While the 2008 Olympics will not have any major direct effect on economic growth in China, it will have an immense indirect impact, in terms of boosting overall sentiment, economists said.
The right to host the world's largest sports event has given many Chinese the feeling that everything is moving in the right direction, and they are spending accordingly in the stock and real estate markets.
"The psychological effect is very powerful. The Olympics are proof that the country has made it and is joining the ranks of the developed countries," said Andy Xie, an independent economist based in Shanghai.
"People are becoming very optimistic, so they are buying property, they are buying stocks. It's really supercharging the economy. Part of the overheating story comes from that," he said.
Public moods are notoriously tough to measure, but economists see clear reflections of the bullish sentiments in for instance the equity markets.
As retail investors have poured their money into stocks, the benchmark Shanghai Composite Index has jumped more than 75 percent this year, after surging about 130 percent in 2006.
This creates a wealth effect, as stock investors spend their new-found fortunes on everything from autos to tourism, contributing to overall economic growth, which reached 11.9 percent in the second quarter.
But mixed with the euphoria is an underlying anxiety about what might come after August 24, 2008, when Beijing passes the Olympic torch to next host London.
Some stock investors and property buyers worry that the government, eager to prevent bubbles in equities and real estate, will act more decisively once the Games are over.
"There seems to be some uncertainty about what will happen after the event, whether there will be significant crackdown on investment," said Tai Hui, a Hong Kong-based economist with Standard Chartered.
"I'd expect the usual gradual tightening of monetary policy in China and for the yuan we also expect gradual appreciation." Outside the intangible realm of sentiments, in terms of actual direct economic benefit, the Games will be felt mostly in the Beijing area.
"We estimate that the Olympics will add two percentage points to Beijing's economic growth," said Li Zhiwu, a Shenzhen-based economist with Essence Securities. "It will be a major driver of economic growth there."
But Beijing has just a little more than one percent of China's 1.3 billion people, and elsewhere in the country the world's largest sport event will hardly be noticed.
Olympic monuments such as the giant Bird's Nest stadium hovering over Beijing's northern skyline may look impressive, but its actual impact on the Chinese economy as a whole is sparrow-sized.
Total investment in preparations for the Games is estimated at about 40 billion dollars, a sizeable figure, but minuscule against a Chinese gross domestic product that topped 2.7 trillion dollars in 2006.
Moreover, the spending has been spread out over several years, and as a result the impact on economic growth each individual year has been even more limited.
In the weeks before, during and after the Olympics, there will be a temporary boost to consumption, although it will be spending that would probably have taken place anyway.
"There may be some spending put forward, for instance people buying a new television or spending such as that, but that will be consumption pushed forward by the event," said Standard Chartered's Tai.
"What you get is a hump in terms of consumption during the event, but that hump actually comes from the period before or after the Olympics."
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