"We always are aware and have been aware of Chinese human rights problems. And I think if you start to take this kind of action, it doesn't really serve the purpose of human rights," Powell told "Good Morning America."
"What is accomplished by boycotting the opening ceremony?" Powell asked rhetorically. "I don't think that makes the situation any better. It probably makes the situation a little more difficult for the Chinese because they will pull back even more."
Powell encouraged China to begin a dialogue with the Dalai Lama, the exiled spiritual leader of Tibet.
"I think we ought (to) recognize that these protests are legitimate, recognize that the Chinese ought to move forward and start having a dialogue with the Dalai Lama, and not just say, 'We're not going to talk to you.' (The) Dalai Lama has indicated flexibility. And I think that's what the Chinese should do," he said. "But I don't think that these kinds of actions, such as boycotting an opening ceremony, or even perhaps thinking twice about sending your team to the Olympics, has the desired effect.
"I very much supported in 2001, when I was secretary of state, that we give the Olympics to the Chinese because I thought it would put them under a spotlight. And they have responded to that spotlight," he said. "But they haven't with respect to Tibet. And these demonstrations show the Chinese leadership that the world is watching this."
Returning to presidential politics, Powell condemned controversial remarks by Rev. Jeremiah Wright, Obama's pastor of 20 years, as "deplorable" but complimented the Democratic candidate for his speech on race that followed in the aftermath.
"Rev. Wright is also somebody who has made enormous contributions in his community and has turned a lot of lives around," Powell said, "And so, I have to put that in context with these very offensive comments that he made, which I reject out of hand."
Powell added that he does not know Wright, and praised Obama's response.
"I think that Sen. Obama handled the issue well . . . he didn't look the other way. He didn't wait for the, for the, you know, for the storm to go over. He went on television, and I thought, gave a very, very thoughtful, direct speech. And he didn't abandon the minister who brought him closer to his faith," Powell told Sawyer.
Powell, who has been mentioned as a possible vice presidential candidate in almost every election since he retired from military service and public life, expressed admiration for Obama.
"It was a good (speech)," Powell said. "I admired him for giving it. And I agreed with much of what he said."