The Olympic Games will generate enormous business opportunities and facilitate a major face-lift of the host city. However, some host countries have experienced an economic recession after hosting the Olympic Games. This phenomenon has been termed the "post-Olympic economic downturn" or "post-Olympic bubble". Where will China go after the Olympics? People's Daily spoke to Chinese economist Professor Li Yining about these issues.

The key: new investment hotspots

Q: Why have some host countries experienced a post-Olympic bubble or an economic downturn?

Li Yining: There are three major reasons: firstly, the Olympics itself provides resources. By using these resources, host countries can create wealth. However, just as a resource-based city will experience difficulties after those resources are depleted, if there is no follow-up industry to support sustainable economic development, the city will experience problems.

Secondly, prior to the Olympic Games, investment surges and reaches a climax in the host country. It is bound to fall once the Olympic Games conclude. The key issue is whether there are any alternative internal ��hotspots', and whether they are big enough to spur on the economic growth of the host country. If not, decreasing investment may cause a long-lasting slump.

Thirdly, the Olympic Games create a huge number of employment opportunities over a considerable period of time. Once it concludes, most people will have to look for new jobs. This will increase pressure on employment.

Ongoing demand in China

Q: Will China experience a "post-Olympics bubble"?

Li Yining: To answer this question, we need to address several major issues, such as how to sustain economic growth after 2008, where the new hotspots for investment will be, what industries will support sustained economic growth, and how to solve the employment problem.

There is no lack of hotspots for post-Olympic investment in China. China has maintained rapid and stable economic growth (8 to10 percent) over the last few years. This has been attributed to the many functions of a multitude of factors. Firstly, investment inertia plays an important role in promoting economic growth. Large projects cannot be completed in a single year. Once launched, ongoing investment is required. The huge investment by the government in infrastructure construction will push forward the economic growth of the country.

Secondly, China's private economy is growing rapidly.

Thirdly, with the rising demands of urban and rural residents, China's domestic market is steadily expanding. The consumption of housing, leisure and tourism products, education, health care, health and durable products including motor vehicles will continue to rise for some time.

Fourthly, China now has to undertake large-scale renovations of fixed assets. Given stricter environmental requirements and the tough task of reducing the consumption of resources, if enterprises refuse to update their equipment, their competitiveness will decline and they risk being eliminated from the market. The updating of fixed assets will drive sustainable economic growth.

The development of high-tech industries is a new hotspot for investment. The new economy combines technological innovation with the capital market. The development of the capital market will greatly promote the development of high-tech industries. The development of new energy sources, biotechnology, new materials and electronic products will attract substantial investment, which, as a result, will stimulate the country's economic growth. In short, China is not worried about a lack of new hotspots for investment. Although unusual and unconventional demand will disappear after 2008, general demand will be ongoing.

Olympics generates opportunities in two important sectors

Q: What are the major influences of the Olympic Games on China's economy?

Li Yining: The Olympic Games is generating some very important business opportunities in mainly two sectors. The first is in construction, building and upgrading sports stadiums and other facilities; the other is the service industry. The latest scientific and technological developments will be widely applied in building, installing and improving sports venues and facilities for 2008. This will eventually promote the technological progress of related industries. Even after the Olympic Games conclude, its influence on China's economic growth will continue.

The influence of the Olympics on the modern service industry is even wider and more persistent. In financial services for example, China's banking sector will handle a large number of bank services that don't depend on interest for income before and during the Olympic Games such as banking card services, ticket sales services, sales of licensed merchandise made of precious metals and more. By offering and improving these services, China's banking sector can improve its service levels significantly. Insurance services will have the same opportunities and endeavor to innovate. In addition, the influence of the 2008 Olympic Games on electronic information services, tourism and sales services, residential services and food services will be profound.

Unemployment will be gradually absorbed by domestic demand

Q: Will China experience a wave of unemployment after 2008 like some other host countries?

Li Yining: Firstly, enterprises in charge of construction, installation and the improvement of sports venues and traffic facilities will be able to take on new projects. Workers will be transferred to new sites. With new technology and better skills, they will be able to find new jobs in China.

Secondly, China has very few professionals in the financial services and electronic information services industry. Those that get experience during the Olympics Games will be able to stay in the industry after 2008.

Thirdly, the tourism, retail and catering industries will experience a slump after 2008, which might decrease job opportunities in these sectors. However, while China's economy continues to grow, Beijing will continue to grow in popularity as a tourist attraction. In the long run, these industries will expand. People engaged in these sectors will be able to find suitable jobs.

Fourthly, we must decide how to utilize the Olympic stadiums after the Games. Of course, a few workers will be required to stay on to take care of the day-to-day management, cleaning, and security of these stadiums. The key issue is how to make full use of them. Of course, it is unlikely that China will host any similarly large-scale sporting events in the near future. However, the stadiums can still be used. Post-2008 unemployment will not be such a serious issue, and we need not be too worried.

Five major obstacles worthy of attention

Q: Even if there is no post-Olympics bubble, China will certainly still encounter obstacles and challenges. In your opinion, what are the main obstacles to sustained economic growth in China?

Li Yining: In my opinion, there are five major obstacles to sustained economic growth: industrial monopolies, the slow transformation of the government's functions, slow growth of farmers' income, an insufficient supply of resources and pressure on the environment. To remove these obstacles, we must expand reforms. Reform will guarantee China's sustained economic growth.

Industrial monopolies must be broken to allow more private enterprises to enter areas that were once closed off to them. The government should complete altering its role as early as possible to serve enterprises best. To increase the income of peasants, China needs to concentrate on the urban-rural dual structural reform, promote and optimize the mobility of production factors in urban and rural areas, and increase investment in rural education, health and social security. In order to address shortages of certain resources, China should give priority to the reform of the science and technological system and encourage enterprises to invest more in innovation, so as to establish a multi-layer capital market system and alleviate the problem of an insufficient energy supply by developing new energy resources. To ease the pressure on environment, the government should adopt a comprehensive assessment system and increase monitoring of environmental protection.

In short, by expanding reforms and accelerating the pace of change, China will be able to maintain a rapid and sustained economic growth; the 2008 Olympic Games will be a turning point in China's economic development; and innovation will drive economic growth in the country.

By People's Daily Online