Cost Puzzle for China’s Grand Events

How much did the Beijing Olympics, Shanghai World Expo and Guangzhou Asian Games cost? That is a question!

Olympics, World Expo and Asian Games were held in China one after one from 2008 to 2010. People consider them as symbols of the rising China. However, how much these did grand events cost? The official and civil experts gave two different answers to this question.

Asian Games: expenditure from 2 billion to 130 billion

On February 22, Zhong Nanshan, an academician of the Chinese Academy of Engineering, spoke of his discovery about the expenditure of the 2010 Guangzhou Asian Games. He found that the direct and indirect investment into the Games was very huge. The total investment amounted to 257.7 billion yuan (USD 39.2 billion). Guangzhou government spent 195 billion yuan (USD 29.7 billion). The debt was 210 billion yuan (USD 31.9 billion).

Zhong Nanshan’s discovery was under heavy scrutiny of the media. On March 23, Zhang Jieming, head of Guangzhou Municipal Financial Department, admitted that the government indeed invested a lot of money in Asian Games. The expenditures for Asian Games and Asian Paralympics Games were 13.6 billion yuan (USD 2.07 billion). The construction of stadiums and related facilities cost 89 billion yuan (USD 13.55 billion). In addition to other cost, the total investment reached 130 billion yuan (USD 16.79 billion). Zhang Jieming stressed the income of the Games from tickets, ads and sponsorship could offset the expenditures.

We can see that huge differences exist between the total cost of the Games mentioned by Zhong Nanshan and Zhang Jieming. Zha Jiaji from the Guangzhou municipal government attributed the difference to the statistic methods. Some projects, such as the river course renovation, must be finished even if there were no Olympics. In the governmental statistics, such projects were not included into the budget.

Notable is the initial budget of Guangzhou Asian Games which was only 2 billion yuan (USD 304.5 million yuan). With that huge budget, Guangzhou defeated Seoul, Amman and Kuala Lumpur and won the right to host the 2010 Asian Games.

Why the cost is 60 times huger than the budget? Take the opening ceremony for example: 160 thousand firework shots were used in this ceremony, more than Beijing Olympics and Shanghai World Expo. According to an insider, the total expenditure of the fireworks for Guangzhou Asian Games reached 380 million yuan (USD 57.85 million).

In addition to the 130-billion-yuan investment into the Games, Guangzhou also invested 109 billion yuan in building and improving the basic facilities in the city (USD 16.6 million). From 2005 to 2010, Guangzhou spent 54.7 billion yuan (USD 8.33 billion) building five metro lines and 18.5 billion yuan (USD 2.82 billion). Zhang Jiemin said that these projects mainly served for the Guangzhou citizens instead of the Asian Games.

Zhong Nanshan hoped that this misunderstanding will urge the government to improve the transparency of its financial system. Public supervision is needed when hosting big events or investing in big projects like the Asian Games. However, when asked when the detailed account book of Asian Games will be published, Zhang Jiemin said that this could not be done in a short while. According to him, the detailed expenditure and income of the Games will be available not later than 2013.

But some experts pointed out that Zhang Jiemin’s explanation about the tardy account book of the Games was quite ridiculous. A simple fact is that the expenditure and income data of the Beijing Olympics were published only half a year after the event.

World Expo: profit or loss depends on real estate

In November 2010, a report said: “The Hanover World Expo expected 40 million visitors and the actual number of visitors is 28 million. The accuracy was 54%. The Aichi World Expo expected 15 million visitors and the actual number of visitors was 22 million. The accuracy is 57%. The Shanghai World Expo expected 70 million visitors and the actual number was 73.08 million. The accuracy was 99.4%.”

The world admired the accurate estimation of visitors of Shanghai World Expo’s organizers.

In May 2009, the New York Times estimated the total investment of Shanghai World Expo would reach 45 billion US dollars. In February 2010, local media also said that Shanghai World Expo was the “most costly World Expo” in the world with the investment amounting to 400 billion yuan (USD 60.89 billion).

In order to appease the doubt of the public, Shanghai mayor Han Zheng said in the parliamentary sessions last March that he, as the mayor of Shanghai, did not know the budget for Expo reached 400 billion yuan. He said that Shanghai made a special report to the State Council (China’s cabinet), stating that the budget for the Expo was 18 billion yuan (USD 2.74 billion). “Of course, the cost of building foreign countries’ pavilions was not included into the budget because the pavilion’s owner contributed the money. The construction cost of China Pavilion, Theme Pavilion, Expo Axis, Expo Center and Culture and Arts Center (today’s Mercedes Benz Arena). These buildings will permanently stand and benefit people. In addition, the budget also includes basic facilities and World Expo Village, as well the renovation to traffic, underground, electricity and water supply, etc. This is the direct investment for the preparation of Expo, which we call the first budget,” said Han Zheng.

It is known that Shanghai government contributed 7.15 billion yuan (USD 1.09 billion) of the budget, accounting for 40% of the total cost. The construction bonds for the Expo raised 8 billion yuan (USD 1.22 billion), taking 44% of the total investment. The rest part of the investment was raised in other methods.

Han Zheng said that the second budget was for the operation of Expo from May 1 to October 31, 2010. The 180-day operation cost about 10.6 billion yuan (USD 1.52 billion). Han said that the money for operation mainly came from the market. For example, the tickets could contribute 6 billion yuan (USD 913.4 million). In addition to the sponsors’ contribution and the sales of Expo-related products, the market can contribute more than 10 billion yuan.

“We will engage the best auditing firms to make a review of the two aforementioned budgets before we open the detailed cost of Expo to the public,” said Han Zheng.

Yu Zhengsheng, Party chief of Shanghai, was at ease with the 45-billion-USD investment reported by the New York Times. “Maybe they have their own method of calculating. I am not offended. Shanghai made use of the Expo to accelerate the construction of the rail transit, which provides efficient solutions to the problems of traffic jam and overcrowded subways.” It is known that the length of rail transit in Shanghai was only 230 km in 2008. It increased to 420 km before the Expo in 2010. The new Line 7, Line 9 and Line 13 all have stations close to the Expo Park. According to Yu Zhengsheng, the total cost of developing the rail transit was 100 billion yuan (USD 15.33 billion).

However, it should be noted that the relocation cost for the residents who previously lived in the place for Expo Park was not included into the aforementioned budgets. How to deal with the land of Expo Park will decide whether the Expo could see profits and loss. According to the statistics, the Shanghai government relocated 18 thousand households and 270 enterprises to leave space for the Expo Park. The total cost reached 40 billion yuan (USD 6.09 billion). During the parliamentary sessions last year, Yu Zhengsheng said: “The land for the Expo Park was free for the exhibitors. The relocation cost is very huge. Our income from tickets and other items can only offset the expenditure in construction and operation. What about the relocation cost? It still depends on how we dispose the land afterwards.”

Olympics: 9 times higher profit than expected

Is the Beijing Olympics profitable? Will it be the most expensive Olympics ever? These questions were frequently put forward after Beijing won the right to host the Olympic Games. In June 2009, the National Bureau of Statistics (NBS) gave the answers to these questions.

As the data show, by March 15, 2009, the Beijing Olympic Organization Committee received the income of 20.5 billion yuan (USD 3.12 billion), 800 million (USD 121.8 million) than the expected. The expenditure was 19.343 billion yuan (USD 2.94 billion), a little higher than the budget. The balance between income and expenditure was 1 billion yuan (USD 152.2 million).

When bidding for the right to host the Olympics, the Beijing Olympic Organization Committee forecasted the revenue at 1.625 billion US dollars and the expenditure at 1.609 billion US dollars. The profit was estimated at 16 million US dollars. But the actual profit was ten times of the forecast.

The NBS said that the income of Beijing Olympics mainly came from the broadcasting right. This part took 40% of the total income. In addition, the tickets, the audience’ accommodation and dining and the other items also contributed to the income.

Compared with the revenue, the expenditure of the Olympics was under heavier scrutiny. Regularly, the income of the Olympic Organization Committee is only used for preparing and running the Games. The cost for building stadiums and other facilities are not included. Though the Beijing Olympic Organization Committee contributed some money to the construction of stadiums, the amount was very small. According to the statistics, the opening and closing ceremonies cost 831 million yuan (USD 126.5 million); the torch relay cost 312 million yuan (USD 47.5 million) and the cost on volunteers was 171 million yuan (USD 26.03 million).

According to the statistical data of the NBS, the expenditure of Beijing Olympic Games was lower than one in Athens. It was not the most costly Olympic Games.

Actually, the organizer was very clear about the investment. In the Economic Study of Beijing Olympics published in 2003, the total investment was estimated at 280 billion yuan (USD 42.6 billion), of which 180 billion yuan (USD 27.4 billion) was used for the construction and improvement of basic facilities; 90 billion yuan (USD 13.7 billion) was used to build rail transit, expressways and airports; 45 billion yuan (USD 6.85 billion) in improving the environment; 30 billion yuan (USD 4.57 billion) in information and communication projects… This book was composed by Liu Qi, Party chief of Beijing.

The data kept changing as the time went. According to an insider, the investment in environment increased from 45 billion to 57 billion yuan (USD 8.68 billion).

Shen Shuwang, professor from the People’s University, said on March 3, 2008 that China had spent 1.5 trillion yuan (USD 228.3 billion) in hosting a wonderful Olympic Games.

It is known that the organizer raised capital through market for the construction of stadiums of the Olympic Games. This part was not included into the expenditure of the Beijing Olympic Organization Committee, as the NBS’ data showed.