Sunday, June 19, 2016

China’s push for FIFA World Cup victory (through taking over the world game)

Chinese investors are once again ramping up their acquisitions and investment in clubs and footballers across the continents, a move that could change the world game forever, writes Simon Chadwick.

China’s push for World Cup victory | Illustration: Chinese football fan, CC BY-SA 3.0

ANYONE WITH EVEN a passing interest in sport, will by now know that China’s ambition is having a profound impact upon football. It’s an impact prompted by President Xi’s vision of a Chinese sport industry driven forward by football and the country’s desire to host the FIFA World Cup. To underpin this goal, in recent months the Chinese Football Association released a development plan which provides a series of lofty targets up to 2050.

Following Xi’s sporting pronouncements in late 2014, there was an initial spate of football club acquisitions by several Chinese entrepreneurs, corporations and investment groups. The standout deals during 2015 were the 20 per cent stake taken in Spain’s Atletico Madrid by the Dalian Wanda Group and the 13 per cent share of England’s Manchester City bought by China Media Capital.

This phase in China’s football development appeared to have ended earlier this year when Chinese Super League clubs instead stepped into the spotlight. Several of the world’s leading players, including Columbia’s Jackson Martinez and Brazil’s Ramires, opted to leave Europe for clubs such as Guangzhou Evergrande and Jiangsu Suning

With the player transfer window in China set to be open again between 21 June and 15 July, it is reasonable to assume that we will see more of the world’s highest profile players heading east.

In the meantime, Chinese investors have acquired or invested in several football service organisations ranging from Infront Sports and Media (a sports marketing company bought by Wanda for $1.2 billion) through to Fosun’s acquisition of a 20 per cent stake in football super-agent Jorge Mendes’ business, Gestifute. Rumours persist too that the Chinese corporations Evergrande, Rastar and Suning are all interested in acquiring the Stellar agency business whose clients include the likes of Real Madrid’s Gareth Bale.

Other Chinese corporations, notably Wanda and Ali E-Auto, have also recently become FIFA sponsorship partners (of the World Cup and World Club Championship respectively). Newspaper stories continue to suggest that Alibaba is also on the verge of becoming a FIFA World Cup sponsor. Meanwhile, white goods and electronics manufacturer Hisense has been in the spotlight following its deal to become a UEFA European Championship sponsor, the first time in its 56-year history that the European governing body has had a sponsor from China.

And now, after a break of almost a year, overseas club acquisitions are seemingly back on the Chinese investment agenda. In May this year, Dr Tony Xia bought England’s Aston Villa – a club located in Britain’s second largest city, but which has just been relegated from the Premier League

More recently, France’s Ligue 1 club Nice has been acquired by a consortium of Chinese and US investors. The former included Alex Zheng, president of hotel operator Plateno Group, and Chien Lee, the founder and chief executive of NewCity Capital. 

In a separate move, Martin Lee, president and chief executive of Chinese lighting corporation Ledman Optoelectronics acquired Australia’s Newcastle Jets. Ledman is already the owner of Chinese club Shenzhen Renren FC, a sponsor of the Chinese Super League and a title sponsor for Portugal’s second division.

The biggest club acquisition news of the summer though has been Suning’s purchase of Italy’s Inter Milan. The Chinese retailer is believed to have paid €270 million ($307 million) for around 70% of the Serie A club, a move that Zhang Jindong, Suning’s chairman, described as “a significant milestone in Chinese soccer history”. 

With Suning in the market for Stellar, and with the club having spent heavily on players such as Ramires and Alex Texeira for its Jiangsu club in the Chinese Super League, the corporation has very rapidly become a significant player in China’s football development project.

Next on the agenda should be the sale of Inter’s city rivals, AC Milan. Stories have been circulating for some time that that the 18-time Italian champions are on the verge of being sold by Fininvest, the Italian club’s majority shareholder, which is owned by media magnate and former Italian prime minister, Silvio Berlusconi. The sale price is rumoured to be somewhere in the region of €700 million, with the Evergrande Real Estate Group, Baidu and Mautai thought to be behind the bid (either together as a consortium or as individual bidders). However, there has thus far been no firm news leading some to speculate that Berlusconi is driving a hard bargain with the prospective new owners.

The pace and magnitude of Chinese investment in the world game continues to bemuse and enthral the West, with China’s emerging network model of integrated football supply-chain management posing new challenges for the sport. Nowhere have we seen before a country so intent on and committed to exerting some degree of control at all levels of football.

There is no doubt that the central focus of China’s strategy is the World Cup, and each part of the country’s football development plans are oriented towards hosting the event and eventually winning it.

Such successes would generate soft power, economic and socio-cultural benefits for China; hence, even in signing, for example, a sponsorship deal, moves are laden with political intent. Indeed, Wang Jianlin revealed during Wanda’s FIFA sponsorship deal launch that he had taken advantage of the governing body’s problems to position itself at the heart of world football. This is very helpful when China is seeking to influence the politics and processes of bidding to host the World Cup.

There are nevertheless some concerns about China’s approach as it is not only radically altering the global balance of power in football, it is also creating several potential conflicts of interest in the process. For instance, there is a distinct possibility that Suning will soon control two professional clubs on either side of the world and an agency business that represents players who may move between them. Potentially therefore conflicts of interest could well become an issue, something that China’s gegenpress approach to football investment is creating.

Inadvertently, this is helping to highlight how poorly elaborated some of world football’s rules actually are, and how fragile its governance is. Under current FIFA rules, a Suning triumvate of Inter, Jiangsu and Stellar would go unchallenged, even if there was evidence that collusion between the three is anti-competitive in some way or creates a conflict of interest. There are other governance issues too, an observation most aptly illustrated by Xia’s purchase of Aston Villa.

England’s football observers were split by his purchase of the Birmingham-based club. Villa fans immediately looked forward to a financial windfall, while many English football fans seemed reassured by the Chinese at last showing an interest in their clubs rather than those elsewhere in Europe. Yet the default question for most people was: ‘who is Tony Xia?’ Unlike most British football club owners, about whom it is normally relatively straightforward to find information, the source of Xia’s wealth proved rather more difficult track down.

Indeed, there are still concerns among some observers that Xia is not a genuine investor, something that rankles with the people of Birmingham following Hong Kong businessman Carson Leung’s problematic tenure as owner of the city’s other, second club, Birmingham City. Unearthing information about such individuals will no doubt preoccupy Europeans for some time to come. China is not as open with its information as Britain or Germany, something football watchers need to get used to.

Otherwise, questions remain about the real intentions of corporate China’s football investments, which are not being directly answered by the people involved. 

Tony Xia has said that his acquisition of Aston Villa was a business decision, not a political one. This may be true, but Suning’s intentions are far less clear; one might assume the corporation’s Inter purchase is the prelude to overseas market-entry. However, there is no evidence at the moment that Suning has plans for its business outside China. 

We are therefore left to speculate on its intentions, which suggests that for the time being at least, China’s football development inevitably remains a politically-oriented phenomenon.

Simon Chadwick is ‘Class of 92’ Professor of Sports Enterprise at Salford University, Manchester in the UK, where he is also a member of the Centre for Sports Business. First published in The Asia and the Pacific Policy Society Policy Forum.  Read the orignal article

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