August 11th, 2008:

Reuters in Beijing – Updated on Aug 11, 2008

The transport restrictions and factory closures that China has ordered as part of its drive to clean Beijing’s air for the Olympics could lead to a dip in overall economic activity in the short term, some economists say.

Hoping to cut down on smog during the Games, authorities have shut down dozens of polluting factories in Beijing and neighbouring provinces and are significantly limiting traffic in and out of the city. It has also banned certain goods from being shipped for security reasons.

Many economists have said that the effect of those measures would probably be offset by factories in other parts of the country ramping up production and by an Olympics-related boost to Beijing’s tourism industry.

But Hong Liang and Yu Song with Goldman Sachs said evidence was mounting to the contrary.

“While the long-term economic impacts of the Olympic Games are likely to be minimal, it increasingly looks like the Games’ short-term economic impacts are likely to be negative,” they wrote in a research note.

Liang and Song expect the measures to lead to a visible slowdown in both production and consumption in August and September, to be followed by a rebound in October after the restrictions expire. They are due to end on September 20.

“Therefore, it will be difficult to get a ‘clean’ reading of the underlying economic trend [as well as price trend] probably until after October,” they wrote.

Many economists expect China’s economy to slow in the second half, as weaker overseas demand and the stronger yuan drag down exports and tightening measures at home dampen investment. Annual growth slowed to 10.1 per cent in the second quarter, down from 11.9 per cent in all of last year.

However, economists agree virtually unanimously that the end of the Games themselves will not contribute significantly to any long-term slowdown in the country’s growth, as has been experienced by some past host nations, including after the Seoul Games in 1988, Barcelona in 1992 and Athens in 2004.

Jonathan Anderson, an economist with UBS in Hong Kong, noted that the impact of the Olympics on the overall economy was greatest in countries in which the host city accounts for a relatively large proportion of the overall population.

Whereas some past host cities have accounted for upwards of 40 per cent of the national population, that figure drops to 1.1 per cent for Beijing, Anderson said.

“Our estimates for China put the impact of the 2008 Olympics far behind the decimal point in terms of growth,” he wrote.

However, the end of the Olympics could be good for the economy in other ways, as that will allow authorities to shift their focus back to the many other pressing problems waiting to be tackled, said William Hess, greater China manager for Global Insight in Beijing.

“The Olympics have been a giant distraction when it comes to policy making, and movement on issues such as energy pricing and power shortages, rising producer costs and the plight of SMEs is arguably overdue,” Hess said. “There are still a lot of big issues out there that need attention.”

Shi Jiangtao in Beijing – SCMP – Updated on Aug 11, 2008

Smoggy skies, which have shrouded Beijing for the past week and remain a persistent concern, are expected to clear today, meteorologists say.

The capital was still blanketed in thick haze yesterday, with poor visibility and sapping humidity. Rainstorms were forecast for overnight.

But Wang Jianjie , deputy director of the Beijing Meteorological Bureau, said weather conditions would help disperse trapped pollutants, especially airborne particles from dust and vehicle emissions.

“The forecasted rainfall tonight and tomorrow is certainly conducive to cleaning up airborne particles and clearing the air,” she said.

Olympic cyclists have complained about the heat and humidity, but weather officials said conditions would improve.

“It is unlikely we will have the sultry and humid weather in the coming days that we saw last week,” said Guo Hu , director of the Beijing Meteorological Observatory.

Amid concerns that frequent summer showers would affect outdoor events like beach volleyball and tennis, which were postponed due to rain yesterday, he said organisers were informed of conditions hourly.

Beijing has tried to reduce pollution ahead of the Games, but substantial improvement has not been seen.

Some international experts have voiced concerns that Beijing’s air quality standards have fallen short of those adopted by the World Health Organisation.

International Olympic Committee president Jacques Rogge and Achim Steiner, who heads the UN Environment Programme, have weighed in and defended Beijing’s efforts. Echoing mainland environmental officials, Mr Rogge said foggy air should not be confused with pollution.