As the Beijing Olympics will be over by the end of next week, China is likely to bask in accolades offered by other nations for having organized one of the most successful Olympics in modern times. China has spent so much money in preparation for the Olympics.

At $36 billion, the total bill is 5.5 times the average for the four previous Olympics held in Athens, Sydney, Atlanta and Barcelona, according to estimates by Asian broker CLSA.

What is likely to be the aftermath of this long-awaited event, the source of an immense upswell of national pride in China and a clear sign that the Middle Kingdom is no longer isolated in any sense of the word among the international community of nations?

Are there any important implications for investors to take note of, such as weaker economic activity once the event has ended and foreign visitors to the Games have departed?

The potential impact of the Beijing Olympics on the macro-economy has been a popular topic in the Chinese financial press and in brokers' research. The large crowds of overseas tourists in Beijing will leave the city and hotel occupancy rate will drop from almost 100 percent to 65 to 70 percent. That much is certain.

Viewed from a national growth perspective, we, however, would argue that the macro-economic consequences of the Olympic Games are relatively small. Thus it should largely be a non-event for the stock markets.

The markets of the host nations of the previous five Games indeed performed strongly after the event, with an average rise of 27 percent in the 12 months afterwards. But we very much doubt this reflects strong causality running from the Olympics to stock market performance.

It seems far more likely that this is mainly a chance correlation - though one which might continue, since the sharp correction to the share prices year-to-date, plus continuing strong economic growth augurs well for a recovery rally in Chinese equities in 2009.

That is not to say that there will not be some important economic effects. But they will tend to be important to specific firms or sectors such as tourism, and to the local economy in Beijing, rather than at national level. Beijing accounts for only 1.1 percent of China's population and less than 3 percent of GDP.

Additional public and private spending due to the Games, though difficult to measure, can potentially be a significant booster to the GDP of a small country like Singapore (host to the first ever "Youth Olympics" in 2010), or Greece (more than 4.5 percent of GDP). Yet when the Olympics was held in a US city, like Atlanta, there was no visible impact on the US GDP at all.

Like the US, China is also a large economy, and is currently the world's fourth largest. China falls in between Greece and the US with regard to the magnitude of the fiscal stimulus in the year of the Games. The World Bank estimates the boost to China's overall public spending in the year of the Olympics should be about 1.1 percent. That is certainly a fiscally significant sum - in relative terms, not much less than the special US tax cuts in the second quarter of 2008.

The author is head of Investor Communications, JF Asset Management.

(HK Edition 08/15/2008 page3)