Post-Olympic China economy to slow

China – As with other host nations, China’s economy post-Olympics may slide, especially in the manufacturing sector, according to a new study.

Other host countries in the past such as South Korea, Spain and Australia have experienced a slowdown in economic growth after hosting the Olympics. China's manufacturing industry is not likely to be spared, with business outlook within the manufacturing industry poised to slow, say analysts at Datamonitor.

The research company says the Chinese economy has been slowing for some time, with a marked increase in inflation as one of the key indicators. The post-Olympic effect identified in the majority of the last 12 host economies will, in the company's opinion, compound this slowdown.

It projects the economic growth in China to drop from 11.4% in 2007 to less than 10% in 2008.

According to the study, demand for Chinese exports has waned in recent months as customers from the West face pressures from the global credit crunch, increased fuel and energy costs, and weakened domestic demand.

Together with the traditional post-Olympic slowdown in host economies, Datamonitor believes there will be a reallocation of IT budgets in Chinese manufacturing companies and a shift away from revenue-generation strategies towards more cost-centric technologies.

More specifically, the study says Chinese manufacturers will give a greater share of their IT budgets towards IT infrastructure such as server hardware, virtualisation technology and other consolidation initiatives.

Similarly, it expects core enterprise applications like ERP will continue to receive significant attention, as Chinese manufacturers look to enhance back-office processes such as finance and accounting and drive standardisation.

In spite of this, there will still be investment made in supply chain technologies, the report says, although the "pull through" created by western customers demanding specific functionality will decrease in line with falling exports and global demand.