The satellite will be launched next May and will orbit the Earth at a distance of about 375 miles, providing information for urban planning, environment-impact assessments, traffic control and disaster planning. The move is part of the government's attempt to use the Olympics to demonstrate the country's advanced technology.
The Chinese government is to invest £14m in the project, according to the official news agency Xinhua. The satellite will be operational until a year after the games.
Construction work is under way in the north of Beijing on a national stadium, 11 gymnasiums and four other major sporting facilities.