China football revolution can be a financial game changer

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When Chinese investors recently decided to acquire a 13%
stake in Manchester City’s parent firm, it put the
country’s renewed interest in football firmly in the
spotlight.
The world’s second largest economy has never been a football
powerhouse, qualifying for just one World Cup.
Meanwhile, the population seems more interested in NBA
basketball than the sport known in the UK as “the people’s
game”.
But over the past couple of years Chinese investors and firms
have quietly been acquiring stakes in football clubs in England,
Spain, France, Holland and the Czech Republic, while President
Xi Jinping has professed a love of the game.
So why are the Chinese now snapping up stakes in European
clubs?
Reasons include a national desire to look good on the world
stage, developing China’s club football and national team,
creating Chinese football fan bases, and firms using clubs to
build their commercial presence in Europe.
‘Acquiring competence’
“China likes to be omnipotent and successful in everything it
does,” Simon Chadwick, chair in sport business at Coventry
University Business School, tells me.
“One thing they currently don’t do particularly well at is football,
the global game. China wants to ascend to a position where it is
respected globally as part of the international football
community.”
He says President Xi has come out as a big football fan, and that
by 2025 China wants to have a domestic sports industry worth
$850bn (£564bn). Optimistic estimates put the current entire
global sports economy at $400bn.
CASE STUDY 1: SLAVIA PRAGUE
Slavia Prague, one of the most historic names in Czech football,
was heavily in debt, and near financial collapse before the start
of this season.
In September, China Energy Company Limited (CEFC) bought
roughly 60% of the club for an undisclosed sum, with Czech
businessman Jiri Simane buying around 40%.
The CEFC football purchase was part of a bigger investment
move by the firm into the Czech Republic. In 2014 it had
decided to establish a major European base in Prague, buying
two historic properties in the city, and also a number of
businesses.
Following Slavia’s previous woes, CEFC has managed to keep top
players like Czech national forward Milan Skoda at the club, and
there are plans to buy other top domestic players, much to the
approval of fans.
Slavia just avoided relegation last season. Now it sits fifth in the
table and there is talk of qualifying for next season’s Europa
League.
“This would be market-making on an unprecedented scale in
sport,” says Prof Chadwick. “China would then be able to bid for
the football World Cup, and the ultimate aim would then be to
win it.
“But they need to learn more about football – that is crucial.
With these club purchases, they have been going about
acquiring competence.”
Mix of influences
Chinese parents traditionally prefer their children to enter a
profession rather than sport, says Prof Chadwick, so in order to
improve playing standards the country has been building US-
style soccer campuses.
These enable talented youngsters to improve their football skills,
while at the same time also learning and potentially preparing to
enter university.
Prof Chadwick says in establishing a domestic football league,
China has been influenced by Japan’s J-League. Before its
creation, in 1993, the Japanese national team did not qualify for
World Cups, but since 1998 has been in five in a row.
Chinese investment in European teams
CMC/Citic Capital – 13% stake in City Football Group (Man City
parent firm)
Rastar Group – 56% stake in Spanish club Espanyol
Dalian Wanda Group – 20% stake in Spanish club Atletico Madrid
CEFC China Energy Company – 60% stake in Czech club Slavia
Prague
Ledus – complete ownership of French club Sochaux
United Vansen International Sports Company – majority
shareholder in Dutch club ADO Den Haag
This combination of US and Japanese influences, has now been
joined by acquiring knowledge from European football clubs.
“Man City is not a random buy,” says Prof Chadwick. “They have
got the Etihad Campus, which is the model the Chinese want to
follow.”
Ownership of European clubs also provides a voice at European
confederation Uefa, which can be useful when decisions are
made about where to stage future World Cups, he says.
‘Scale and resources’
Meanwhile, Gu Xin, from Beijing-based sports marketing firm
Yutang Sports, says that Chinese investors can also see
potentially rich economic returns from European football.
He says owning stakes in the likes of Atletico Madrid could
potentially open the doors to Chinese players appearing in club
first teams in Europe.
“As a result, there could be more Chinese fans of the clubs,
which means larger commercial values for the clubs in the
Chinese market.
“The companies could [also] then earn money by transferring
international players [from the European teams] to Chinese
teams. This is another very profitable revenue stream.”
CASE STUDY 2: SOCHAUX
Fans in France were surprised – and rather sceptical – when
Hong Kong-listed Ledus bought second division Sochaux from
Peugeot for €7m (£5m) in July. Ledus is an electrical
components manufacturer specialising in the production of
LED-based lighting systems.
Sochaux is one of the oldest professional clubs in France, and
had always been owned by Peugeot, which founded the team in
1928. For local residents, the club and the firm were a family.
French media observers say it is unlikely that Ledus will be able
to build a fan base in China around the club, rather that the new
owners are using Sochaux as a vehicle to develop the Ledus
brand in France and Europe.
After a poor start to the season, the club currently sits third
from bottom of the second tier, and fans are starting to ask
questions about what the Chinese strategy for Sochaux actually
is.
The Chinese ownership says that Ledus is in Sochaux for the long
term, and that the club will achieve its goal of getting back into
Ligue 1.
Prof Chadwick also says those Chinese businesses that follow the
wishes of their national president and support football may be
looked upon favourably by the authorities.
And there are signs that investment by firms in the Chinese
domestic football market is creating progress there.
He points to club Guangzhou Evergrande – 60% owned by
Evergrande Real Estate and 40% by Jack Ma’s Alibaba – which has
won the Asian Champions league two times in past three years.
“I think China can win a World Cup,” he says. “It has the
resources, scale, and and state backing to fast forward 150 years
of football development into 10

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One Comment

  1. Indigo Riot says:

    Sorry i couldn’t finsih reading the rest of your blog , interesting statistics … you can’t buy a hooligan . This will be a great show can’t wait , whens the movie coming out

    Like

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