By Jason Subler

BEIJING, Aug 10 (Reuters) - The transport restrictions and factory closures that China has ordered as part of its drive to clean Beijing's air for the Olympics could lead to a dip in overall economic activity in the short term, some economists say.

Hoping to cut down on smog during the Games, authorities have shut down dozens of polluting factories in Beijing and neighbouring provinces and are significantly limiting traffic in and out of the city. It has also banned certain goods from being shipped for security reasons.

Many economists have said that the effect of those measures would probably be offset by factories in other parts of the country ramping up production and by an Olympics-related boost to Beijing's tourism industry.

But Hong Liang and Yu Song with Goldman Sachs said evidence was mounting to the contrary.

"While the long-term economic impacts of the Olympic Games are likely to be minimal, it increasingly looks like the Games' short-term economic impacts are likely to be negative," they wrote in a research note.

Liang and Song expect the measures to lead to a visible slowdown in both production and consumption in August and September, to be followed by a rebound in October after the restrictions expire. They are due to end on Sept. 20.

"Therefore, it will be difficult to get a 'clean' reading of the underlying economic trend (as well as price trend) probably until after October," they wrote.

Many economists expect China's economy to slow in the second half, as weaker overseas demand and the stronger yuan <CNY=CFXS> drag down exports and tightening measures at home dampen investment. Annual growth slowed to 10.1 percent in the second quarter, down from 11.9 percent in all of 2007.

"GIANT DISTRACTION"

However, economists agree virtually unanimously that the end of the Games themselves will not contribute significantly to any long-term slowdown in the country's growth, as has been experienced by some past host nations, including after the Seoul Games in 1988, Barcelona in 1992 and Athens in 2004.

Jonathan Anderson, an economist with UBS in Hong Kong, noted that the impact of the Olympics on the overall economy was greatest in countries in which the host city accounts for a relatively large proportion of the overall population.

Whereas some past host cities have accounted for upwards of 40 percent of the national population, that figure drops to 1.1 percent for Beijing, Anderson said.

"Our estimates for China put the impact of the 2008 Olympics far behind the decimal point in terms of growth," he wrote.

However, the end of the Olympics could be good for the economy in other ways, as that will allow authorities to shift their focus back to the many other pressing problems waiting to be tackled, said William Hess, greater China manager for Global Insight in Beijing.

"The Olympics have been a giant distraction when it comes to policy making, and movement on issues such as energy pricing and power shortages, rising producer costs and the plight of SMEs (small- and medium-sized enterprises) is arguably overdue," Hess said. "There are still a lot of big issues out there that need attention."

(Editing by Jeremy Laurence) (For more stories visit our multimedia website "2008 Summer Olympics" at http://www.reuters.com/news/sports/2008olympics; and see our blog at http://blogs.reuters.com/china)

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