The Economics of the Beijing Winter Olympics 2022

The Winter Olympics are upon us in Beijing, who also hosted the Summer Olympics in 2008, giving China a unique double. Like in 2008, hosting the Olympics is important to China in terms of showcasing its economic and technology credentials to the world as player on the global stage.

But the times are different now compared to 2008, when there was less geo-political tension.  And whilst we had a global financial crisis (GFC) to handle at the time, there was no global pandemic. These factors make hosting a global sporting event more problematic, and as we saw in the Tokyo 2020 Summer Olympic Games (albeit held a year later in 2021), there is less domestic public support for the Games due to fears of Covid19 contagion.  

So why should a host city press on given the uncertainty in world affairs and covid?

Even before covid hit, there was mounting evidence that hosting the games came with a significant price tag.  According to Oxford University, nearly every games has overrun its budget since the infamous 1976 Montreal Olympics (that caused long term financial problems for the City of Montreal), with an average overrun of 252 per cent (adjusted for inflation). The only exception was Los Angeles 1984 which, as the only bidder, negotiated a favourable TV rights deal from the International Olympics Committee (IOC).

From an economics perspective, how does hosting a winter games compare to summer? It’s a bit cheaper. The official budget for the 2022 Winter Olympics is just AU$ 5.6 billion compared to AU$64.3 billion for the 2008 Summer Olympics.  It’s on a smaller scale with fewer countries and fewer athletes.  And in 2022, it will rely on domestic Chinese tourism given covid19 and China’s border controls.

Is there any risk of a cost blow out? Beijing has had to use fake snow and some complex water delivery systems that could be both financially and environmentally risky, although Beijing also wants to demonstrate China’s green credentials in renewable energy.  And of course a covid19 outbreak in the Olympic village or further poses a major risk as we saw in Tokyo.

So given these risks, why does Beijing 2022 matter to China?

Like 2008, it’s for global prestige, although in 2022, it’s more about China showing it can go it alone in the world.  There are benefits from Chinese athletes working with international coaches given increased interest in winter sports amongst the Chinese population.  And the Chinese Government has used the Winter Olympics to invest in poorer mountainous areas in Northern China, to boost local jobs and domestic tourism. Some 400 ski resorts were built across China between 2014 and 2017 with a goal of 803 by the time the Games commence together with over 654 skating rinks.  The Games are principally for domestic consumption in terms of tourism, local infrastructure and jobs.

Will the 2022 Winter Olympics help China’s ‘soft diplomacy’?

Covid19 has limited its wins in this regard and the diplomatic boycott won’t help but the athletes and the local tourists will largely be unaffected by the boycott. The bottom line for this Games is to develop the winter sports industry in China, for domestic consumption and investment and cheer the Chinese athletes on. And if they can get through the games largely covid19 free, it will be deemed a success.