Is football finally making its way home to China?

Is football finally making its way home to China?
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If football truly is the opiate of the people, then China is the place to prove it.

Sport and politics are indivisible. As Diego Maradona said, “Football isn’t a game, nor a sport, it’s a religion.” And like religion, sport is politics. The Chinese love football and the government is well aware of the benefits of the beautiful game in promoting their own ideological agenda, nationalism and political unity. Furthermore, the ruling Communist Party (CCP) knows it must offer a compelling spectacle if it is to keep the population content.

Panem et circenses

With a new season across the European leagues well under way, and the January transfer window set to open on the first day of 2017, one country in particular has been turning heads from Madrid to Moscow: China. At the end of the summer, a state-owned consortium, Everbright, and a private equity firm PCP Capital Partners, made a multi-million-pound bid for Liverpool FC. Contrary to previous trends only a few years ago, this bid follows a recent pattern of Chinese investors buying stakes in major European clubs while teams in the Chinese Super League (CSL), the country’s top flight of professional football, have been making staggering purchases of some of the world’s best players.

Google any football player and add the word “China” after their name and you will see endless whisperings of Chinese clubs offering obscene amounts of money to lure their talents to the East. Announced only this week, Argentinian international Carlos Tevez is set to become the world’s highest earning player when he signs a contract with Chinese Super League club Shanghai Shenhua worth an astonishing £615k a week.

This is, however, no one-time phenomenon. Chelsea star Oscar has also just confirmed he will be joining former Chelsea manager André Villas-Boas at Chinese club Shanghai SIPG in a deal worth £60m. Also rumoured to be considering joining previous managers in China are Alexis Sanchez, who has been offered £500k a week to play under Manuel Pellegrini at Hebei China Fortune, and former England International John Terry, who finds himself in the middle of a £16m tug-of-war between two Chinese top-tier clubs.

In the run up to Christmas, even the world’s greatest players can’t escape the rumours. Arguably the best footballer on the planet, Lionel Messi, is wanted by Hebei China Fortune, who are reportedly willing to offer him half a billion pounds — more than four times his current salary. This revelation followed the news that Manchester United frontman Zlatan Ibrahimovic, the gift that keeps on giving, turned down a £120m offer from the Chinese Super League which would have included millions in commercial revenue and feature Zlatan as the League’s ambassador in a bid to boost the game around the world.

What is the catalyst behind this fascination with the beautiful game and what do such aspirations mean for the future of world football? Making sense of China’s recent interest in the sport should make the world sit up and take note of this ‘cultural revolution’ by an ambitious superpower which aims to change the face of the game.

China: The origin of football

In the Warring States Era (476 BC to 221 BC), a game called “cuju” was conceived in China. “Cuju”, meaning “to kick a ball”, involved players doing just that to a leather ball stuffed with feathers through a piece of simple cloth hung between two sticks while referees enforced the rules of play. The game gained popularity as military leaders used it to keep soldiers fit and eventually it spread to the Royal Courts. Although cuju began to decline in popularity during the mid-17th century, its codes of play survived and are clearly recognisable in the modern game.

Fast forward two millennia: FIFA accepts the earliest form of ‘soccer’ was actually a Chinese invention, and the Asian powerhouse is attempting to reclaim its history. China likes to think ‘football’s coming home’.

Reclaiming history

China is currently ranked 78th globally by the world’s football governing body, FIFA, much to the embarrassment of the government and its people. Beyond an attempt to restore prestige, China’s desires also have economic and political considerations. As Deloitte’s Annual Review of Football Finance 2016 identifies: the combined revenues of the ‘big five’ European leagues were £9.2bn in 2014-15, with the European football market expected to exceed £19.2bn in 2016-17. These numbers are certainly testament as to why China’s interest is no surprise.

China’s wish to integrate is, however, only the beginning. It plans to develop the calibre of its club and national level teams, create lucrative nuclei of supporters and use clubs to build Chinese investment presence in Europe and one day win the World Cup. Understanding why China invests in a market where it is still regarded as a rank outsider is key to predicting its future effect on the sport and the world.

The alternative economy

Beijing has introduced a number of plans aimed at improving its footballing calibre. The ruling CCP has implemented a fixed-growth target for sports with the improvement of the sports economy, and especially football, as a key priority. They believe that “revitalising soccer is a must to build China into a sports powerhouse as part of the Chinese dream.”

On October 20th 2014, the State Council announced a guideline named “Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption”, which drew the blueprint for China’s future development of the sports industry. A month later on November 27th, it announced that football would become a compulsory part of the school’s national curriculum with 20,000 schools receiving new training facilities and the number of specialised football schools rising from 5,000 to 50,000. Last year, under President Xi Jinping’s directive, it published its ‘Football Reform and Development Programme’, a 50-point plan with the target of making the world’s most populous country a true footballing superpower.

Xi Jinping & Chinese investment

Policy drivers have gone hand-in-hand with two other actors central to the rise of football in the Middle Kingdom: the role of Xi Jinping and the activity of Chinese investors.

China is currently under the steer of President Xi and it is no secret that Xi loves football. His personal ambition is for the domestic sports industry to be worth £564bn by 2025, which would be no small feat, especially as even the most optimistic estimates put the current entire global sports economy at £307bn. A viral selfie of Xi posing with former British Prime Minister David Cameron and Manchester City’s Sergio Aguero during his state visit to the UK in 2015 attests to his keenness for China to be seen as part of the global football landscape. He wants to turn China into a “great sports nation”, with the most-followed sport in the world as the cynosure.

Chinese investors thus now see an opportunity to build integrated sports businesses that can slake the thirst for entertainment in the world’s second-biggest economy, while at the same time satisfying the fancies of Mr. Xi. The President’s enthusiasm has significantly impacted how much major enterprises are willing to invest precisely because, beyond the obvious cachet, owning stakes in the likes of Atletico Madrid potentially opens doors for Chinese players to appear in European club teams. This has been a real game-changer for commercial opportunities as larger fan bases mean larger commercial values for clubs in the Chinese market, which could subsequently lead to monetising the transfer of international players to Chinese teams.

In short, Chinese companies have piggybacked their way onto the global stage via strategic acquisitions of clubs, purchasing high-profile players and through investments in marketing. As one football business analyst at Deloitte argues, “as long as high-net worth individuals and businesses want to compete in football, clubs don’t have to generate all the revenue needed to cover their costs.” Seemingly the complementary entities of deep-pocketed owners and rising revenues will serve to support at least the medium-term growth of the game in China.

Football diplomacy

Due to the fact that sports and politics are intertwined, football has even been used as a means to influence diplomatic relations by China. On November 25, government officials, sporting executives and interested parties from China and Germany signed a series of football-related agreements. After being negotiated at the highest echelons of government on both sides, the German Football Association (DFB) and Germany’s top-flight of domestic football, the Bundesliga, agreed to a series of 5-year long partnerships with the Chinese Ministry of Education and Chinese Football Association.

More recently, at the 2016 High Level People-to-People Dialogue in Shanghai in early December, the UK and China signed the UK-China Football Coach Training Framework, which will see the British Council, Premier League, The FA “develop a UK-China Football Coach Training Framework which aims to deliver a development pathway for football coaches in China” in collaboration with the Federation of University Sports China.

Sky’s the limit

Strategic directives, Xi’s determination, investor pother and football as a tool of diplomatic engagement have all had an alarming impact on China’s role in the international football industry, with Chinese firms repeatedly capturing media headlines. From statement acquisitions of clubs and marquee signings of players and managers to securing TV licences and sponsorship deals, China is never far from the action.

During the winter 2015 transfer window for example, Chinese clubs spent in excess of £214m, more than any other footballing league (including the EPL), with five of the top six global transfers coming from the CSL. This trend continued throughout 2016, peaking in the summer with Shanghai SIPG purchasing Brazilian superstar Hulk from Zenit Saint Petersburg for a then record-breaking fee of £46m.

The early paradigm of China importing fading stars has evolved as a number of CSL clubs have now managed to secure the services of leading players in their prime from big European clubs. Jiangsu Suning made history in signing the 26-year old Brazilian midfielder Alex Teixeira, beating a number of teams (including Liverpool) to his signature and breaking China’s national transfer record for the third time in a matter of days.

Beyond the likes of Oscar and Teixera, a number of other world-class football players have also headed East. In the last summer transfer window, notable signings included Graziano Pellé moving from Southampton to SD Luneng for £12.9m, Anthony Ujah moving from Werder Bremen to Liaoning FC for £9.8m and Roger Martinez moving from Racing Club to JS Suning for £7.6m.

While attracting world-class talent, Chinese companies have also made enormous investments in clubs across Europe and beyond, totalling in excess of £760m in the last 2 years. In the UK alone, West Bromwich Albion, Wolverhampton Wanderers and Aston Villa were all acquired by Chinese investors and Manchester City’s parent firm sold a 13% stake to CMC/Citic Capital. This followed a number of other notable investments on the continent including Sino-Europe Sports Investment Management Changxing Group buying AC Milan for £628m, and Suning acquiring a 55% stake of derby side Inter Milan, worth £235m.

It’s not just players and clubs, though. A number of well-known managers have joined the CSL. When the aforementioned André Villas-Boas took over from former England manager Sven-Goran Eriksson at Shanghai SIPG in December, the Swede moved south to head up Shenzhen FC, taking over from another giant of the game: ex-Dutch international (and brief manager of AC Milan) Clarence Seedorf. Just north of Shenzhen at Guangzhou Evergrande, Brazilian legend Luiz Felipe Scolari replaced Italy’s 2006 World-cup hero “Il Muro di Berlin” (“The Berlin Wall”) Fabio Cannavaro, who moved to Tianjin Quanjian. Cannavaro has previously taken over from his former manager Marcello Lippi who now manages the China national team.

On top of all of this money and talent changing hands, Dalian Wanda – the firm owned by China’s richest man Wang Jianlin – announced plans to launch its version of the Champions’ League – the most prestigious annual football competition in the world. Dalian Wanda is holding talks with top-level clubs like Manchester United, Chelsea, Real Madrid, and Barcelona in order to propose a new, exclusive tournament. Such a revolutionary concept would undoubtedly change the nature of the existing meritocratic structures of European football.

Achieving the Chinese dream

These eye-catching facts and figures pose questions. Can China score the goals it wants in the global football market? Can it develop domestic football? Can the CPL become a genuine competitor to the EPL and the world’s other big leagues? Can the Chinese national team win the World Cup? The answer to all these questions is, quite simply, yes. Whether China will requires a more intricate dissection of the realities at play.

In answering the question of ‘will?’, it is worth bearing three things in mind. First, the Chinese super league is young – only 12 years old. Second, investors have unlimited spending power and a real thirst to be seen in European football. Third, investors have Xi and the government’s backing, which is a key ingredient for the success of any industry at home and abroad.

Taking these factors into consideration, the future depends a lot on the success of China negotiating present and future realities. The challenges facing its hopes and dreams are neither few nor small.

Changing perceptions

To start, China doesn’t have the best historical relationship with the global football market. When people think of Chinese investment in the EPL for example, they remember Carson Yeung’s inauspicious reign at Birmingham City FC. After becoming the first Chinese proprietor of an English top-flight club in 2009, Birmingham were then relegated from the Premiership and Yeung himself was gaoled in Hong Kong for money laundering.

This, in addition to the chaos and confusion surrounding Didier Drogba and Nicolas Anelka’s hasty exits from their Chinese clubs, has not inspired confidence in other players seeking to follow in their footsteps. In the short-term, China will have to work tremendously hard to change the perception of players, clubs and the wider football community.

Soccer-ruption

Beyond historical limitations, Chinese football is generally perceived to be plagued with corruption.

In 2003, Shanghai Shenhua was stripped of its league title for fixing a game against Shaanxi Guoli. Eventually in 2013, after a long investigation, the CFA banned a large number of former and current football officials, referees and players in a crackdown on match-fixing.

This is unfortunately not a simple irregularity, and is no small matter to overcome how football is seen in China by Chinese people and the rest of the world.

Neophyte knowledge

China also faces another challenge: inexperience. As football is a relatively new investment opportunity, investors are not yet erudite on how to secure returns in the industry. Many investors would sell their grandmother to secure a deal to please Xi Jinping, and there is a real fear that the Chinese tycoons will either lose interest, run out of cash or fall foul of Xi’s anti-corruption crackdown.

Furthermore, Chinese entrepreneurs believe they can make quick cash by purchasing underperforming European clubs with a large fan base and turning them around. They hope this will enable them to capitalise on a higher valuation by injecting them into Chinese listed companies. However, as many company executives admitted, this business model means it eventually becomes difficult for investors to know whether the premiums they are paying for players are justified, which in turn makes valuation hard.

Cultural proclivities

Additionally, as is always a problem in any industry concerning the Chinese government, navigating the PRC politics and culture is taxing. In Bamboo Goalposts, Rowan Simons argues that the troubled growth of Chinese football has traditionally been set against by the forces of politics and culture. He observes that China has historically been a country where large gatherings were expressly forbidden and that forming a football pyramid from the ground up was next to impossible.

Yet perhaps the largest cultural hindrance is the Chinese bias towards traditional, conventional education rather than pursuing a sport such as football, professionally. There is enormous pressure on the part of Chinese parents for their children to enter a profession such as law or medicine, while time undertaking a sport at education’s expense is considered a faux pas. Despite limited advances in educational evolution, until this systemic problem changes, China will struggle to develop a new generation of footballing talent.

Causing ripples: The global football market in flux

So what is China doing to mitigate these challenges? And, arguably more importantly, is Beijing succeeding in changing the world through football?

Talent & tariffs

One of China’s main ambitions has been to buy players in their prime, which as of recently they have started doing and with great success. The major difference from other tyro leagues aiming at throwing their weight around in the global football market is that the CSL is concentrated on buying players who are still at the top of their game. This has led to huge transfer fees and it is no surprise, given China’s economic development, that wealthy team owners mean Chinese clubs can afford extortionate transfer fees. Clubs like Guangzhou Evergrande and Jiangsu Suning are backed by major conglomerates and are thus able to spend large precisely because they have sufficient financial backing.

Scaling & size

Mammoth transfer sums have brought about increased revenue streams. The CSL has just signed a TV deal worth £958m over 5 years, meaning the league will receive around £153m in 2016, up from £6.9m in 2015. These revenue streams have brought a real increase in the potential size of the game in China. The CSL already has average attendance approximately equal to that of La Liga at roughly 20,000. This figure doubled in a year and even conservative estimates expect the figure to reach 30-40k in the next few years; numbers Guangzhou and Beijing already attract.

Beyond attendance, more than 51% of Chinese football fans claim to follow the EPL with more than 350 million regular viewers throughout the Middle Kingdom. In mid-November, the English Premier League sold its television rights in China to streaming service PPTV — part of Suning retail group — for a reported £564m. The three-year deal is one of the largest ever deals the Premier League has signed abroad and will mean all 380 matches will be broadcast in China over the 36 month period. These numbers and developments mean that the potential size of the Chinese market for the sport – if the country harnesses its potential – will dwarf that of any other country.

Competence & coaching

Added interest has improved professionalism in China’s domestic football. For one, clubs are now tied to a city; they cannot be vagabonds periodically changing base. This means that clubs are now integral to a city’s sporting culture, like they are in European leagues. Coupled with this, as part of a wider government purge, the CCP is adamant its anti-corruption drive is generating positive results and confident “public enthusiasm for football is being gradually restored with the audience and television viewers for the CSL are at record highs.”

This has been noted in the reaction of foreign players who have come to China. For example, Fredy Guarin, who left Inter Milan for Shanghai Greenland Shenhua in January 2016 for a £10m fee, claims the standard of the Chinese Super League “is substantially similar to that of [the Italian] Serie A”, an averment he would be ridiculed for just a matter of years ago.

Thus, as the game is perceived as more desirable, footballing education in China is undergoing a historic change. As part of CCP policy, schools in China are being made to underscore football as part of a more balanced education. There’s even a book titled Football Starts At Home, emphasizing the need for parents to encourage children to develop control of the football from an early age.

At the same time, the establishment of new football-focused academies such as the eponymous Ebbe Sand Soccer Academy in Shanghai as well as the assistance in the development of existing academies, such as the Guangzhou Evergrande-Real Madrid exchange, are both aimed at ensuring homegrown talent continues to develop within China. Beyond this, La Liga rival FC Barcelona has also recently become a strategic financial partner to a new football training headquarters on the Chinese island of Hainan developed by the Mission Hills Group. This academy will be a base for both the national team and top clubs, and hopes to benefit from the coaching expertise provided by the Spanish giants.

They think it’s all over…

What are the odds on the original home of modern football truly coming home? China’s aims and objectives for one suggest Beijing is in it for the long-haul. As Owen Gibson argues on football in China, “People will take it much more seriously in 10 years’ time than they do today. It’s one thing having a successful league that people want to watch and another having a national team that can win the World Cup … This won’t happen overnight.”

Despite the realisation that some of China’s goals won’t be achieved in the immediate future, even in today’s global football market, the implications of China’s interest are changing the face of the sport. The game of football is diversifying away from long-standing homes such as Europe, and China – unlike other non-traditional football markets such as Qatar and the MLS who failed to advance their domestic leagues and international status within the game – is succeeding in making progress.

With the backing of Xi Jinping and government policy, large and diversified financial investments, increased size, scale and professionalism, as well as an increasingly accommodating education system, the CSL is set to become a world-class league featuring the world’s best players, clubs and managers, and has set the foundation for China to one day contend for the World Cup itself. We are still in the early stages of seeing the true capabilities of the country’s role in the future of the global football market, and if China both overcomes its challenges and harnesses its potential, current disruptive waves will soon become an unstoppable tsunami.

James Tunningley is the Director of the Young China Watchers in London having previously held positions at the Royal United Services Institute for Defence and Security Studies and the China-Britain Business Council. He is on the Young Leaders Program at the Center for Strategic and International Studies Pacific Forum, a Fellow at the Royal Asiatic Society and a Junior Member of the Royal Society for Asian Affairs. He is a graduate of the University of Oxford.

Categories: Asia Pacific, Politics

About Author

James Tunningley

James Tunningley is a GRI Associate Analyst. He is the Director of the Young China Watchers in London having previously held positions at the Royal United Services Institute for Defence and Security Studies and the China-Britain Business Council. He is on the Young Leaders Program at the Center for Strategic and International Studies Pacific Forum, a Fellow at the Royal Asiatic Society and a Junior Member of the Royal Society for Asian Affairs. He is a graduate of the University of Oxford.