Olympic Hopes and Doubts of Two Asian Megacities

Whilst hosting the Olympic Games has proven to increase infrastructural investment and national pride, the idea of Olympic events being advantageous for wider economic growth is often debated. Economists, nonetheless, do agree that the potential benefits of hosting Olympic Games very much depend on the state that the host city is in before the Olympic events start. An example of the abovementioned discussions is currently taking place in Asia, where two megacities are about to go down the Olympic road. Tokyo will be hosting the 2020 Summer Olympics, while Beijing has recently won the right to the 2022 Winter Olympics. It is notable the sentiments regarding the Olympic Games are quite different in the two cities.

Development of Beijing and Tokyo 2005-2030

Bejing-and-Tokyo

Big gains awaited in Beijing

The positive effects of hosting the Olympic Games are traditionally associated with boosting the destination’s tourism industry, fast-tracking valuable infrastructure improvements and improving a city’s image in the eyes of global businesses. Naturally, emerging cities have more to gain here, and their growing economic prowess is often behind their becoming event hosts. Over 2005-2014, Beijing and adjacent Tianjin were the top two most rapidly expanding cities in China in terms of population and were among the top 10 worldwide. They were also two of the top 10 most dynamic urban economies globally, recording annual real GDP growth of 10% and 15%, respectively. The 2022 Winter Games have the potential to complement and catalyse Beijing’s now flattening growth.

The preparations for the Olympic Games are, however, not entirely conducive to rational planning and long-term objectives. Sport facilities, like stadiums and Olympic villages must be built, and priority is given to the infrastructure serving these developments, which are expensive to construct and maintain. Beijing plans to rely heavily on existing venues, including those built for the 2008 Games, such as the Bird’s Nest stadium, hence avoiding having to build extensive sports facilities from scratch.

Beijing intends to invest US$1.5 billion in Olympic villages, sports venues and other infrastructure, which would be significantly less than estimated investment of US$40 billion during the Beijing Summer Olympics of 2008 or the US$51 billion spent on the Sochi Winter Games in 2014. Although China is not traditionally perceived as having a winter sports culture, Chinese officials hope that the 2022 Winter Olympics will ignite “a winter sports passion” and help create a US$800 million industry in China by 2025. Beijing’s pledge to tackle the toxic air pollution which often enshrouds the city is seen as another considerable gain from the 2022 Winter Olympics. According to Beijing’s mayor, huge steps have already been taken since the city hosted the 2008 Summer Olympics, including the removal of one million high-emissions vehicles from Beijing’s roads.

Benefits more dubious for Tokyo

The potential gains of the Olympic Games seem to be less alluring for fully developed and congested cities, such as Tokyo. Tokyo’s real GDP growth has been negligible over the last 10 years, having inched up by just 4%. The ageing of the population is accelerating across Japan, and the birth rate remains low. Migration from the provinces to Tokyo is expected to slow over the coming years. By 2030, Tokyo is expected to lose its place as the world’s most populous metropolis, with a forecast population 35.7 million people being less than that of Karachi (40.8 million) and Jakarta (40.7 million), and just ahead of Manila (34.4 million). With large-scale immigration from abroad being opposed by the government, the scope for the revitalisation of Tokyo’s economy by the 2020 Summer Olympics might be limited.

According to Mizuho Research Institute Ltd, infrastructure upgrades in Tokyo are expected to create over 200,000 jobs, while the investment bill is estimated to reach up to US$22 billion. Retrospectively, the costs of the Summer Games were estimated at US$16 billion in Athens (2004), US$40 billion in Beijing (2008) and US$20 billion in London (2012). However, only some of this investment was tied up in infrastructure projects that would be useful going forward, which could also happen in case of Tokyo. The question is if the country can afford this. Japan’s public debt accounted for 247% of national GDP in 2014, which was already by far the largest ratio in the world.

On the positive side, Japan’s Prime Minister hopes that Tokyo’s successful 2020 Olympic Games bid will boost tourism to the country. Annual international tourist arrivals in Tokyo fell by more than 30% year-on-year in 2011, due to the earthquake and tsunami, which triggered meltdowns and explosions at the Fukushima Daiichi nuclear plant. Although the city’s tourism market has been recovering since, and the exchange rate is now more favourable to foreign visitors, experts warn that the city is still consistently rated as one of the most expensive in the world, which might deter some tourists.