• Wishing for good luck, the Chinese open the Olympics

• Can the games re-ignite their dimming economic flame?

Mark Lamb is Director
of FPC Investment Consultants
marklamb@fpc.com.mt

It was no coincidence that China’s spectacular Olympic opening ceremony was held on the eight day of the eight month in 2008 as many Chinese people consider the number eight to be lucky, as in Mandarin and Cantonese the number eight sounds similar to their word for getting rich. Many investors in China are certainly hoping for the word ‘prosperity’ to appear in their fortune cookie!
As China’s huge hero and flag bearer, basketball player Yao Ming, walked in to the impressive Birds Nest stadium which took 52 months to build at an estimated cost of 3.5 billion yaun (over $500 dollars), the years of meticulous detail and planning resulted in a spectacle show of which the people of China can be truly proud.
The Chinese had always hoped the Olympic Games would showcase their emergence in both sporting and economic terms and while we will soon see how their athletes compare with the best in the world the events of the last eight months have certainly taken the shine off their previous considerable economic achievements.
Based on figures recently released by Bloomberg, China’s main CSI 300 index is currently this year’s worst performer among 88 worldwide benchmarks, representing a fall of around 50% from its peak.
In February, as the Chinese celebrated entering their ‘Year of the Rat’, regular readers will recall my article commenting that unlike their previous ‘Year of the Pig’ which is positively symbolised in Chinese culture and astrology with fertility and virility, the ‘Year of the Rat’ is a little more ambiguous as it is has both positive and negative connotations as it is associated with wealth, aggression and order yet also with death, war and pestilence. This interpretation followed January’s article entitled ‘Outrageous Predictions for 2008’ in which I highlighted some events which I believed could shape 2008, one of which was a major fall in the Chinese Markets. In the article I suggested that ‘following their fantastic growth over the previous few years China could experience a sharp correction in this their Olympic year, possibly by as much as 40% from their high point.’
A slowing economy, pollution and human rights demonstrations will no doubt feature along side the commentary of the games themselves but could the games act to re-ignite their dimming economic flame? In reality, as an event by themselves the games can not. Consider tourist numbers. Although it is estimated that around half-a-million tourists will visit China to experience the games this drop in the ocean can not hope to set their economy alight and while 17 million people may live in the host city Beijing, in a country with a population of 1.3 billion even their extra enthusiasm can go only so far.
But the lasting, slow burning legacy of the $43 billion spent on infrastructure projects together with a major brand recognition hurdle being cleared in China for certain international brands associated with the Olympics will, given a little luck, offer long term opportunities and prosperity.

While China’s economy may not be favourites at this time to win the sprint would anyone bet against it winning the marathon?