Following last night’s closing ceremony at the Olympic Games, analysts are evaluating the market’s potential for outside investment going forward.
“What worries me is the fact that the present clampdown by Chinese officials needs to be actively removed, post-Olympics,” said Matthew Crabbe, director of research firm Access Asia, referring to the widespread visa restrictions on foreigners that began earlier in the year, coupled with security-oriented logistics and shipping rules.
“However, it is always easier to give power than it is to take it away, especially when you are talking about security and intelligence forces,” added Crabbe. “You would expect Beijing will be keen to continue to show off to the world after the Olympics, and will therefore be keen to keep the tourists coming in.”
“Maybe they will use [the Olympics] as a way to leverage their country to attract consumers and corporations,” suggested Christopher Svezia, an analyst at Susquehanna Financial Group.
Svezia said that despite some headwinds — including noticeable inflation and labor pressures — most footwear companies continue to look to China as a major opportunity, thanks to the burgeoning spending power of the nation’s consumers. “Skechers, Brown Shoe, Ugg, Nike, Reebok and everyone under the sun believes [in the market],” Svezia said. “They wouldn’t commit this level of capital if they didn’t.”
In a recent roundtable discussion with journalists in Beijing, Adidas Group CEO Herbert Hainer said his company’s Olympics sponsorship is intended as a long-term investment in branding for the Chinese market. Though Hainer wouldn’t say how much Adidas spent on sponsoring the Olympics (it’s rumored to cost around $100 million), he did say the large investment was lucrative for the company. “We definitely believe all the investments have paid off,” said Hainer.
It’s unclear how much business the games themselves have generated, though. “We haven’t had the Olympics bring in too many people,” said Nicole Niu, a clerk at Nike in the Solana mall, a sprawling new development located near the Olympic beach volleyball grounds.
Solana is one of 10 large malls opened in Beijing this year, timed to cash in on a strong Olympic-related business that never materialized. Some new malls around town, especially those with big-screen Olympic TV viewing opportunities, have seen a steady flow of window-shoppers and scattered buyers, but business is not booming by any measure, clerks and shoppers said.
Initially, the Chinese government predicted record numbers of tourists would visit Beijing for the Olympics. The government later scaled back its projections, saying around 500,000 visitors would come, just slightly more than the number who visited Beijing in August last year. But recent estimates suggest the numbers are even softer, with thousands of empty hotel rooms and cancelled tours from other countries and within China.