Business eyes Olympic gold in Beijing

By CNN's Nick Hopkins

BEIJING, China (CNN) -- The Beijing 2008 Olympics will trigger a flood of investment from major international corporations in China, analysts say.

The chance to use the world's highest profile sporting event as a marketing platform in the world's most populous nation promises investment above and beyond the up-front investment required to stage the Games.

Tim Stratford, the vice-chairman of auto giant General Motors' China Operations, says the first Olympics to be held in China will provide an opportunity to market a brand to hundreds of millions of Chinese people.

"You want to be a good corporate citizen wherever you do business and you also need to be mindful of the marketing opportunities, and the Olympics is the perfect combination of both of those things," he says.

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Global sponsors of the International Olympic Committee, such as McDonald's, the Coca-Cola Company and Eastman Kodak have marketing rights to the 2008 Games regardless of where they are held.

Those three, and many more, have already broken into the emerging but potentially lucrative Chinese market.

Bidding cities are prevented from securing their own sponsors until they have been awarded the Games hosting rights.

China will select 10 headline partners and as many as 15 sponsors for the Beijing Olympics, providing more than $120 million in revenues.

Modest profit

But even before the vote in Moscow on July 13, a number of major companies began jostling to win the favor of Beijing city officials by aligning themselves with the Beijing 2008 bid.

Among the 20 official bid sponsors are a swathe of Chinese companies as well as GM, Taiwan's computer giant Acer and photocopier maker Xerox. Stratford says GM provided cars and an undisclosed amount of cash to the Beijing 2008 effort.

"The Beijing games would be a catalyst for a high level of economic activity in this city and whenever you have a high level of economic activity you have business opportunities," says Stratford.

The Beijing bid committee says in its bid material that an Olympics held in China would cost $1.625 billion to stage and reap $1.606 billion in revenues, yielding a modest $19 million profit.

But economists at investment bank Goldman Sachs estimate that the right to host the Games will lift China's gross domestic product by 0.3 per cent annually between 2002 and 2008.

Hong Kong-based UBS Warburg economist Arup Raha says the economic impact of the Games will be largely overshadowed by China's looming accession to the World Trade Organization.

Infrastructure improved

"But it would definitely be good for China's economy, if only in the short-term," he told CNN. "Just look at the impact the Olympics have had on previous host countries like Australia, where the impact was clearly positive."

"You can't break down the impact year on year because that would assume everything is constant, which of course it is not in China," says Raha.

In addition to the marketing and promotional opportunities the games would provide, literally thousands of companies are lining up to get a slice of the money Beijing city officials plan to spend on improving their city ahead of the Games.

Beijing city officials say they will spend some $22 billion on improvements to Beijing's infrastructure and environment, as well as on an array of new sports facilities, leading up to the Games.

That amounts to about 2.2 percent of China's approximately $1000 billion annual gross domestic product.

Experience a bonus

At the head of the line of companies hoping to strike up for deals with Beijing are those with previous Olympics experience.

Fresh from the success of staging the Sydney Olympics, Australian companies from all industry sectors teamed with the Australian Trade Commission (Austrade) to launch a concerted bid for work on the Beijing Games.

GM China's Tim Stratford sees the Games as an enormous opportunity for both Beijing and international companies

"The competition is going to be crazy to win work in Beijing leading up to 2008," says Beijing-based Austrade commissioner Carolyn Hughes.

Austrade has compiled a list of some 320 companies that worked on the Sydney Games in industry sectors spanning telecommunications to seating, design and environmental planning.

"It's a phenomenal opportunity for these companies, especially in light of the goodwill that was generated by the Sydney Games," says Hughes.

More goodwill has been generated by Australia's open support for Beijing's bid, and the behind-the-scenes assistance lent to the Beijing bid by former Sydney Games officials.

Says GM's Stratford, who is also chairman of the American Chamber of Commerce in China, more value will be found in the long-term ties opened up by holding the Olympics in China.

"You've got to have a certain type of overall environment for business to develop smoothly and for there to be economic progress and so on, and a lot of benefit is to be gained by greater understanding around the world of what's going on in China," he says.