China to Turn Economic Growth Into Olympic Growth, End U.S. Reign

By Simon Kennedy

July 29 (Bloomberg) — China’s economic boom may be as good as gold at the Beijing Olympics.

China stands to win more gold medals than any other country at the Aug. 8-24 Summer Games, according to an economic model created by Colorado College economist Daniel Johnson. John Hawksworth of PriceWaterhouseCoopers LLC projects it to win the most gold, silver and bronze medals combined.

“China is the big story this year,” said Johnson, an economics professor whose number-crunching has projected the gold medal count with more than 80 percent accuracy at the last four Winter and Summer Games. “If it does as well as predicted, it will be one of the most-golden nations ever.”

Chinese athletes will win 44 gold medals this year, ending America’s gold-medal dominance it has had since the 1992 Games in Barcelona, Johnson’s model projects. Economic strength translates into Olympic medals because the fitter a nation’s economy, the more money it has to spend on training, diet and sporting infrastructure, the economists said.

The Chinese economy, the world’s fourth-largest, has grown 54 percent since the 2004 Summer Games in Athens compared with U.S. growth of 18 percent, according to International Monetary Fund data. Gross domestic product per capita surged to 18,670 yuan last year from 12,300 yuan in 2004.

“China’s economy has been rising very strongly,” said Johnson at Colorado College in Colorado Springs. “It’s been the boom to watch.”

Forecast for U.S.

The U.S., which won more gold medals than any nation at Athens, Sydney in 2000 and Atlanta in 1996, will take home 33 gold medals this year, Johnson estimates. Russia is forecast to win 28. China claimed 32 gold medals at the Athens Games and 28 in Sydney.

Hawksworth projects that China will win 88 gold, silver and bronze medals, 25 more than they took home from the Athens Games, compared with 87 medals for the U.S. Russia will come in third with 79 medals and Germany will follow with 43, he estimates.

Hawksworth’s calculations show that the top 30 countries will win 82 percent of the medals, mirroring their 84 percent share of the world economy.

Hosting this year’s Games is also an edge for China, according to the statistical models. Johnson estimates China will win 25 medals just by virtue of having home advantage. Greece won 16 medals at the Athens games compared with 13 four years earlier, while Australia boosted its haul in Sydney in 2000 to 58 from 41 in 1996.

Communist Government

China also benefits from having the world’s largest populace and a communist government, said Hawksworth, PriceWaterhouseCooper’s London-based head of macroeconomics. The more people there are in a country the more chance it has of finding talent, while nations with a communist history such as China or Russia tend to do well because their leaders attach political importance to sporting success, he said.

“Sport is one area where state planning and intervention can produce results,” said Hawksworth, whose model projects Cuba to win 24 medals, just four fewer than the number it estimates for the U.K.

China is not alone in harnessing stronger economic growth for sporting gain, said Andrew Bernard, an economics professor at Tuck School of Business at Dartmouth College in Hanover, New Hampshire. Rising income around the world means rich countries now face more competition for medals. At the 1960 Games in Rome, the top 10 countries won 78 percent of the medals, while in Athens they managed 53 percent.

Standards of Living

“This is consistent with poorer countries over the same time having improved their standard of living and thereby having improved their chances of sharing in Olympic glory,” Bernard said.

China may also prove a winner off the track by not suffering as much economic fallout as host countries typically do once the athletes have left, says Stephen Jen, chief currency economist at Morgan Stanley in London. He calculates that since World War II, the economies of almost all the host nations experienced a 4 percent deceleration in growth the year after they held the Games.

While the Chinese economy grew at its slowest pace since 2005 in the second quarter, Jen said domestic demand will ensure it doesn’t slow as much as its predecessors once the Games are over.

Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London, estimates the country may grow so fast that it replaces Germany as the world’s third-largest economy by the 2012 Olympics in London.

“We’re very excited about China,” said O’Neill. If the Goldman Sachs outlook “pans out it would be consistent with China doing well at the Olympics.”

Also, I wonder based on your points to what degree an athletic victory would be more a matter of internal Chinese victory rather than an international victory. To what degree is the Chinese government doing all of this to curry domestic support as well as gain international prestige?

hzl2 – your prediction of a Chinese “coming of age” party is perfectly in line with what China thinks of these Olympics, but it may be bit optimistic from my perspective. If you remember how the torch relay turned into an international embarrassment, it’s possible (although I grant unlikely) to imagine a similar fiasco during the games themselves. If Tibet protesters are violently subdued or if extreme pollution forces the cancellation of several events (as Olympic President Jacques Rogge has already suggested), China probably won’t be able to declare any sort of moral victory.