China’s football future

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Simon Chadwick

Economics and finance, Trade and industry, Arts, culture & society | Asia, East Asia, The World

23 July 2019

With a recent return to big investment in sport beginning to take its hold in China, a new dawn is breaking in the east, Simon Chadwick writes.

When Austrian footballer Marko Arnautovic recently completed his transfer away from English Premier League club West Ham United, it brought rumours about his future to an end.

Back in January, speculation was rife that Arnautovic would move for a fee of £35 million. His eventual departure was for a rather less eye-watering £22 million (a somewhat modest price in the currently overheated market for footballers).

However, it was the Austrian’s destination rather than his transfer fee that was most significant. Arnautovic was heading to China, signing for one of the Chinese Super League’s (CSL) top clubs – Shanghai SIPG.

This had long been the expected outcome, though an earlier deal had stalled amidst concerns that it would fall foul of a player transfer tax that is levied in China, and of government restrictions on overseas capital movements. In this context, the significance of the player’s move to SIPG rests in its symbolism rather than its financial magnitude.

Around the same time as this deal was completed, a new overseas manager also arrived in the CSL; Rafael Benitez, recently departed from English club Newcastle United, was announced as the new manager of Dalian Yifang.

Although overseas coaches and managers in Chinese football are not unusual, Benitez’s reported salary of £12 million is generous when compared with many other coaches now plying their trade in China.

More on this: China football and future power

Here too there is symbolism; the club’s owner – Yifang Group – is owned by the Dalian Wanda Group, a company that has made significant investments in overseas sports assets over the last five years.

For example, in 2015 Wanda acquired a 20 per cent stake in Spanish football club Atletico Madrid. This marked the start of a spending spree by the corporation’s proprietor, Wang Jianlin.

By 2017, it was however suspected that Wang had been detained by the Chinese authorities, accused of engaging in irrational overseas investments, though this was publicly denied by his company.

Wang then sold all but 3 per cent of his stake in the Madrid club and was reportedly restricted in his movements outside of China.

Since then, the businessman has re-engaged with football, at Dalian Yifang, in what appears to be a much more politically acceptable role in the sport.

Governing authorities in Beijing have previously spoken about the need to put China first and for the country’s business people to develop football ‘with Chinese characteristics’. This presumably alludes to state demands that investors spend their money at home before they spend it abroad.

It was no surprise then when this spring Wanda announced that it will be investing nearly US$300 million in China’s grassroots football. Specifically, the corporation will fund the construction of football pitches, school sports facilities, and other infrastructure.

More on this: The guanxi of football: China's Wolves experiment

Wanda is not the only company to consider here. As this summer’s World Cup in France concluded, Alibaba, through its online payment app business Alipay, announced that it will be spending US$145 million to grow women’s football in China.

Yet if money, a domestic focus, and apparent patriotism are behind these latest developments that have seen Chinese spending on sport reignite, then the importance of China’s wider economic and international investments is also evident.

This summer, Alipay has not only committed to Chinese women’s football but also to a major sponsorship contract with European football’s governing body UEFA. In a long-term, eight-year deal, Alipay will become the UEFA men’s national team sponsor from 2018 to 2026, which includes UEFA EURO 2020 and 2024 and the UEFA Nations League finals.

Clearly, overseas investments are back on the agenda. The deal resonates with Beijing’s renewed focus on the global promotion of Chinese industry, and on using its corporations to build influence with key international sports stakeholders.

Football is not the only recipient of what appears to be a second wave of Chinese sports investment. Indeed, a major sponsorship deal with the International Olympic Committee (IOC) involving a Chinese dairy company has helped to re-emphasise the government’s commitment to building China’s sports industry.

More on this: How China is positioning to lead the line

Some reports have estimated the deal to be worth US$3 billion, making it one of the biggest sponsorships in history.

Equally as important is the fact that the deal was struck with a US corporation, Coca Cola, at a time when trade war tensions have intensified. Money is one thing, China overtly demonstrating that it is open for business and willing to engage is another.

The Chinese government now seems to have a stronger sense of where to go with its sport industry and what to do with it and aims to reach a domestic size of US$850 billion by 2025. The investments we now see are a restatement of China’s commitment to these targets.

With the National Development and Reform Commission and the Ministry of Commerce of China recently publishing a catalogue that identifies sport as an industry where the government is keen to promote overseas investment, the messaging coming out of Beijing has definitely changed in recent months.

Indeed, a 2030 football World Cup bid is now on the cards and with the player transfer window currently open for business, we are likely to see others heading eastwards, further symbolising China’s renewed commitment to overseas investment in sport.

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