numbers we can make the conclusion that the Shanghai expo was a key driver in generating this increase in tourism that lead to an increase in economic growth.[xvii]  Much like the Beijing Olympics, the Chinese government was able to leverage the presence of the Expo to attract more tourism, increase consumer expenditure, and provide new job opportunities that would ultimately stimulate the economy.

Looking at tourism alone, we’ve already seen that tourism increased about 59% in Shanghai due to this event.  Furthermore, according to the National Tourism Administration, the Expo itself generated over $12 billion USD from the 6-months that it was open.[xviii]  To give some perspective, the average annual revenue in Shanghai in 2005 converted to USD is $3,130,148,270.[xix]  So the fact that the Shanghai Expo generated four times the amount of the average annual revenue in only 6-months speaks to the success and economic stimulation that it created for both the city and the country of China.

This table represents the average foot traffic in the city of Shanghai pre-2010. The number I’ve presented in my research paper represents the number in 2010, representing the impact the 2010 shanghai expo had on foot traffic for the city.

Moreover, the Shanghai Expo not only serviced the tourism business in Shanghai, but it also had beneficial spillover effects.  According to the national Tourism Administration, there was a 20% increase in demand for tourism services to Shanghai’s adjacent cities.[xx]  Additionally, foreign exchanges earning from inbound visitors hit $33.7 billion – a 15.8% increase from previous years.  The mere fact that earnings are up to $33.7 Billion from purely exchanging money goes to show how significant this event was for Shanghai and ultimately, China’s economy.[xxi]  From the evidence, we can conclude that because the government allowed for this mega-event, Shanghai’s tourism business was able to flourish which attributed to China’s economy stimulation.

Much like Beijing and how consumer spending increased, the same effects happened to Shanghai.  Looking at Shanghai’s 2010 consumer yearbook, 2010 consumer expenditure had a net growth of 897.07 (100 Million Yuan) compared to the average growth of 500 (100 Million Yuan) of previous years.[xxii]  To put in perspective of the amount, that’s a 4.34% increase in the growth rate itself compared to the 0.34-.9% growth rate we’ve seen in the pre-2010.  This adds huge significance to Shanghai’s economic growth.  Because of the event, the city was able to grow four times the amount it would have had the event not happened.  This just goes to show how the expo increased consumer expenditure, which was pivotal in stimulating China’s economy.

This financial statement is taken from the 2011 Shanghai Yearbook.  It represents the increased growth due to the expo.

This financial statement is taken from the 2011 Shanghai Yearbook. It represents the increased growth due to the expo.

With more consumer expenditure, Shanghai had to find ways to sustain all traction.  Similar to Beijing, Shanghai’s employment skyrocketed.  To account for the 73 million visitors, Shanghai put in place an extensive transportation network, built new hotels, and hired over 5,000 employees to sustain the city and unleash its potential.  According to the Shanghai Statistical Yearbook, the city alone saw an increase from 49.74 (per 10,000 people) to 70.21 (per 10,000 people) of new urban employees.[xxiii]  This is significant because this event alone accounted for 41% increase in employment and I think it’s safe to say that any country with this employment rate would be pretty happy with the trajectory of their economy.  It’s evident that there are a lot of economic benefits that formulated due to the 2010 Shanghai Expo.  Whether that be the increase in tourism, in consumer expenditure, or employment, the event itself ultimately served as an opportunity that provided China with opportunities that lead to economic stimulation.
With that being said, both the 2010 Shanghai Expo and 2008 Olympics promote the idea that China is now a global player and deserves a place in the modern world next to America, Europe, Hong Kong, Singapore, and other major developed countries.  Like we discussed in class about Zhang Yimou and his drive to promote international recognition for China through collaboration, the two mega-events did as well, except in a more capitalist fashion.  Instead of emphasizing the presence of collaboration with other nationalities through performance culture like Zhang did when he directed Sarah Brightman to sing in Chinese or when he presented the order of arrival in a Chinese fashion,[xxiv] the mega-events focused on their ability to increase tourism business.  China’s theory is very simple; by attracting more international tourists to China, people will recognize the country and see its economic potential, which will ultimately allow China to be recognized as part of the modern state.

Furthermore, both the Shanghai Expo and Beijing Olympics embodied Pal Nyiri’s concept of commoditization and how the Chinese government was able to commoditize sublime locations and turn them into profit generating entities.[xxv]  This was a similar concept that was adopted by the creators of both the Beijing Olympics and Shanghai Expo, except everything was on a bigger scale.  Instead of commoditizing sublime locations, the Chinese government in a sense, commoditized the entire city and its resources into these two large mega-events.  As a result, many business opportunities arose and the revenues were tenfold compared to what Zhang Yimou did with Impression Liu Sanjie but the underlying concept of commoditization and generating revenue is still the same.

Moreover, both the mega-events emphasized the idea of opportunity, much like how Yang Liping did with her infamous play Dynamic Yunnan.[xxvi]  In her journey to create a play to raise awareness for an unknown ethnic group, she was able to provide many career opportunities that were once non-existent.  For example in an interview with a local performer, the villager states, “I’m fortunate to be here because without Yang Liping, I would still be farming back home”.[xxvii]  That statement goes to show how yang Liping was able to take a performance event and create an employment opportunity out of the process, much like how the 2008 Beijing Olympics and 2010 Shanghai Expo did for the Chinese citizens.

As a result of the increase in tourism, consumer expenditure and employment opportunities, China has made lots of progression in entering the modern world.  From a business perspective, China is now starting to act as leaders opposed to the outsourcing that most people know China for.  In recent times, we’ve seen lots of activity between the Chinese and U.S., especially in consumer retail and just recently real estate.  Just last week, Chinese investors bought nearly $450 billion dollars in Assets in Detroit.[xxviii]  Additionally, China has been increasing their outsourcing costs because they know have enough capital and infrastructure in their own country that they can start focusing on their growth instead and slowly divest out of working for other people.[xxix]  With the momentum China is gaining, it goes to show how much China has grown and that mega-events like the Beijing Olympics and Shanghai Expo have been contributing factors to China becoming a global business leader.

With everything we’ve examined, it’s evident that China’s performance culture was much more than just magnificent performances.  Instead, with the ample growth the performance culture has seen, the government saw the opportunity and capitalized it by utilizing mega-events as an economic driver.  In order to accomplish this, the government utilized events such as the 2008 Beijing Olympics and 2010 Shanghai International exposition to stimulate the tourism business, which lead to consumer expenditure, and ultimately resulted in new employment opportunities.  With these value-adding opportunities, China is now not only able to stimulate its economy, but ultimately make progress that would advance them to a modern world.

 


[xii] Wilcox, Emily.  Lecture.  September 16, 2013

[xvi]Qu, Yunhua. “Research of Economic Growth Model of Shanghai World Expo Impact.” (n.d.): n. pag. Print.

[xvii] Qu, Yunhua. “Research of Economic Growth Model of Shanghai World Expo Impact.” (n.d.): n. pag. Print.

[xxiv] Ctools viewing.  Video.  Laura Brubacher.  September 16, 2013

[xxv] Nyiri, pal.  Scenic Spots: Chinese Tourism, the State, and Cultural Authority Seattle: University of Washington, 2006.  Print.

[xxvi] http://www.youtube.com/watch?v=01SCRGSdxTw

[xxvii] http://www.youtube.com/watch?v=01SCRGSdxTw

 

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