Chinese investment in football is rapidly increasing, but with more money comes more problems, Simon Chadwick writes.
Rumours have recently intensified that Premier League club Liverpool are subject to a takeover bid from Chinese investors. Earlier in the year, it was reported that billionaire entrepreneur and art dealer Liu Yiqian had made an offer for Liverpool but was rebuffed in his approach.
Over the last month, new reports have emerged suggesting that China’s state-owned China Everbright has since stepped in as the most likely buyer, a rumour the company nevertheless denies. Once more, reports indicate that Liverpool’s owners Fenway Sports Group (FSG) have again held-up a ‘not for sale’ sign.
However, stories now circulating in some quarters point to FSG finally having agreed to dispose of their Merseyside asset, for what may possibly be a ten figure sum (in pounds). This rumour has yet to be confirmed, as has the name of the buyer, although as one source has put it, “the buyer will be some sort of Chinese state investment vehicle.”
If such a sale does go through, it will be the latest chapter in a period of intense activity by Chinese investors buying into European football. The reasons for this activity have already been well documented, not least in a series of columns I have written for Policy Forum.
Clubs ranging from Inter Milan in Italy to Wolverhampton Wanderers in England now boast Chinese owners. Some of them have acquired controlling ownership stakes (as in Inter’s case); others have purchased a minority shareholding (as in Atletico Madrid and Manchester City’s cases); some of them are now in outright ownership (such as Wolves).
As China’s new investment elite has gone about its business, so some of the fundamental governance principles of world football are increasingly being tested. This is already posing major challenges for football, its governing bodies, and some of its most important leagues and competitions.
Assuming the Liverpool deal does go through, then the Premier League will be paying very close attention. China Everbright is part of the state-owned China Everbright Group, which is a serious issue for the Chinese government because China Media Capital (CMC), also a Chinese state investment vehicle, already owns 13 per cent of Manchester City.
In England football club owners with more than a 10 per cent stake in one club are not permitted to own more than 9.9 per cent of any subsequent clubs in which they invest. In other words, the Chinese state theoretically cannot own Liverpool and Manchester City at the same time unless it restricts its shareholding in one of them to 9.9 per cent or less.
The reasons for controlling ownership in this way should seem obvious: the potential conflicts of interest ranging from match-fixing through to market manipulation in the form of, for example, ‘managed’ player transfers. These of course raise all manner of issues that may be against the interests of clubs, fans, football, and the general public.
UEFA is similarly mindful of such matters, although football’s European governing body is somewhat more relaxed in its approach to regulation. UEFA permits ownership in more than one club as long as the investing entity does not have a controlling interest (more than 50.1 per cent) in any of them. This ruling has been backed by the Court of Arbitration for Sport (CAS).
Even so, a Liverpool deal could see the Chinese state contravening both English and UEFA regulations, as well as CAS’s ruling. One also needs to factor AC Milan into the mix; all summer rumours raged about the identity of the Italian club’s new owners, one of the most prevalent being that the Chinese government was somehow involved. In the end it proved to be the case, with state-owned Haixia Capital among the investors.
Such are the concerns of some in football, that a report last week by Bloomberg revealed that the Premier League has enlisted the help of a corporate investigation firm to probe the identities and business histories of the new wave of Chinese investors. Not only is multiple ownership of clubs in the spotlight, so too is whether the likes of Lai Guochuan (who recently acquired West Bromwich Albion) pass the Premier League’s ‘fit and proper person’ test.
In the words of a Premier League representative, the test “[checks for] proof and provenance of funding, [who the] owners and directors [are], and who the ultimate beneficial owner is.” This process resulted in a Chinese bid for Hull City being rejected by the Premier League amid rumours the club’s proposed new owners, Dai Xiu Li and Dai Yongge, had failed the test.
However, the two Chinese investors are thought to be preparing a second approach for Hull, which, in spite of the Premier League’s regulations, raises concerns about the always opaque nature of governance standards in China. Indeed, one has to question whether any of world football’s authorities have the political nous, the will, or the resources to go head-to-head with the Chinese state.
This issue could, however, be the tip of a very large governance iceberg lurking in football’s waters launched by Chinese football’s bamboo revolution. For example, earlier this year Brazilian international Ramires unexpectedly transferred from Chelsea to Jiangsu Suning. Months later, the electrical store chain Suning acquired a controlling stake in Inter Milan.
It was with a strong sense of inevitability that stories emerged recently that Ramires could well be on the verge of signing for…you guessed it, Inter. If Suning’s mooted acquisition of representation business Stellar ultimately takes place, it could see a Chinese high-street electrical appliance retailer securing arguably unprecedented control over the football labour market.
A similar situation is evident at Wolves too. Acquired by China’s Fosun, which bought a stake in super-agent Jorge Mendes’ representation business earlier this year, the club were intriguingly active in this summer’s transfer window. At one stage, it was being reported that the second-tier club was about to sign Anderson Talisca from Benfica for £20 million (amid reported interest from Liverpool).
In the end, Talisca did not move to England’s industrial West Midlands, preferring instead to move to Champions League contenders Besiktas of Turkey. Yet what his case illustrates is a governance issue (an integrated and controlled supply-chain) one suspects world football did not anticipate and is not yet in a position to effectively address.
Across the world, China’s great football seduction has left many people with dollar signs in the eyes. Yet beyond the money and the hype lie some challenging and very real governance issues which the likes of the Premier League, UEFA and, perhaps more importantly, FIFA must rapidly get to grips with if the integrity of the sport is to be upheld.