Will the Olympics bring wealth to China?

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Beijing Olympics

The Olympic games are full of sponsorship possibilities, along with tourism, all injecting plenty of money into the events. But will the Olympics bring economic health to China or just more problems?

Inflation and the Olympics

Inflation continues to be a concern in China; the government reports very high inflation to the tune of 10% year over year. Bringing the Olympic games to China will mean plenty of tourism and more money to the already overly inflated Chinese public. It is likely that the Olympic games could bring more localized inflation to places like Beijing, where the games will be hosted.

The injection of tourism into China

China has never been touted as a holiday sweet spot, but as the Olympiads and spectators visit, they may find that China is the perfect place for a vacation. The Chinese tourism industry will likely do very well for the few quarters following the Olympic games. If you were to make any play on the Olympic games, the tourism industry is the perfect place to start.

Yuan purchasing power

The influx of athletes and travelers will have a very fundamental impact on the price of the Chinese Yuan. Without any more government intervention, it is likely that more dollars, euros, and yen will find themselves in China after being exchanged for the RMB. Though the government is rapidly fighting a rising Yuan, the influx from tourism could bring the Yuan’s value even higher.

The political ramifications

The biggest impact of these four factors would certainly be in the political arena.  With any luck, the political problems that plagued the past will not surface in the 2008 games. The political impact of the Olympics is certainly an element to watch. Tensions between nations are at their highest ever, especially between oil producing nations. China has much to gain in how the rest of the world views its government, and some nations might have some dirty tactics to pull if problems occur. Let’s hope for a peaceful competition, but be weary of what has happened in the past.

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