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7 Aug 2008

International Economy

China’s Post-Olympic Economic Trend: Restructuring to Sustain Balanced Growth (Current Issue No.2091)

As the host for the Beijing 2008 Olympic Games, during August 8-24, 2008, China has shown to the world their potential to play a grater role in the world market. Moreover, China's preparedness as the Olympic host using a budget of USD42 billion for the construction of the new National Stadiums, plus various buildings, new infrastructure, transportation systems and other facilities is expected to benefit China's economy over the long-term, because such facilities can be used in other, world class events in the future. China's spending on this event has also helped spur economic growth over the past 5 years since 2003.
It is expected that tourism income generated by the anticipated 450,000 international guests and some 150 million domestic travelers should help spur at least USD450 million in additional cash circulating in Beijing. This will fuel Beijing's economic growth in continuation from the 13.5 percent growth record in 2007. It was been found that some international and domestic tourists, who have avoided the tourist congestion and accommodation shortfalls during the Olympics, are planning to visit China after the end of the Olympics. Therefore, it is expected that foreign tourist arrivals to Beijing will increase over the remainder of this year, bringing the total number of foreign tourists to China this year to at least 140 million, increasing 6 percent from the 132 million tourists in 2007. Facilities in Beijing and its vicinity that were constructed for the Olympics include transportation systems and other public facilities to support the long-term growth in China's tourism industry. These favorable factors lead KASIKORN RESEARCH CENTER to forecast that China's economy may maintain double-digit growth for 6th consecutive year, with the projected growth of 10 percent this year.
China's investments for this Olympic Games to help support long-term economic growth coincides with their economic restructuring policies. The robust Chinese economy seen in the past several years has ironically led to many problems that might adversely affect sustainable growth, such as the gap in income distribution between city dwellers and rural people, an over-concentration of development in the eastern and southern coastal areas and the overuse of resources and energy, which has led to environmental problems. In addition, many external and internal factors adversely affecting China's economy this year include high inflation, plus US economic problems that have dealt a blow to their export sector. These factors are signaling the need for economic restructuring to sustain balanced development. Featured steps include:
- Diversifying away from export dependency risks by promoting service industries, upgrading infrastructure and stimulating domestic consumption.
- Promoting energy-efficiency and conservation, plus a preference for clean energy, featuring reduced pollutant emissions and fostering more active environmental protection.
- Improving the living conditions of the people, encouraging a fairer income distribution and balancing development between the eastern, southern costal and inland areas.

KResearch expects that China's economic stabilization will benefit Thailand because China is our third largest export market, after the USA and Japan. China's economic restructuring may offer some guidelines for Thailand because we also have a high export dependency. (Our export value accounts for more than 65 percent of our GDP.) We are facing many external risks. In order to develop our economic strength and reduce negative external risks, many improvements are needed, such as developing our domestic economy i.e., investment and consumption, raising income and improving the living conditions of the people because these strategies will help support sustainable economic growth and create self-sufficiency for our country.

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International Economy