The Chinese flirtation with European football is over

AS the old adage tells us, if something looks too good to be true, it usually is, or words to that effect. China’s appetite for European football clubs and players seems to have dissolved, a fleeting moment in time when money from the world’s second biggest economy seemed to signal a shift in the balance of power. Chinese business people, corporates and their football clubs threatened to change the face of football, but the macro-economic situation, government priorities and, more recently, covid-19 has put paid to their ambitions. 

The latest symptom of change came when Gao Jisheng sold his stake in Southampton to Serbian media mogul Dragan Salak for £ 100 million. Anyone who assumed Jisheng was looking to make a killing by treating Southampton as a “pig to be fattened”, was wrong. He made a £ 110 million loss on his original investment.

After the flurry of activity that saw clubs like West Bromwich Albion, Reading, Aston Villa, Atlético Madrid, AC Milan, Slavia Prague and others either purchased or invested in by Chinese individuals or companies, the flame has clearly gone out. The only Premier League side with Chinese backing is Wolverhampton Wanderers, who are owned by Fosun, a multi-tentacled company that also has strong links with super agent Jorge Mendes.

China’s government was keen to encourage investment abroad, mostly because the country had designs on becoming a major football power. The country’s prime minister, Xi Jinping, is a big football fan and would dearly love China to not only host the World Cup, but also win the competition. However, the national team is way behind many of their Asian rivals and since China discovered their football aspirations, they have yet to qualify for the World Cup. Their only appearance was in 2002 when they lost all three group games and failed to score a goal.

So the investments made by China at home and abroad have yet to yield dividends and the government is feeling a little short-changed. With China’s economic growth slowing – GDP looks set to rise by 5% in 2022 – people are wondering if the money spent abroad might be better used at home. The Communist Party, for example, wants investors to pull out of European football, and government officials is now calling for the focus to be on developing local talent.

In 2017, there were 20 Chinese-owned clubs across Europe, now there are just 10. Owners such as Wang Jianlin (Atlético Madrid) and Ye Jianming (Slavia Prague) were encouraged to sell their holdings. No surprirse given China’s 14th five-year plan proposes money from outward investment should return home.

Naturally, the economic situation has affected the Chinese Super League (CSL). Many clubs are in financial trouble and 12 of the 16 clubs who took part in 2020-21 have fallen behind with players’ wages and most have serious cashflow problems due to a lack of liquidity and a reluctance to lend from the banking sector. One of the most influential corporates in the CSL, Evergrande, has recently been on the brink and has only pulled clear of danger because of a debt relief deal.

Inter Milan’s owners, Suning, had huge debt problems, and closed down their club Jiangsu, but according to the company, the crisis has now subsided due to help from the government. They have to pay £ 157 million to the Premier league over a legal case related to TV rights. Suning, who own PPTV, agreed a three-year deal with the Premier, but they failed to pay the first two instalments of their agreement. The deal was subsequently cancelled and settled in court.

Players were attracted to the CSL because of the obscene wages. Brazilian midfielder Oscar, left Chelsea at the age of 25 to join Shanghai SIPG, reputed to be earning £ 400,000 oper week. The move, which earned Chelsea £ 50 million, was something of a shock because Oscar was in his prime. He is now looking to return to Europe, possibly Barcelona. Other players saw China as a cash cow or a pension fund deal.

The CSL has had two seasons of empty seasons, but before the pandemic, attendances had risen to just under 25,000 – it is likely that momentum will be lost and they will have to work to build its football back to pre-crisis levels. For the time being, European clubs will no longer be able to look to China for a convenient takeover. The country is still in love with the game, but they now realise how difficult it is to buy credibility. They will be back, that is almost a certainty.

China’s football faces a lengthy trek for credibility

CHINA’s dream of hosting and winning a World Cup looks a little forlorn at present, the national team has stalled and the Chinese Super League (CSL), once the destination for pension fund-building players and football mercenaries, is at something of a crisis point. 

The world looked to China in the aftermath of the 2008 financial crisis, along with Brazil, India and Russia, the so-called BRICS. These economies were supposed to take up the slack as more mature markets struggled to come to terms with debt, economic stagnation and banking crises. Over a decade later, China finds itself at the centre of the covid-19 pandemic and another economic challenge.

Over zealous

China grew at an alarming pace after the financial crisis and against this backdrop, the country’s football clubs started to go international, spending large sums on talent in a bid to make the Chinese Super League a compelling product, both domestically and internationally. Moreover, Chinese investors started to buy stakes in European clubs, including Inter Milan, Wolverhampton Wanderers, Manchester City, West Bromwich Albion and Atlético Madrid. Some investors overpaid for their assets and also took on high levels of debt.

The initial strategy  – which appeared over-zealous at times – was to assist President Xi Jinping’s ambition for Chinese football by learning to run big clubs in other countries. Then they started to withdraw as the Chinese government discouraged further investment and insisted investors had to demonstrate synergies between their international business and Chinese football. The underlying concern was that money being poured into foreign football would be better spent at home. Furthermore, some critics believed Europe was literally feeding off of China’s huge resources and enthusiasm, and not just around football. China’s outbound cross-border mergers and acquisitions fell sharply. In 2017, there were 20 Chinese-owned clubs outside of China, that figure has halved since then.

With the world suffering from the covid-19 pandemic, China’s economy is bouncing back in 2021, GDP growing by 18.3% in the first quarter of the year. This was largely anticipated by analysts as a year ago, China’s economy contracted for the first time in decades. This downturn impacted China’s football, for most clubs are owned by major corporations. Hence, the fortunes of the clubs are precariously linked to their owners’ performance.

A case in point is the tale of 2020 Chinese Super League champions Jiangsu Suning, owned by the Suning Appliance group. In December 2020, all the shares of Suning Holding group were pledged to Alibaba’s Taobao to secure a loan. To stave off liquidity concerns, Suning announced it would buy back US$ 305 million worth of bonds with its own capital. This triggered a slump in the company’s share price. Despite China’s economic growth, many of its major corporates are having financial difficulties and Suning announced in February that it would dissolve the Jiangsu club. A lot of people are unhappy and claim that Jiangsu were sacrificed to ensure Suning’s other interest, the new Serie A champions Inter Milan, could continue. The Chinese government has bought a 23% stake in Suning, clearly to protect one of their most prominent commercial names. Another thought is that should China be responsible for the collapse of one of Europe’s greatest clubs, the president’s football dream would suffer a mortal blow.

Jiangsu are not the only club to disappear – 20 clubs have left China’s professional leagues over the past two years and in 2020, 11 were expelled for financial problems and five more opted for voluntary liquidation. The way Chinese clubs operate  – 70% of total expenditure on player wages was commonplace – suggests that more may follow. For example, Guangzhou Evergrande, Chinese champions eight times in 10 years, earned only a third of the US$ 450 million they spent in 2020. In 2019, the average Chinese Super League salary was US$ 1.2 million per year, which was more or less at the level of France’s Ligue 1. Even though crowds have remained stable in normal times, tickets are cheap, often the equivalent of below US$ 10. 

Without big-spending companies such as Fosun, Wanda, CEFC and TEDA, Chinese football would not have made the noise it has so far, but clubs are now forbidden from including their sponsors in their club names. Guangzhou Evergrande and Guangzhou R&F are now known as Guangzhou FC and Guangzhou City respectively. Some analysts believe Chinese football should abandon single-owner models and implement multiple stakeholder structures that include government, private enterprise, local communities and high net worth individuals. Instead of relying on regular injections of life-saving cash from their parent companies, Chinese clubs need to build more revenues from sponsorship, matchdays, player trading and broadcasting.

The government has also insisted on salary caps, imposing a limit of five million yuan for Chinese players (€ 650,000) and € 3 million (Yuan 23 million) for foreigners. Chinese players averaged € 709,000 annually (double the well established J-League) compared to € 7.5 million for foreign players. As a result, there has been an exodus of overseas players from China. 

Continued faith

Unsurprisingly, the corporates are now being encouraged to keep faith with Chinese football. The President of the Chinese FA, Chen Xuyan told them they have a responsibility and to treat football as a public welfare issue and accept that it may be non-profitable. No other country could issue such a statement and expect to get away with it. And there’s more – there is currently a political move to get more players to join the Communist party. 

Meanwhile, the new season is underway and China’s World Cup qualifying campaign is in progress. There are still some star names, but they are getting older – Oscar, the former Chelsea midfielder who went to China at the peak of his career, is now 29; Marouane Fellaini of Shandong Taishan is 33; Marko Arnautović is 32; and Mousa Dembélé is 33. With the restrictions on pay, the Chinese Super League is not as attractive to the “have boots, will travel” contingent.

The national team has beaten Guam and the Maldives in the second round of the World Cup qualifiers but they have Syria in their five-team group, who have already beaten them. World Cup qualification would be a boost to the domestic game, but China are still lowly-ranked (77th) and languish below countries like Curacao and Cabo Verde. More positively, soccer schools are opening all the time and youth development has also benefitted from foreign involvement, such as Bundesliga clubs. A football culture is developing in China, but maybe not at the speed government officials envisaged, fans are distracted by their interest in the European game, notably the Premier League. China may eventually become a powerhouse in the distant future, but right now the journey looks a long and patient one, but it will remain an interesting story.

@GameofthePeople
Photo: ALAMY

Another title, now Ghangzhou look ahead to the opportunity of 2021

THERE’S LITTLE doubt that China’s most high-profile and successful club is Ghangzhou Evergrande Taobao, who lifted their eighth Chinese Super League title at the start of December 2019. Ghangzhou are not only China’s most celebrated club, they are arguably the noisiest across the Asia Pacific region.

The 16th Chinese Super League championship race was a tense, problematical affair, probably the hardest title win Ghangzhou have endured among their triumphs. It was not until the final game of the season they clinched the top prize, finishing two points ahead of Beijing Guoan.

The campaign was bizarre in places, with Guangzhou relieving coach Fabio Cannavaro, of his post in October as punishment for poor performance, only for the Italian World Cup winner to return in November. This suspension amounted to a very public reprimand, underlining that China has very particular ways of conducting business, as the recent Mesut Özil saga revealed. Cannavaro was accused of being “weak” and slow to respond to problems.

He was expected to lose his job and names like José Mourinho were being linked to the club, but he survived the wave of speculation and his somewhat humiliating punishment. Now, despite rumours that he will be looking to return to Europe and a job in Italy, he is talking about staying in China. “I hope to reduce the average age of the team, get in better replacements and continue to provide talent for the national team,” he recently said. The last part of that quote is very relevant as clubs are bound to providing talent for the China national XI. Even if they don’t mean it, they have to say it publically.

It would seem unlikely that Guangzhou will throw money around as they have in the past. Back in 2016, they created a stir when they spent € 42 milllion on Jackson Martinez and more recently, they tabled a similar amount for Paulinho and € 19 million on Talisca.

But there has been a change of stance in China, primarily because the government has issued a caution about clubs bringing too many mercenaries to the Super League. There is also a big levy on overseas signings. Furthermore, China’s economy, which has been expanding at a fast rate for the past decade, has started to slow – in the third quarter of 2019, GDP grew by 6%, the lowest since 1992.

There are also issues closer to home for the club. In 2018, Guangzhou Evergrande Taobao posted a loss of Yuan 1.8 billion, which translates to around US$ 267 million. The Chinese Football Association (CFA) has limited financial deficits at US$ 46.4 million, so Guangzhou, in 2019, will need to have reduced their expenses by 50% and deficit by 80%. If they have not achieved their objectives, they will be fined by the CFA.

Brazilian football player Paulinho of Guangzhou Evergrande Taobao F.C., right, protects the ball during the 30th round match of Chinese Football Association Super League (CSL) against Shanghai Greenland Shenhua.

This could be a hurdle given they have a big wage bill to service, Guangzhou pay their players an average of US$ 2.2 million per annum, almost twice the league’s average. In a country where the average annual salary is just US$ 6,600 , it takes a CSL player just 2.25 days to earn the annual average wage.

Elsewhere, there have been stories that players at some clubs have not been paid on time, notably in the lower leagues. Also there has been some discontent among fans – six Beijing supporters were arrested after walking to a match (!). The CFA also caused a stir when they changed the rules concerning foreign players in mid-season.

Guangzhou were pushed all the way by Beijing Guoan, who won their first 10 games and topped the table from April to mid-July. A couple of defeats in September put pressure on the South China Tigers (their nickname) and with one game to go, Guangzhou still hadn’t shaken off Beijing Guoan. A 3-0 win at the Tianhe Stadium was enough to maintain the two point margin, despite the team from the capital winning 3-2 against Shangdong.

Guangzhou’s leading scorer was Brazilian midfielder/striker Paulinho with 19 goals, 10 behind the Chinese Super League’s top marksman, Guangzhou R&F’s Israeli striker Eran Zahavi. Paulinho, the CSL player of the year, and his team-mate Yang Liyu, were named in the team of the year.

Having regained their title, Guangzhou will have one eye on the AFC Champions League, a competition they have won twice (2013 and 2015). The draw for the group stage has already been made and they will face South Korea’s Suwon Samsung Bluewings, Malaysia’s Johor Darul Ta’zim as well as the winners of Japan’s Emperor Cup, either Vissel Kobe or Kashima Antlers. Guangzhou reached the semi-finals in 2019 and the knockout stages of the AFC Champions League seven times in eight years.

But what of the longer term? There’s more adjustments ahead for Chinese football. The CFA has announced that there will be a salary cap for incoming players, with wages capped at € 3 million, while domestic Chinese players will be capped at Yuan 10 million. The market may have become less attractive for foreign players. Real Madrid president Florentino Perez’s controversial plan for a world league, which would surely involve Guangzhou, is most probably a dead duck, but it is clear that changes are afoot in world football. Such projects are not based on football common sense alone  – China is one of the most important economies, so any blueprint for a global competition, financed by broadcasting as well as very wealthy sponsors, would undoubtedly call for Chinese involvement.

And then there’s the revamped 24-team FIFA World Club Cup, which is to be staged by China in 2021. This could be Guangzhou Evergrande Taobao’s chance to make a mark on the world stage, especially as the city will be one of the host venues.

Make no mistake, this a big club from a big city (population 15 million), watched by 45,000-plus people every week and backed by an owner with estimated personal wealth of US$ 30 billion. The club’s brand is the strongest in its local market and if a Chinese club is going to break into the global super bracket, it will surely be this one. Not for nothing do they have the motto, “be the best forever”.

@GameofthePeople

Photo: PA