If you are intentionally avoiding China and Beijing during the Olympic Games, thinking that the country and the city will just be too crowded, you may want to reconsider.

August is always the hottest and most humid month in China’s capital city, and most expatriates living here typically take the month to return to their home countries. This year’s exodus is being exacerbated, however, by new rules that are making it difficult to renew visas; and the visa restrictions, plus concerns about the availability and high prices of hotel rooms and tickets, are causing would-be Olympic travelers to stay at home. As a result, it now appears that there will not be nearly as many visitors as previously expected to enjoy the $40 billion of new infrastructure that has been put in place in China’s capital city over the past seven years.

The new visa restrictions, which China has adopted for security reasons are definitely having an impact on tourism. The number of foreign visitors to Beijing in May dropped by 12.5 percent from a year ago, China’s tourism bureau said. Among the biggest drops were Japanese visitors, down 45 percent. The number of American visitors fell by 17.15 percent.

As a result, many are predicting that the Olympics may be a bust for Beijing’s hotels. “We are not full at the moment, and we have rooms to fill,” said Anthony Ha, general manager of the newly-opened Marriott Courtyard Beijing Northeast. “There’s not much time left, and we have a way to go.” With the opening ceremony of the Olympics just seven weeks away, only 44 percent of the rooms in four star hotels and 77 percent of five-star hotel rooms are booked, according to the Beijing Tourist Bureau.

Many other cities in China are also feeling Beijing’s pain of fewer tourists, including Shanghai, where some hotels say occupancy rates are down 15 to 20 percent. The new visa rules are not only affecting tourism but also business travel:

Nothing is more of an obstacle than the new visa policy. Businessmen, particularly from the United States, Hong Kong and Taiwan, have complained that new visa restrictions have prevented business meetings from taking place and crimped deal making. Many Hong Kong-based businessmen, for example, say new visa rules require frequent and complicated applications, often including proof of a hotel booking, round-trip airline tickets, and in some cases, a letter of invitation.

The visa restrictions are also having an impact on expatriates living and working in China. Because the new rules may require expatriates to return to their home countries to renew visas, many are simply staying home and telling their Beijing colleagues, “We’ll see you in September!” This hit home over the weekend when I learned that John T. McAlister, a good friend and a driving force behind the Yale Club of Beijing, has lost his months-long battle with the visa authorities, and is being forced to leave Beijing after being here for eight years.

All of this is having an impact on business, and the Olympics may not be the economic boon that many expected. There has already been a visible drop in traffic at restaurants, bars, hair salons and other establishments frequented by tourists and the expatriate community. Most shop owners that I know can’t wait for the Olympics to be over so that Beijing can return to normal.

In addition to there being fewer people than expected on the streets of Beijing, there will also be fewer cars. Beginning July 20, the odd/even license plate system will begin and the number of vehicles will be cut in half. The only experience I have in this regard was the 50th year anniversary of the founding of the People’s Republic of China in 1999. All traffic inside the Third Ring Road was restricted, and the flow of people in and out of Beijing was reduced considerably. October is one of the nicest months to be in Beijing weather-wise, but the traffic restrictions certainly helped ensure blue skies for the parade.

Although there are peculiar circumstances such as the visa rules in the case of China, Beijing’s experience may not be so different from what I have been told about other Olympic cities. Vlad Reyes, a good friend of ours who runs the Beijing Hilton, managed a hotel in Sydney when that city hosted the Olympic Games in 2000. Just like Beijing, all of the hotels were fully booked one year in advance of the games. As the games approached, however, rooms were let go and many rooms became available.

Similarly, another friend of ours who lived in Los Angeles in 1984 when the games were held there, sent his children away, figuring that traffic during the games would be horrific. He said it was the biggest mistake he ever made. The freeways were empty and getting around LA was easy. Everyone thought as he did and stayed away from the city. With the much anticipated Games only weeks away, it appears that potential visitors to Beijing and the city’s residents are having the same reaction.

As anyone who lives and works in China knows, obtaining visas is becoming a bigger and bigger problem here. So much so that some, like the Australian foreign minister, are warning that this could harm future trade and business. In a recent interview, Stephen Smith told reporters in Hong Kong: “It is important that the Chinese authorities understand the potential practical, on-the-ground difficulties that this is causing.” Whether this is part of the overall pre-Olympic tightening that may begin to dissipate when the last athlete leaves Beijing, we won’t know until later. In the meantime, individuals and businesses alike need to understand the new restrictions and how to best deal with them.

To this end, Jason Inch, a Shanghai-based consultant and co-author of the soon to be released “Supertrends of Future China,” did us all a favor by putting together in one place some of the most current thoughts on the visa issue. Last week, Jason commented on his blog, China Supertrends, about a recent panel discussion and networking event in Shanghai which was sponsored by Beijing-based China Entrepreneurs and whose theme was “The State of Entrepreneurship in China.” I had the pleasure of serving on the panel along with Taiwan entrepreneur Raymond Chang, who is bringing a new take to home television shopping in Shandong; and Rocky Lee, an American lawyer with DLA Piper who heads its Asia Venture Capital and Private Equity practice.

We did not have time or the occasion that evening to discuss the visa issue and how it impacts entrepreneurs in China, so Jason provided a nice summary in his post. He referenced the changes you should know about and how this might affect your personal and business travel plans; a timely post on the subject from Dan Harris of China Law Blog; as well as several posts from China Herald.

I won’t repeat all of the advice, wisdom and observations contained in these sources, but merely refer you to them.

Several months ago, Joni Evans, a good friend of mine, began a new Web site www.wowowow.com (“The Women on the Web”) that is oriented to women, 40 years of age and over. Joni, a veritable powerhouse in the publishing industry whose career includes serving as president and publisher of Simon & Schuster and publisher at Random House, identified women over 40 as an underserved market on the Internet, and decided to create a Web site targeting this segment. To help her create, run and write for the site, Joni organized 15 extremely successful women, including Lesley Stahl (broadcast journalist), Peggy Noonan (political columnist), Mary Wells (inventor of modern day advertising); and entertainers, Whoopi Goldberg, Candice Bergen, Lily Tomlin, and Marlo Thomas into a powerful team.

Why do I mention this on Managing the Dragon, a site devoted to China? Trust me, there is a China angle– I’m getting to it. But first, a bit more background.

A popular feature of the site is the “Question of the Day” which each contributor is asked to answer. One of the first questions was a doozy. Followers of New York politics will recall that in mid-March, Eliot Spitzer, the self-righteous former Attorney General of New York who had been elected Governor in 2006, was literally caught with his pants down when an investigation uncovered that he had been spending tens of thousands of dollars on hookers over a 10-year period. All of New York and the United States watched as Governor Spitzer stepped down, effective March 17, a distraught Mrs. Spitzer by his side. wowowow’s Question of the day: “Should Silda Spitzer Stand By Her Man?”

Now to the main point. As the Olympics draw near, and all things relating to China take center stage, one of last week’s questions of the day on www.wowowow was: ”It’s been 19 years since the protests in Tiananmen Square. What do you think about China today?mebeli”

One way or another, this question will be asked over and over again in the coming months. Whether you think the views of these very accomplished women represent a cross section of Americans or not, they are opinion makers and their comments provide interesting reading.

I confess to being most impressed with the comments made by Mary Wells, whose opening lines demonstrate a refreshing open-mindedness regarding China:

It is easy to complain about China but can you find a country you fully admire and have no complaints about? Including America? There have been big differences in China since Tiananmen Square and if you haven’t been there in awhile a visit there is astonishing. You can’t think about Tibet without being reminded of America’s own mistakes and you can’t visit Beijing without being reminded of America’s past capitalistic growth.

Well said.

She continues with a common sense, pragmatic prescription for the future:

I think this is the time to start encouraging our young people to learn to speak and to write Chinese in school. I would guess that in their primary career years the timing will be such that to be expert in Chinese will enhance a career and, in an important competition, make the difference.

Unfortunately, many Americans and Europeans do not share the same balanced perspective as Mary Wells. On my recent trip to the United States, I was surprised by how frequently I heard negative remarks made about the country and its leaders. The focus on the Olympics and the publicity surrounding anti-China demonstrations is drawing true sentiments to the surface. Jack Cafferty of CNN said it most crudely, but I suspect his comments speak for many.

If the Beijing Olympic Games, by bringing millions of first-time visitors to China, help to close this “understanding” gap, they will be considered a great success.

Long after the last athlete leaves Beijing, the legacy of the 2008 Olympics will be seen for many years. Terminal 3, the airport train, new subways, roads and stadium venues, a refurbished Forbidden City and countless landscaping projects are all part of the $40 billion makeover that Beijing is receiving in preparation for August. Most, if not all, of these projects would have been done anyway as part of Beijing’s ongoing development. The effect of the Olympics has been to pull them forward in time. When my oldest daughter told me several years ago that she wanted to have a wedding reception at our farm in New Jersey, her upcoming marriage had the same effect on me. All of those projects on my “to do” list immediately became high priorities that now had a hard deadline.

Apart from the physical infrastructure, though, the most lasting legacy of the 2008 Olympics may be a China which has at least begun to walk down the long road to becoming “greener.” I don’t want to overstate the case, because anyone who has traveled here can easily see that cleaning up the environment is one of the country’s biggest challenges. However, it is increasingly clear that environmental issues are coming front and center with business leaders and government officials alike. Whereas the word “environment” had never been part of any discussions I had during my earlier days in China, it comes up in almost every one today.

Evidence of an emphasis on going green is growing. Several major Chinese companies were forced to delay initial public offerings last year to comply with environmental rules. Ten domestic IPO’s—including one by China Coal Energy Co., China’s second largest coal producer by output—were held back in the second half of 2007, after the government began vetting such deals for environmental factors. Environmental issues are now taken into consideration in the annual evaluation of local government officials. Banks are restricting loans to companies that aren’t dealing properly with the environment.

It’s also no accident that Chang’an Auto Corp, China’s fourth largest automaker, has developed a hybrid that will be mass-marketed this year. Or that Chery, China’s largest local car maker, has had an R&D team of 100 engineers working on hybrid projects for the past seven years. Chery is now testing a hybrid model in the Wuhan taxi market and expects to hit the market in the second half of this year. Even the newcomers are getting into the act.  BYD, a cellphone battery company that began developing an auto business in 2005, displayed a plug-in hybrid model at the Detroit Auto Show that it said will be available later in 2008.

I believe that the mindset in China regarding the environment began to change when it was announced seven years ago that Beijing would host the 2008 Olympics. (That might explain why companies like Chery began working on hybrid projects in that timeframe.) At once, the prospect of millions of new visitors coming to China for the first time, as well as daily TV broadcasts that are part and parcel of such a large, global event, made it painfully obvious that environmental conditions in Beijing and China would be brought into sharp focus in 2008. I imagine that the worst nightmare of every Beijing official is to have NBC open its broadcast every night with a picture of a grey, smoggy Beijing, followed by a five-minute discussion about the sad state of China’s air quality.

To prevent that from happening, a number of temporary measures will be taken. Factories in and around Beijing will be closed for business ahead of the games; construction activity will stop well before the start of the Olympics, and at least one-half of the vehicles will be taken off Beijing’s streets in August. We are hearing that transportation may begin to be affected as early as this June, and I wouldn’t be surprised if curbs on the use of autos are even more severe than the odd/even system that has been announced. We have two factories near the Fourth Ring Road (neither of which creates pollution) and are being told that transportation in and out of those factories will be nearly impossible during the period of the games.

In addition to these temporary measures, China is taking even more drastic steps that will have a longer term impact on a large part of China. As reported in the Wall Street Journal:

Six provinces and municipalities—Hebei, Inner Mongolia, Shandong, Shanxi, Tianjin and Beijing—have already started shutting down polluting factories and curbing power-plant production in an ambitious attempt to cut down on air pollution. Collectively, these provinces represent an area larger than France, Germany and Italy combined, but pollutants from factories far from Beijing are believed to be partially responsible for the capital’s often smoggy air.

The worst polluting factories will not only be closed during the Games, but will be shut down for good. While these factories are already in violation of China’s environmental standards, it has been difficult to overcome the strong vested interests of local officials who have every incentive to keep them open. We know this from personal experience, because we happen to have a factory in the area discussed that, unfortunately, has been dealing with a particularly dirty neighbor. A nearby steel factory spews out clouds of orange smoke that make it nearly impossible for our workers to breathe when it is running. Repeated efforts to convince the local officials to force the factory to clean up its act have fallen on deaf ears.

If the pressure to clean up the air in Beijing for the Olympics provides the extra push needed to close or clean up factories like this in a large part of China, the impact will be positive and long term, and the Olympic legacy may be a greener China.

Companies thinking about hosting event in Beijing next summer…think again.

Recent reports in the Chinese press indicate that from April 30, 2008 - July 31, the Chinese government will “severely restrict” major promotional gatherings, and will ban the events outright from August 1 - September 23 . Though it remains to be seen how the policy will play out, the ramifications on the communications industry could be massive.

Many companies have been counting on hosting events during the Olympic season in order to capitalize on the unprecedented enthusiasm that the government has been drumming up for more than six years; event planning and public relations firms, which are primarily focused on event planning and management are now bracing for what could be a severe blow to their marketing business.

Though the Olympic committee has a legitimate right to protect against ambush marketing, and while it is recognized that the local government is preoccupied with keeping a handle on things during this sensitive time, this new policy unreasonably punishes many company’s who have unwittingly built their operations around the Olympic economy. One can only hope that, like many Chinese regulations, it goes unenforced.

For a full translation of the original article and the policy itself, see below:

Read more »

In my innocent attempt to pass along hard data on the effect of the four day test period in Beijing in August, I seem to have stepped into a bit of a controversy. In Fudging and Deleting Pollution Data, Josh at China Expat presents some very well reasoned arguments and data suggesting that the experiment was not at all successful, contrary to the view expressed by China Automotive Review. Anyone interested in hearing the other side of the argument should read his post in Daily Tea Leaves.

Meanwhile, I would be interested in hearing any other facts or opinions on this important subject.

Apart from the anecdotal evidence regarding pollution levels and traffic congestion during the four-day test period in August in Beijing, it appears, not surprisingly, that reducing the number of vehicles on Beijing’s streets by almost one-half did reduce the pollution index considerably. Our thanks to China Automotive Review, which ran the following article in its September edition:

Cleaner air for 4 days in Beijing

by Witman Liao, published in SEP issue , 2007 

BEIJING – Beijing enjoyed four consecutive days of bluer-sky with fairly good air quality by August 20, the last day of the trial period of “Lucky Beijing,” which allows cars with even license number to run on August 18 and 20 while odd number cars can run only on August 19 and 21. It shows the plausibility of success for the temporary vehicle ban planned for the Olympic Games next year.

August 16 was a day of slight pollution with pollutant index of 116 in Beijing, according to the municipal weather report. The following days were of the same weather conditions having small wind but heavy humidity and haze not conducive for pollutant dispersion. As anticipated, however, the pollutant indexes were considerably reduced to 91, 93, 95 and 95 for four days in a row from August 17 to 20, largely due to the presence of fewer vehicles in the city areas. Witman Liao

So it looks like it might be true that Sohu has the exclusive rights to the any web-marketing inside of China, which can be read about in this Wall Street Journal report. At least that’s what Sohu is telling ad agencies… Here is an excerpt:

In 2005, Chinese Web company Sohu.com Inc. outbid fierce competition to become the exclusive Internet sponsor of the Beijing Games. For an estimated $30 million, Sohu bought the right to create the official Web site for the Beijing Organizing Committee and to use the Beijing Games logo of a runner in the company’s marketing.

And earlier this year, ad agencies say, Sohu started telling them that online ads from other sponsors that carry the Beijing Olympics logo can appear only on Sohu.com.

One would have to ask the question: does this cover any representation of the logo? All sponsors of the Olympics have a special Olympic logo with the company logo juxtaposed with the “Running Man” Olympic Games logo and I’m sure this would seriously hinder their marketing campaigns within greater China.

Now only this but it would seem to give Sohu a bit of a monopoly on the Olympic marketing pipeline, at least inside the country. For a county with over 162 million internet users this could represent a major coup.

You can see why some current sponsers have been “loath to comment”.

Here’s the one of the main cruxes of Sohu’s claim:

Sohu’s ad claim extends only to partners and sponsors of the Beijing committee and not to international participants in The Olympic Partner (TOP) program, who can use the Olympic rings in ads around the world. It also affects only Web sites based in China — including the localized versions of Yahoo Inc., Google Inc. and Microsoft Corp.’s MSN — because only the Beijing committee’s sponsors are allowed to use the running-man logo inside China.

Sohu is even saying that they will have exclusive access to events, further sweetening the potential for online ad revenue. Of course this is probably a PR ploy aimed at creating buzz where there is no honey.

“Sohu only got the right to run the official Web site, and except for that, they have no other exclusive rights,” says Chen Tong, rival Sina Corp.’s executive vice president and chief editor. Sina, which operates a heavily news-driven site, claims the alliance already has a team putting together content about the Games.

At this point I would like to get a hold of that agreement and see for myself.

Update:

I’ve pasted the full text of a Wall Street Journal article which sheds some light on the situation.

Olympics Organizers Back Sohu in Ad Dispute
By Geoffrey A. Fowler and Juliet Ye
22 August 2007

Organizers of the Beijing Olympics have thrown their support behind Sohu.com Inc.in a feud between the Chinese Web portal and its rivals over advertising during the 2008 Games.

The Beijing Organizing Committee, known as Bocog, confirmed a statement by Sohu, its Internet-content sponsor, that the site has the exclusive right to post advertisements by Olympic sponsors who are using the Games’ official logo of a running man.

Beijing-level sponsors are “only allowed to release their Olympic-related online advertisements on Sohu,” Bocog said in a statement to The Wall Street Journal.

Beijing-level sponsors include partners and sponsors of Bocog, not international participants.

In 2005 Sohu bought, for an estimated $30 million, the right to create and run the official Web site for the Beijing Organizing Committee and to use the Beijing Games logo of a runner in the company’s marketing.

Other Chinese Web sites, which have formed an alliance to counter Sohu, have said Sohu’s sponsorship of the Games bought it the right only to manage the official Games Web site and to use the Games logo in its own ads. There is little precedent for the issue, as the Games have never had an Internet-content sponsor like Sohu.

Bocog says the ruling doesn’t apply to international sponsors of the Games, which are allowed to use the Olympic rings in any market and in any media around the world they choose.

Lawrence Wan, China director of Omnicom Group Inc.’s OMD Digital, says the announcement answers one question — but raises new problems for marketers. “Now the use of logos becomes an issue. Strategically, do we want to have a split personality online?” he asks, using the logo on Sohu but not elsewhere. “Will brands still promote the Olympics when they can’t use the logo?”

Du Hong, marketing and sales manager of Web site Sina.com, owned by Sina Corp., says the alliance of Sohu’s rivals is still waiting for a public statement from Bocog and continues to challenge Sohu’s claims.

Bocog was less clear about another claim by Sohu: that it would get preferential access to report on the Games for its own commercial use. “Bocog welcomes all media coverage on the Olympics,” it said in a statement, without specifically commenting on Sohu’s claim. Generally, Chinese Web sites say they haven’t been granted access for their journalists to cover the Games.

Even without the exclusive coverage right it looks like the best spent $30 million dollars in a long time… I see litigation in the future. Maybe not in China but definently at future Olympic Games. With the promise of a more connected world populace in the future this is likely to grow into a bigger issue or at least needs to be better defined in the years to come. $30 million dollars just seems a little low to me for what they are claiming.

The most common conversation I’ve run into over the past week: What’s with the amazing weather?

Although Beijing has been having one of the most polluted summers in years, on August eighth, a perhaps-not-so-coincidental year to the day before the Olympics, the sky went bright blue and has stayed that way ever since. So far, the Beijing Weather Manipulation Office has no comment, so I’ve been trying to think through the many variables and I can’t figure out an answer.

Beijing announced that they will force half the cars of the road between the seventeenth and twentieth of this month, alternating driving restrictions between license plates with odd and even numbers - indicating that this weekend will be even bluer, but not explaining the previous week. Beijing also moved several large polluting factories out of the region. However, these factories closed up months ago and the city has remained polluted. So again, this doesn’t explain the weather change. In terms of weather modification (i.e. controlling the rain), there has been regular rain in the middle of the night over the past week, said to clear out dust and smog. Once again however, this is just business as usual in Beijing; the weather modification office makes it rain quite often during the summers, but they don’t achieve day after day of perfect weather in the aftermath, as has been the case.

This leaves another theory that I’ve heard tossed around - forcing farmers not to burn their crops. In northern China, slash-and-burn farming is still a quite common practice and is responsible for blowing thick smoke hundreds of miles east over Beijing’s skies. I have been told that this is done frequently during the summers. Perhaps the government stopped allowing farmers to burn their crops during the test events this month? If this is the case, I haven’t heard any confirmation in any media outlet, but it would be an interesting piece of news in that it would require the cooperation of thousands of farms and impressive regulatory control on the local level.

Perhaps the good weather is coincidental. But if the government is able to make the sky blue - as it claims it will next year - it begs the question: why are they only making blue skies an Olympic priority? I have personally heard several people say “if the weather in Beijing was like this, I wouldn’t go back to the States after the Olympics.” For a city hoping to attract top talent, establish itself as a world class city, and avoid a recession in ‘09, blue skies will be an important long term goal. For the Beijing government, rather than approach air pollution as a potential Olympic embarrassment, they should approach it as the city’s greatest weakness and one which needs to be solved. After all, the Olympics is only 17 days long.