China monthly review: August 2008

The Beijing 2008 Olympic Games placed China at center stage during the entire month of August 2008. The press described the sporting event as "the best in history."

The Games broke world records for television audience records and sports brand sales. Despite all this, China did not escape the controversy and political demonstrations against its government, even with the extraordinary security measures it took.

Throughout these eventful weeks, inflation did not recede, though it failed to affect the dynamism of China’s economy, which continues to grow and open to the rest of the world.

Controversy at the Games

In the months leading up to the Olympics, protests regarding Tibet and by human rights organizations against the Chinese government threatened to politicize the atmosphere.  Days before the start of the tournament, President George W. Bush and Prime Minister Gordon Brown, called on the Chinese government to grant greater freedoms to its people.

Chinese President Hu Jintao, for his part, made a call to leave politics outside the sporting event and resolve contentious issues through dialogue.

Tensions increased when seven soldiers and a security guard were killed in a series of bomb attacks in the Xingjian region, located northwest of the country, on August 10, 2008.  This and other earlier attacks caused security to be heightened during the event. Security forces totaling 100 thousand troops and police to those already present in the capital.

Several demonstrations occurred despite the increased presence. They involved the arrest of eight U.S. citizens, one German and one Briton involved in protests on Tibet. All were eventually deported.

The Best Olympic Games

It was amid this air of controversy that the Games launched on August 8. The spectacular opening ceremony was an amazing spectacle involving more than 10,000 artists.

The only issue that overshadowed the opening Olympic was the case of the young girl chosen to sing at the opening ceremony who was replaced by another "more beautiful" girl, according to a government spokesperson. This generated strong criticism of Chinese authorities from throughout the world.

Athletes suffered before the start of the Games when air pollution levels were declared dangerously high for sporting activity. However, the measures taken by the authorities, such as the temporary closing of factories in the city and restrictions on motorists, provided a substantial improvement in air quality.

By the end of the Games, China led the Gold Medal race with 51 gold, 21 silver and 28 bronze medals, for a total of 100. In second place the United States won 36 gold medals and a total of 110. Russia was in third place with 23 gold medals, 2 silver and 28 bronze.

China is beginning preparations for the Paralympics, where 4,000 athletes will compete. The Games will take place September 6-17, 2008.

Some Crisis, Some Growth

This month Chinese stocks hit their lowest level in 19 months due to fears caused by inflation. This meant that the Shanghai Composite Index experienced a total decrease of 15%. This was after a week of consecutive falls.

In spite of the stock market situation, China reported a rise in its trade surplus, which reached an eight-month high in July. Moreover, the National Statistics Office said that production in factories during the month of July reached 14.7%. It is, however, less than the July 2007 figure.

Chinese investments continue to expand. The Chinese aluminum giant, Chinalco, will acquire 11% of the Australian-British mining company Rio Tinto, at a cost of U.S. $ 14 billion. For its part, China Mobile, the largest mobile telephone company in the world, reported 51% growth for the last quarter.  The state-run oil company, CNPC, signed a contract for tankers servicing the Government of Iraq. It will involve a total of USD$ 3 billion.

At the same time, the Chinese financial sector has grown stronger. Industrial and Commercial Bank of China’s revenue reached USD$ 9.4 billion for the first half of 2008, making it the world's most profitable bank.

Banco de Chile signed a credit agreement with the China Development Bank for over U.S. $ 100 million and an agreement of mutual support regarding investment. This is the first loan requested by a Chilean bank from a Chinese bank. It is part of the free trade agreement signed by these two countries.

On a negative note, the National Audit Office of the People’s Republic of China, reported that USD$ 6.7 billion had been misused by the government, ending in the arrest of 14 central government authorities, and the punishment of 200 people.