Can China Rule the Olympics?

The economic story of the past several years has been China's massive growth as it has nabbed market share in important international competition and assumed a higher profile on the global stage. Nothing exemplifies China's rise more than its hosting the 2008 Olympics. Could it put an exclamation point on its upward trajectory by dominating the Games?

Economists seem to think so. Four years ago, I wrote about models that predicted Olympic medal totals based on factors that have nothing to do with sports and everything to do with what has been going on in economies around the world. The competitors in this medal-count guessing game are PricewaterhouseCoopers and Andrew Bernard of Dartmouth's Tuck School of Business. (Descriptions of Bernard's model, developed with Meghan Busse of the University of California-Berkeley, can be seen here and here.) Both engage in the classic economists' tactic of forecasting via extrapolation of the recent past. While the models differ, both share the basic assumptions that population (more potential competitors) and income levels (more resources to develop competitors) are crucial determinants of Olympic success. Both also agree that other factors enable countries to punch above their economic weight, including past performance, having been a member of the Soviet/Communist bloc, and/or home-field advantage.

This year, each of those factors would seem to weigh heavily in China's favor. Its economy has grown rapidly for many years, making it the world's second-largest when measured by purchasing power parity. It's a former member of the Communist bloc with an enduring and strong state sports bureaucracy bent on bringing home the maximum number of medals. And it's the host. Taking all of that into consideration, PricewaterhouseCoopersprojects that China will better its 2004 medal haul by 40 percent, going from 63 to 88. "The combination of the home country effect and the state support for sport ... is expected to lead to a particularly significant boost to Chinese medal performance," writes PwC economist John Hawksworth.

That would allow China to edge out the United States as the leading medal miner in Beijing. Hawksworth projects the American medal count will fall nearly 20 percent from 2004, from 108 to 87. Other big losers: Russia, Germany, Australia, Japan, and France. In other words, China and some other emerging markets (Brazil, Indonesia, Mexico, Poland) are expected to grab market share from the industrialized West. Such predictions are perfectly in keeping with the shifting geography of wealth and achievement that has been a byproduct of globalization. The world may not be flat, but the valleys aren't quite as deep as they were in the past, at least when it comes to Olympic competition. In 1960, the top 10 countries won 78 percent of the medals. In 2004, the top 10 countries won nearly 56 percent. This year, PwC projects the top 10 will win only 52.4 percent.

Bernard reaches a somewhat different result this time around. He sees the rich getting richer, and the emerging world taking less of a bite. Bernard's model foresees the U.S. easily on top with 105 medals, Russia holding steady at 92, and China making only relatively modest gains, with 81 medals. Bernard also sees Germany and Australia holding steady. The net result: The top ten nations should take home 59 percent of these games' medals.

But I'm skeptical that either PwC or Bernard will come close to predicting the actual medal count. First, the 2004 projections made by both the PwC and the Bernard models didn't quite pan out. Both overestimated the degree of American decline and the gains by countries whose economies were growing rapidly but lacked a tradition of sports achievement. Both overestimated home-field advantage, and both overestimated the degrees to which established Western powers would lose market share. (Here are Bernard's 2004 projections.) As we noted in our 2004 Olympics post-mortem, PWC and Bernard projected that the U.S. medal haul would fall 30 percent and 4 percent from the 2000 total, respectively. Both foresaw that host nation Greece would more than double its 2000 medal count. And PwC boldly forecast that India would massively increase its medal count, from one in 2000 to 10 in 2004.