Looking Ahead to the Olympics

Robert Hsu, November 01, 2007

While in Greece, I was able to visit the capital city of Athens. I was excited to see the city because I've been fascinated by Greek mythology ever since I was a child. It was wonderful to finally see the famous Acropolis as well as the remains of the ancient Temple of Zeus.

In addition to the ancient sites, tourists can also see the large stadiums and facilities that were built especially for the 2004 Summer Olympic Games. Because China is hosting the Summer Games next year, I want to talk a bit about what happened in Athens three short years ago.

The Athens Olympics attracted only half as many visitors as the Greek government expected. Although the event was labeled by many as a money-loser, it had a positive effect on the country's economy. Since the Olympics, Greece has been the fastest-growing economy in the developed portion of the European Union (EU), with annual GDP growth close to 5% -- its highest growth level in recent history.

The 2004 Olympics reminded the rest of the world that Greece is thriving in the increasingly global economy of the 21st century. The billions of dollars in free publicity more than made up for what Greece lost from poor ticket sales and empty hotel rooms.

I expect a similar result from next year's Beijing Olympics. Regardless of how many visitors show up to the 2008 Games, people around the world will see the incredible transformation taking place in China today. The event should be a great PR coup for China -- and one that they will take full advantage of.

Many investors ask me what I think will happen to China's economy after the Beijing Olympics. Two interesting things happened to me here in Athens that demonstrate how strong China's growth is and will continue to be after the 2008 Games.

First, when traveling I always head out to shopping centers to get a sense of consumer spending. Upscale Greek shopping centers were doing well, despite high prices that are comparable to New York and Beverly Hills. The streets were crowded, and people were busy spending. At a high-end department store, my children saw some beautifully bound and drawn hardcover notebooks with artwork from Greek mythology. I bought the notebooks for my kids, which cost 20 euros each, only to notice later that they were made in China.

It may surprise you to learn that the EU has surpassed the U.S. as China's largest trading partner and export market. Goods made in China have increasingly gone upscale and are no longer sold only by discount mass retailers. Just as Japanese products improved in quality during the '60s and '70s, Chinese goods have been doing the same thing.

As product quality from China improves, select Chinese-made goods will move higher on the product ladder. As a result, I don't see disaster for China's economy following the Olympics. The truth is that China is benefiting from increased travel to Europe (where its goods are sold) and has enough irons in the fire to keep its red-hot economy growing -- with or without the Olympics.

Secondly, my visit to Athens would have been incomplete without a trip to the Acropolis, the 2,500-year-old citadel situated on a high hill overlooking the city and the harbor. At the Acropolis, I saw tourists from around the world admiring the Parthenon, the beautiful temple of the goddess Athena. But tourists from Mainland China, wearing bright yellow vests, outnumbered all of the other tourist groups. It's clear that the China Miracle is alive and well, and I don't expect anything to derail it.

Until next month,

To keep tracking China's progress as we head towards the 2008 Olympic Games, become a member of China Strategy and follow my frequent updates.