Why has China chosen to invest in European football?
26 Gold, 18 Silver and 26 Bronze medals. China was ranked 3rd in the 2016 Olympics.
Those numbers are quite impressive and there is absolutely no doubt as to why anyone wouldn't believe that China is in safe hands as far as sports are concerned. China and sports go long back. Martial arts, ping pong (table tennis), badminton, etc. are some sports which the Chinese are very good at.
However, there is one sport which China is, sadly, not very good at - Football. The most watched sport in the world and China hasn't been able to cement its place. However, things have been changing rapidly in the last couple of years.
Chinese President Xi plans to make China a world football superpower by 2050 and has already started working on a plan to make it a reality.
Also read: China - World Football Superpower by 2050?
The thirst for football has been growing simultaneously with the country's economic ambition. Last year in May, China's 13th 5-year plan stated that the Chinese sports industry should account for at least 1% of the country's GDP by 2020.
The plan is to increase the spending in the sports industry to US$750-800 billion by 2026 and have around 500 million (that's a little less than the total population of China!) Chinese people playing sports while establishing sports facilities all over the country.
Now you may wonder if those numbers are feasible or not. Well, it is sort of achievable. China has around 600 billionaires and most of them are willing to help their President's dream come true. The Chinese population also mainly comprises of middle-class people, a section that is growing at almost 2-3% every year and the country has the money and resources to spend on the sports.
In the last few years, China has been busy making a mark for itself in the sports industry. China became the world's largest supplier of sports equipment. The Chinese sports sponsorship was worth around US$18 billion by the start of this year.
Ti'ao Dongli, Chinese sports broadcasting company acquired the broadcasting rights for the Chinese Super League (now known as Ping An Chinese Football Association Super League) for almost US$1.3 billion for a period of 5-years. Considering that the CSL only received US$50 million a couple of years ago, that's a massive increase.
Hisense Group, a leading electronics group, sponsored the UEFA European Championship in 2016. Hisense said that owing to the sponsorship, the sales in China increased by as much as 9% and sales in other parts of the world increased by almost 6%.
The company has also become a "top tier" sponsor of the World Cup that is going to be held next year in Russia. It was also a sponsor of the Confederations Cup which was held earlier this year.
Football has become a key driver in China and why shouldn't it be? Their President has a lot of passion for football. The Chinese investors and the companies believe that football would provide a lot of political advantage. Not to forget, football makes up almost 40% of the profits in the sporting industry. There is no way China was going to ignore that.
China's interest in football dates back to 2007 when a resident of Hong Kong, Carson Yeung, wanted to take over Birmingham City but couldn't gain control until 2009 which cost him £81 million.
Just when China seemed to be making a name for itself in the football world, Yeung was arrested for alleged money laundering. Birmingham City is now controlled by Trillion Trophy Asia Ltd, another Chinese company.
This was the starting point. Alibaba Group then purchased a minority holding in Guangzhou Evergrande - the 1st Chinese club to participate in the FIFA Club World Cup.
In the last 2 years, the Chinese have spent heavily in football. As much as US$2.5 billion was spent in buying stakes in European football clubs such as AC Milan, Inter Milan, West Bromwich Albion, Aston Villa, Manchester City, Wolverhampton Wanderers, Birmingham City, Granada CF, Espanyol, Atletico Madrid, ADO Den Haag, Sochaux and Slavia Prague. Let's not forget that the Chinese have even bought stakes in clubs from the US and Australia.
While it may seem like the Chinese are investing in football because they like the game, in reality, they have other reasons for their heavy investments. They actually want to market their products in Europe. Last year in June, Suning Holdings not only invested US$307 million in Inter Milan but also cleared a large part of the club's debt.
The motive behind was to market their product. "Ours is an international product and our brand will soon be big in Europe too," said Zhang Jindong, the chairman of Suning Holdings.
Suning had a thoughtful and more strategic approach when it came to announcing the takeover Inter Milan. Zhang said, "Inter Milan firstly belongs to Italy, Europe and definitely to the whole world. This will help Suning to grow internationally." Notice how he did not say "takeover" and instead said that Inter Milan is still theirs.
Back in 2015, Suning also paid US$270 million to La Liga to have the exclusive media rights. The company also did not back down from paying a hefty sum for European footballers such as Ramiers and Alex Teixeira (the company owns a CSL club named Jiangsu Suning).
Also, the company has naming right deals for the club's first team and youth training centres. Not to forget, they are also the official partner for the training apparel for the senior and the youth teams. If that was not enough, Suning also has advertising brands throughout the stadium and logo positioning on the shirts. It is safe to say that buying a 70% stake in Inter Milan has definitely raised Suning's profile both in the commercial and political aspects.
So, is it safe to say that buying a stake in a European football club make things easy to move capital out of China? It sure does. It is a quick and a hassle-free way. More importantly, having a European club's brand name can significantly increase the brand value of the company.
As things stand, it is difficult to say whether the investments done by the Chinese will have a positive influence on their products. But nevertheless, the Chinese look serious to make their mark in the footballing world. After all, they plan to be the world football superpower by 2050!
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