Beijing Olympics—Too large, too costly? Maybe not

The use of diversified funding sources, and plans to use the venues after the games could see Beijing come out ahead.

Billed as the most expensive games to date, this summer's Beijing Olympics will likely run up a bill of significantly over $20 billion. Some may question whether this will be too much—that it will become a financial millstone around the Beijing municipal government's neck. But while the cost of hosting the games is huge, Standard & Poor's Ratings Services believes that Beijing is well-equipped to handle it. The importance to China in terms of boosting its international standing is obvious, but the Chinese authorities appear to recognise that the Olympics isn't an end in itself. Indeed, their careful planning of this massive sporting event suggests the benefits of hosting the Games will continue long after the closing ceremony.

Setting a record for construction

Beijing's bid documentation, submitted to the International Olympic Committee in 2000, estimated that the infrastructural work leading up to the games would cost up to $14.3 billion. Much of this relates to improvements needed to make Beijing a suitable venue for the games. However, steep gains in commodity prices over recent years have likely pushed construction costs well above this initial projection - thus the current estimates that suggest the total cost of hosting the games could be well over $20 billion.

The cost of Beijing Olympics 2008 is considerable also compared with the 2012 Olympics, to be held in London (see "The Cost of Olympic Gold: the Credit Effect of Hosting the 2012 Olympics" published January 20, 2005, on RatingsDirect). With the benefit of more updated construction material costs, London's estimated Olympic capital spending in late 2004 of $15.8 billion was only a little higher than Beijing's official estimates. This is despite the higher labour and other costs of building in London. Other candidate cities competing with London submitted lower estimates, with Madrid putting in the next highest bid at $11.6 billion (see chart 1).

It's easy to see why the Beijing Games require such a big investment. The new infrastructure includes some of the world's most impressive structures. The newly-opened passenger terminal at the Beijing Capital International Airport, for instance, has a floor area larger than all five terminal buildings at London Heathrow airport. The Beijing subway expansion plan also aims to make what was a two-line system into the world's most extensive underground network in less than a decade. A number of the sports facilities built for the Olympics, including the National Stadium and the National Aquatics Centre, are also architectural marvels that are possible only with the use of recently developed technology. Moreover, all of these facilities have been built at breakneck speed.

Some have made the case that China is pulling out all the financial stops to showcase its development during the Games. Despite years of exceptional growth, annual average income in the People's Republic of China remains relatively low at less than $3,000. And the infrastructure cost estimate in Beijing's bid document is close to the municipal government's total expenditure in 2006 (see chart 2). With pressing social spending needs in a country where regional income disparity has become a significant problem, it's not immediately obvious why Beijing should outspend much wealthier cities in hosting the Games. The risk of large losses, as in the cases of Montreal in 1976 and Athens in 2004, clearly increases with financial commitment.

Development first, games second?

A closer examination of the finances of the Beijing Olympics assuages many of these concerns. To begin with, many of the projects would have gone ahead whether the city had won the Olympics bid or not. China's capital city is a fast-growing metropolis—the population grew by almost 16% from 2000 to 2006, reaching 15.8 million. Until recently, Beijing's urban infrastructure also lagged significantly behind cities of comparable importance in the advanced economies.

Therefore, most of the capital projects involved improvements that were already in the city's development plan.

Hosting the Olympic games required some re-prioritisation of the plan's projects. In a few instances, construction of sports venues proceeded, while budget constraints caused other projects to be postponed. The number of facilities built specifically for the Olympics (the National Stadium being one) is very small. Total spending on all sports facilities for the games is also modest. In early 2008, a Beijing vice-mayor revealed that the cost of Olympic venues will be no more than Rmb13 billion ($1.8 billion). Therefore, Beijing's bid document earmarked most of the capital budget for improving public facilities, such as the airport and the subway system.

Moreover, of the amount spent on the sports venues, the government shoulders only about one-half. In planning for the Olympics, the government made a conscious effort to seek diversified funding. It tendered commercially viable projects out to the corporate sector and offered financial support and incentives where necessary, as was the case with the National Stadium. The government also sought donations to build structures such as the National Aquatics Centre, which it financed with contributions by overseas Chinese. These measures helped to significantly reduce the financial burden.

Looking beyond the finish line

The Beijing government appears to have considered the issue of Olympic white elephants as well. Tenders for building sports venues encouraged winners to put these structures to commercial use after the games. Other venues went up in universities and other educational institutions which will make use of them after the competitions are over. These arrangements reduce the future cost to the government of maintaining these facilities.

The Chinese government is clearly eager to put its best face forward when the country is in the international spotlight this year. However, in doing so, it hasn't thrown its characteristic fiscal prudence to the wind. In this regard, attention to execution appears to have led to timely completion of various projects without substantial cost overruns.

Standard & Poor's hasn't assigned a local government credit rating to Beijing, as it has with most bidders for the 2012 Olympics. If we do, however, the city's rating fundamentals are unlikely to be affected by hosting what appears to be among the most expensive Olympic games ever. Indeed, the Beijing Olympics could be one of the most financially successful games in terms of revenue receipts. Indications are that strong revenue support is coming from commercial sponsors eager to reach what some forecast could become the second-largest consumer market in the next decade. Furthermore, unlike with the Athens games, slow ticket sales don't appear to be a problem due to enthusiastic local demand.

Fortunately for the Chinese central government, its guarantee to bear losses relating to the games is unlikely to be called upon. The need to absorb losses associated with the Athens Olympics had weighed heavily on sovereign credit support for similarly-rated Greece (see "Greece's Sovereign Credit Worthiness Beyond the Olympics: a Marathon, Not a Sprint" published August 9, 2004, on RatingsDirect). Therefore, we don't expect the 2008 Olympics to weaken China's significant advantage vis-à-vis Greece either in terms of net government debt or budget performance (see table 1).

Beijing's experience may be more comparable with that of Barcelona. The Spanish city's substantial infrastructure investment leading up to the 1992 Games helped boost its appeal for visitors and businesses alike. The positive economic impact helped lift the city's credit ratings to its current level (AA+/Stable/--) from the A-/Positive/-- rating that we assigned in 1994. With the advantage of a rich and long history, Beijing could experience an even greater tourism boost. Hosting the Olympics could lead to long-term improvement in the city government's credit worthiness, rather than to a huge financial burden.

北京奥运会——规模太大、成本太高？何以见得。

北京奥运会——规模太大、成本太高？何以见得。

　　多样化融资渠道及奥运会结束后场地使用规划显示出北京谋事在前。

　　北京为举办本届夏季奥运会可能需支付超过200亿美元的巨额账单，从而成为迄今为止最昂贵的一届奥运会。有人质疑这笔开销是否过于庞大了，因而使北京市政府背上沉重的财政包袱。虽然举办奥运会的代价不菲，但标准普尔评级服务相信北京已做好了充分的准备来应对这一局面。举办奥运会对中国提升其国际地位的重要性是不言而喻的，中国似乎认识到奥运会本身并没有结束。事实上，当局对大规模体育赛事的精心规划暗示出举办奥运会所带来的利益在闭幕式后仍将长期持续。

　　在2000年北京向国际奥委会递交的申办文件中，为举办奥运会而进行的基建工程费用预计为143亿美元，多数工程与将北京改造成适合举办奥运会的城市有关。但近几年中，由于物价飞涨，建设费用极有可能超过原来的预计。因此，当前预计为举办奥运会而投入的成本总计将超过200亿美元。

　　同2012年将在伦敦举办的奥运会相比，2008年北京奥运会的成本也是相当可观的（见“奥运金牌的成本：2012年奥运会举办的信用影响”，RatingsDirect于2005年1月20日发表）。因采用最新建筑材料而导致成本上升，伦敦奥运会在2004年末的开支预计为158亿美元，仅比北京官方估计略高，这还不包括伦敦较高的劳动力成本和其他建设费用。在与伦敦竞争的其他候选城市所提交的较低预算中，马德里以116亿美元的成本预计位居次席。

　　由此可知为何北京奥运会需要如此之巨的投入。在新建基础设施中，包含一些让世界为之震撼的建筑。例如，北京首都国际机场投入运营的新航站楼，其占地面积比伦敦希思罗机场全部五个航站楼加起来的面积总和还要大。在未来十年内，北京地铁扩建规划将把其双线地铁系统建成世界上最长的地下交通网络。在众多为奥运而建的体育设施中，还有像国家体育馆和水立方这样只有采用最新技术才能创造出的建筑奇迹。而且，所有这些设施都以惊人的速度建成。

　　有些人已经意识到，中国正在扫清所有财政障碍以在奥运会期间向世人展示其发展成就。尽管经济连年高速增长，但中国的人均年收入仍停留在3000美元以下的较低水平。北京申办文件中预计的基建成本接近于北京市政府2006年全年开支（见图表2）。在一个地区收入差距已成为严重问题又迫切需要社会投入的国家，尚不能明了为何北京在举办奥运会的投入上竞超过那些比它富裕得多的城市。与1976年蒙特利尔和2004年雅典奥运会发生巨额损失的情况一样，同样的风险无疑将随着北京奥运会财政投入的增加而增大。

发展第一，奥运第二？

　　对北京奥运会财政情况的进一步考查缓解了许多此类担忧。从奥运会申办开始，不论这座城市能否赢得奥运会举办资格，许多项目都已经提前进行了。中国的首都是一座快速发展中的大都市，人口在2000-2006年间增长了近16%，达到了1580万人。目前，北京城市基础设施建设仍严重落后于经济发达国家中的同等城市。

　　因此，绝大多数资本项目均涉及改善，而这些改善也已列入到城市的发展规划当中。

　　举办奥运会要求对规划中的项目按轻重缓急重新进行某种排序。因预算限制的原因，体育场馆的建设将导致其他项目推后进行属于少数情况。专为奥运会修建的设施数量（国家体育馆为其中之一）是很少的，全部奥运体育设施的支出也是适度的。2008年初，据北京一位副市长透露，奥运场馆的建设成本不会超过130亿人民币（约合18亿美元）。因此，北京申办文件中的资金预算大部分都用于改善公共设施，如机场和地铁系统等。

　　而且，政府只承担了二分之一的体育场馆建设费用。在奥运会规划中，政府主动寻求多样化融资方式，将可行项目通过商业招标的方式向企业抛出橄榄枝，并在需要的地方给予支持和鼓励，如国家体育馆便是一例。同时，政府也寻求捐助来进行场馆建设，如水立方就是由海外华侨捐助修建的。这些措施明显减轻了政府的财政负担。

终点线后的展望

　　北京政府似乎也考虑到了奥运会华而不实的问题。对体育场馆建设的中标者，将鼓励他们在奥运会结束后将这些场馆用于商业用途。其它在大学和教育机构中建设的体育场馆也将在奥运会结束后为其所用。如此安排将减少政府未来对这些设施进行维护的成本。

　　毫无疑问，中国政府希望于今年将其最好的一面呈现在国际聚光灯下。但即便如此，中国政府对其特有的财政审慎仍只字不提。因此，对财政执行情况的关注似乎转移到各项目能否及时完工上来，前提是没有大幅度超出预算。

　　因忙于2012年奥运会申办城市，标准普尔未对北京给出当地政府信用评级。如若进行评级，其基本原则也不太可能因举办有史以来最昂贵的奥运会而受到影响。事实上，根据其岁入，北京奥运会有可能成为财政上最为成功的一届奥运会。原因在于，商业赞助者提供了强有力的收入支持。这些赞助商渴望进入中国市场，有预测称，在未来十年内中国将成为世界第二大消费市场。与雅典奥运会不同的是，缓慢的门票销售对旺盛的本地需求似乎构不成问题。

　　对于中国中央政府来说，不太可能有人要求其保证承担与奥运会有关的损失是幸运的。雅典奥运会要想消化损失，很大程度上要倚重与对希腊同样评级的主权信用支持（见《奥运会以外之希腊主权信用价值：是马拉松而非短跑》，RatingsDirect于2004年8月9日发表）。因此，我们不希望2008年奥运会削弱中国相对于希腊的显著优势，无论是关于政府净债务还是预算执行情况（见表1）。

　　也许北京的经验更值得与巴塞罗那相比较。这座西班牙城市对1992年奥运会基础设施的巨额投入助其提高了对游客与商业的吸引力。积极的经济影响也助其城市信用评级从（A-/积极/--）提高到（AA+/稳定/--）的水平，标准普尔于1994年给出的评级。北京拥有丰富而悠久的历史优势，因此相比巴塞罗对旅游业的推动也将更大。举办奥运会将长期提高城市政府的信用价值而不是造成巨大的财政负担。