Tuesday, 4 October 2011

Paying for Face

An architectural drawing of the China Pavilion at the Shanghai Expo
Adding to the woes that China's economy is slowing down, Shanghai is presented with a 19 billion RMB ($2.4 billion) bill for the World Expo 2010 last year.
Organizers had used nearly 13 billion RMB in bonds and loans to pay for construction and other costs.
Although the six-month fair made 1.05 billion RMB in operating profit, the city still has to pony up 19.7 billion RMB for the cost of building the site.
The fair, which ran from May to November last year brought in 73 million visitors, the highest number in the fair's 160-year history. 
The government of course hailed it as a major success, but now one wonders how the city is going to pay for the massive bill.
An official report by the Shanghai municipal audit bureau released on Friday showed that the expo cost 31.7 billion RMB to build and run -- 3.1 billion RMB more than the original budget.
Ticket sales were meant to be the main revenue source, but then visitor numbers grew due to discounted and free tickets. In the end tickets worked out to be on average 100 RMB ($15.67) per person, the price of a concessionary one. All adults were supposed to be charged double that amount.
It turns out the municipal government handed out at least 10 million tickets -- one for every Shanghai household -- just before the opening of the fair. In addition it is widely believed more free or discounted tickets were available through state-owned enterprises.

Talk about free giveaways. Seems like pumping attendance numbers was more important than actual profits.
Another rumour was that staff at national pavillions inflated official gate numbers, but expo organizers denied this.
The increased budget may have been due to poor attendance in the first month which promoted organizers to have more live performances and more staff on hand. Strong inflation in wages and construction materials were other factors as well as some countries backing out of building their own pavillions and using rented facilities built by the organizers.
The costs were paid by a number of sources:
2.66 billion RMB from Shanghai government
2.86 billion RMB from commercial and social donations
1.20 billion RMB from a dedicated cultural fund
5.50 billion RMB from the sale of expo bonds
7.50 billion RMB from loans from banks, capital funds and "other methods"
That total is 19.72 billion RMB. So doesn't that mean 11.98 billion RMB still needs to be paid up? Why is Shanghai still on the hook for over 19 billion RMB, or are there other costs we're not told about?
The audit says bills have either already been paid or in the process of being paid. And the report is only restricted to the 5.28 square kilometre site, not taking into account the massive infrastructure improvements made -- which some estimate at up to 400 billion RMB.

Just like the Olympics where giant architectural structures like the Beijing National Stadium or Bird's Nest were built just for show, the Shanghai Expo was another face-saving event to prove the Chinese really do have tons of people who are interested in expositions even though no one wants to either participate in them or visit them.

After all those warnings to Shanghai residents telling them not to wear pjamas on the streets and hang out laundry, they will have to pay the giant bill when it was the various government departments who put on the costly charade.

How was the Shanghai Expo, Better City, Better Life?

1 comment:

  1. china should be handed a dose of modesty.