SportBusiness International looks at whether a volatile stock market could be the undoing of the free spending Chinese Super League.
China's president, XI Jinping, reportedly keeps a framed picture of himself kicking a football on the wall of his Beijing office. In it, he seems to have more control of the ball than his government did of the stock market meltdown in July.
With Chinese Super League clubs, some backed by Chinese businesses, spending huge amounts on famous foreign stars, could economic issues derail the plans of the planet’smost populous country to become a powerhouse in the world’s most popular game?
It appears not. Since 2010 when the spending started, the league’s top clubs have been moving up the gears in terms of spending. In the winter transfer market, the total outlay on players was around $133m, second only to the English Premier League. This summer has seen more of the same.
“There is no sign of the spending stopping,” said Ma Dexing of Titan Sports Weekly and China’s leading football writer. “This is because every club wants good results as soon as possible. They think that the only way to achieve success is to buy good foreigners and they do not care how much it costs.”
Some of the big deals are very big indeed. In July, Shanghai SIPG broke the Asian transfer record, spending over $20 million to sign Asamoah Gyan from UAE team Al Ain.
Guangzhou Evergrande spent almost as much on Paulinho and Robinho while Demba Ba cost Shanghai Shenhua around $14m. Needless to say, the salaries are equally impressive and, often tax-free.
“The tax rate is 45 per cent, but usually clubs pays this. Before the contracts are signed, this is usually insisted upon by the foreigners,” said Ma.
With former Chinese FA president Nan Yong sentenced to a decade in prison following corruption investigations, the game was seen to be clean. Businesses moved in, big ones. This was because, according to Ma, the Chinese government has made it clear that the country’s decades of underachievement has to end.
“The bosses of Chinese clubs bosses invest money just because the president likes football. The bosses themselves do not like football. They just want to make somebody happy,” he said.
Leading the Way
Guangzhou Evergrande Tabao were the first to spend big, and have been the most prolific, spending almost $100m on transfer fees and salaries since 2010. Then in the second division, the club has won all four Chinese titles since.
Other clubs have been playing catch-up and have the money to do so. Rivals such as Guangzhou R&F and Shanghai Shenhua are owned by property developers with very deep pockets thanks to years of massive growth in that sector.
Scott Kennedy, a Chinese business expert at the Center for Strategic and International Studies in Washington believes that there is no cause for these companies to worry when it comes to the stock market.
“You shouldn’t be overly concerned about the rise or fall of share prices for individual companies,” he said. “They all tend to depend primarily on retained earnings, bank loans, and bonds for their financing, not the stock market, which is getting all the headlines these days.
“More important to these companies are overall trends growth and demand for commercial and household real estate. Those numbers are still very soft, though construction is beginning to rebound in China’s most important cities.”
Such corporations have diversified to reduce their reliance on one single industry. Greenland is involved in the world of finance and energy while Evergrande have various commercial intiatives, and if you attend a Guangzhou gamealong with 40,000 others you can even drink Evergrande bottled water.
Stock market fluctuations are not expected to have an effect on football spending overseas, despite recent concerns.
According to Forbes in July, China’s richest man by some accounts, Wang Jianlin, lost billions in the downturn. His company Dalian Wanda has been involved in Chinese soccer for years and earlier in 2015 Wang bought a 20 per cent stake in Spanish giants Atletico Madrid.
“China’s stock market volatility will have absolutely zero effect on Chinese companies’ ability to sponsor football clubs in Europe or elsewhere,” said Kennedy. “Even with the ups and downs of the stock market and real economy, there will always be Chinese companies looking to grow in markets beyond China as well as burnish the image domestically. Sponsoring elite football clubs is one route to that goal.”
The main goal for the government is to produce better players. Chinese clubs are certainly improving on the field thanks to the quick fix that a better class of foreign player provides. Attendances have risen to almost 23,000, the best in Asia though the standard of the average Chinese player may take longer to grow to similar heights.
“Everyone believes that the foreign stars playing in the Asian Leagues will somehow lift the level of the domestic players,” said Tom Byer, youth Development expert said. “This could be true based on what’s happened over the past 20 years in Japan.”
However, Byer a football consultant to the Chinese Ministry of Education believes that while this could happen, real long term success can only be achieved at the grassroots level.
For Byer, the real change is the government’s plan to have football part of the curriculum in 20,000 schools by 2017, a bid to address the country’s biggest problem which is that despite a population of over 1.3bn, few Chinese actually play football.
“Because of the Chinese government’s policy to promote football in the schools, there are lots of resources being invested. Many provinces are investing heavily in many different areas such as facility development and coach education,” Byer said. There are other possible ways to grow. Japanese clubs have followed Japanese business into south-east Asia in a bid to expand partnerships, do broadcasting deals and, where possible, import players. There has, not yet, been any equivalent Chinese attempts to explore possibilities in the Middle East and Africa, areas where Chinese businesses are increasingly visible.
“Super League clubs only want to buy big names,” said Ma. The spending seems set to continue for a while yet.
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