Enter the Dragon: China’s Superpower Ambitions

In 2014 Chinese authorities launched a detailed plan for the country to become a world football powerhouse by the middle of the century. Asian football expert John Duerden looks back at ambitious Chinese investments in domestic and international football, and explains why progress has now slowed after a frenzied few years.

September 2018

The high point of Chinese spending on famous foreign players and famous foreign clubs reached a peak during 2015 and 2016, and while the frenzy has abated of late, there are still serious football ambitions in the country. There is a long way to go, of course. China failed to qualify for the FIFA World Cup in Russia this summer, although its influence was still visible.

A couple of days before the big tournament kicked off in Moscow, the sponsor stalls outside Luzhniki Stadium were still being erected in scenes replicated outside all twelve World Cup stadia around Russia. Four of nine sponsors were Chinese: television producer Hisense; Vivo, a smartphone maker; property and entertainment company giant Dalian Wanda; and the China Mengnui Dairy Company. Before the opening game between Russia and Saudi Arabia, there were large groups of Chinese tourists – reportedly around 80,000 bought tickets for the tournament as a whole – wandering between the stalls, waving flags, taking pictures and singing patriotic songs, making more noise than the locals. They then stopped for an ice-cream taste of home under the watchful eye of Vladimir Lenin’s statue. Throw in three regional sponsors from the Middle Kingdom, and it is clear to see that when it comes to FIFA business, China is increasingly important and influential.

When the time is right, all this activity will do China no harm in its attempts to host the World Cup. That is part of the long-term plan, released in 50-point detail in 2014, to make China a global football power by the middle of this century. The goal is not necessarily to be world champion but at least to be a contender. Everything is connected to President Xi Jinping at the top. Even before he took office in 2012, Xi was known for his enthusiasm for football (the photo of him kicking a ball in Dublin's Croke Park stadium (below) has become an agency staple) and a desire to turn China into a powerhouse. After all, it could not be right that a nation as economically and culturally powerful as China could be such a failure at the world’s most popular sport. A solitary World Cup appearance back in 2002 – when the team played three, lost three and scored zero – was just not good enough. It is not necessarily a bad thing to struggle in a debut appearance on the global stage – neighbours South Korea and Japan certainly did – but not returning since is a bigger issue. Or perhaps it is a symptom of a wider problem.

Investment in Chinese domestic football

By the time Xi took office, the spending at home had already begun. In 2009, Guangzhou were relegated from the top tier of the Chinese Super League after being found guilty of match fixing. If ever there was a silver lining it came in the form of the Evergrande Group, a property company that, like many property companies in China, was expanding into other fields (when the club eventually reached the Asian Champions league final, the AFC ordered the labels on Evergrande's bottled water to be covered up). The company took over the club and Guangzhou Evergrande was born. The potential was there in China’s third city, formerly known as Canton, just a short train ride from Hong Kong and part of the Pearl River Delta, a metropolitan area with a population of over forty million. The spending started almost immediately. Chinese internationals Gao Lin, Zheng Zhi and Sun Xiang joined the second-tier side; akin to Harry Kane, Dele Alli and Jesse Lingard dropping down to the Championship in England. Guangzhou’s strong local foundation was a major reason for the success that was to come, but it was complemented by the kind of foreign talent that had rarely been seen before in China.

When in the second tier, around US$4 million was spent on the magical Muriqui from Atlético Mineiro in Brazil, and he helped his new team walk the promotion race. The spending continued in the top flight and the club first made international headlines by signing Darío Conca in 2011. The Argentine playmaker was well known in South America having won the Brazilian championship with Fluminense, but he was not exactly a household name elsewhere. While few in Asia had heard of Conca, the reports which stated that he would become the third-highest paid player in the world were read widely. He turned out to be a great player too, and it is hard to think of another import who has impressed as much. Guangzhou went on to win the 2011 Chinese Super League title and have won every championship since. Under Marcello Lippi and then Luiz Felipe Scolari – as well as famous foreign players, big name tacticians were also in demand – they also went on to win the AFC Champions League in 2013 and 2015, the first Chinese club to win that competition.

Others followed suit. Shanghai Shenhua signed Nicolas Anelka and Didier Drogba in 2012, with Jean Tigana briefly installed as manager, but this was something of an anomaly as owner Zhu Jun, who had previously selected himself to face Liverpool FC in a friendly match, was also the founder of the internet gaming company The9 Ltd, and he seemed to covet star football players mostly to promote his new online game. Most of the time, however, it was large companies like Evergrande that drove investment in local football. The Shanghai International Port Group (SIPG) took over Shanghai East Asia and brought in Brazilian internationals Hulk and Oscar, while retail giant Suning bought Jiangsu and then Alex Teixeira and Ramires. China Fortune Land Development financed unfashionable Hebei and replaced former Everton midfielder Li Tie as manager with the Chilean Manuel Pellegrini to coach the likes of Ezequiel Lavezzi, Javier Mascherano and Gervinho. 

The spending reached a peak in the January 2016 transfer window when Chinese Super League teams spent US$296 million on new players. It all got so much that Antonio Conte, the boss of big-spending Chelsea FC in the English Premier League, said in December 2016 that "the Chinese market is a danger for all teams in the world. Not only for Chelsea but all teams in the world.'' Manchester United CEO Ed Woodward sounded a more rational note as he told investors that China was a useful market in which to offload unwanted players.

The money has come from business. The question is, why? Why have big companies invested some serious money in a Chinese Super League that was, until recently, not taken seriously by many in the country? While corruption is not quite a thing of the past, the game has cleaned up thanks to tough measures from the government that saw China FA officials given ten-year prison sentences. Mostly, though, it is just the way things can work in China. The government let it be known that it was time for the country’s football scene to improve, and whether through a desire to improve relations with local, regional, or national politicians, the private sector moved in.

It did the job, to an extent. Large-scale investment obviously made the league more exciting. Average attendances rose to nearly 25,000 from 14,500 in 2010, and there were lucrative broadcast deals at home as well as intense interest from overseas. China was becoming the place to be outside the big five leagues of Europe. The CSL had become almost glamorous, and deals were done to show its games in over 50 countries around the world, something that would have been unthinkable just a decade earlier. It all helped.

The major part of the domestic project is getting children to play the game. The statistic that came out in 2010 that China had around 10,000 under-12 children as registered footballers compared to Japan’s ca. 300,000 was shocking, if not that surprising to anyone who had spent time in the respective countries. It was even worse when you consider that the population of the Middle Kingdom is over ten times that of its eastern neighbour. A walk around any major city would confirm that nobody was playing football. There were places for basketball and table tennis in school yards, but not football. It did not help that China’s one-child policy meant that parents focused even more than usual on education for their boy. There was little time for the frivolity of sport and even less for the option of choosing it as a career. Children had to study in to get into good schools that could help them progress to good universities, which were vital in order to get the jobs that they would need in order to look after their parents when they became too old to work.

The arrival of better and more famous players from abroad has helped to provide role models. The increasing money in the game (there has been a resultant increase in the domestic transfer market too as clubs are limited in the number of foreign players they can buy, which means that those with the best Chinese players – usually Guangzhou – do best) makes it a more attractive career option. This together with government efforts to roll out a football programme throughout the school system means that there are ever more opportunities to play.

Perhaps one day these developments will help to produce players that head overseas, to a growing number of Chinese-owned clubs that will be more than happy to give a young player a chance to make it big in Europe. This has been the second part of developments: the network of overseas teams that belong to various Chinese businesses and tycoons.

Chinese investments overseas

European giants such as AC Milan and Internazionale came under Chinese ownership. A number of English clubs were targeted, all in the Midlands. Yunyi Guokai Sports Development bought an 88% stake in West Bromwich Albion; Tony Xia took over Aston Villa; a consortium headed by Hong Kong businessman Paul Suen took over Birmingham City; and the Shanghai-based investment company Fosun International bought Wolverhampton Wanderers. In addition, China Media Capital and CITIC Capital acquired 13% of City Football Group, the holding company which runs Abu Dhabi’s football interests from Manchester and New York to Melbourne and beyond. Clubs in France like AJ Auxerre, Sochaux, OGC Nice and Olympique Lyonnais, as well as Espanyol and Atlético Madrid in Spain and others in the Czech Republic, also came under Chinese sway to varying degrees.

There was something of a frenzy about it all. Not all can agree on what the individual owners and businesses were trying to get out of it. There did seem to be some speculative investments for profit, but there is also a wider issue at stake. Along with the desire to make China a global power, the 2014 plan focused on the development of the sports industry within China. The government wants the country to have the world’s biggest sports economy by 2025, and the intense activity in football reflected this.

Yet it went too far, too quickly.  Some owners were not in town very long. Tony Xia sold his majority stake in Aston Villa in July this year. He blamed the Chinese government and their policies of discouraging what it saw as “irrational” spending by Chinese businesses in European football. “It’s been very, very tough two months,” Xia wrote on social media. “Nothing changed my love and commitment to AV.” The sale was part of a trend, as around the same time Chinese investors reduced or sold stakes in AC Milan, Atlético Madrid, Slavia Prague and even fourth-tier English club Northampton Town.

President Xi even hinted that irrational investors would be named and shamed as the government became increasingly concerned about the exodus of money from the country. Fears began to grow that the whole industry was a bubble in danger of bursting. In 2016, China saw an unprecedented net capital outflow which reached US$300 billion, an amount seen as unacceptable by the authorities, who feared a liquidity crisis. The problem was not confined to football or sports but was evident across all industries. From 2017 onwards, the Chinese have been much less active when it comes to acquiring football clubs overseas.

That has led to a slowdown in Chinese companies getting involved overseas, and even to some companies dropping the investments they have made. Yet it is not the end of spending, according to Shin Satozaki, senior vice president of the sports business group at Deloitte Tohmatsu Financial Advisory. "Investing in foreign clubs [and players] has had the by-product of raising awareness of the strength of the Chinese economy, which ties in with raising national pride. It is hard to think that the tide of investment will turn completely as a result of the stricter outbound investment control,” he said.

Rather than investment drying up entirely, overseas investors will likely have to show what they are going to get for their money if they want the green light from Beijing. The current spending is set to be moderated in the next two years. “We will see a more hard-nosed and strategic approach to investment in sport from the Chinese state and businesses,” said Simon Chadwick, professor of Sports Business at Salford University. “There has been a lot of speculation in the last two or three years […] but we will increasingly see the Chinese government seeking to enforce a certain discipline upon the markets, in other words when Chinese businesses make investments in sports businesses, for those investments to go ahead, there will have to be a clear and tangible business case [. . .] there will have to be a return on investment that is demonstrable. You can’t just by clubs any more because it seems like a good idea.”

These financial measures were followed by footballing ones, which aimed to slow down the spending inside China. At Beijing's behest, clubs went from being allowed to name five foreign players in the matchday squad (with four of those on the field at any one time) to only three players. The demand for imports slowed as a result. Another brake came when the Chinese Football Association (CFA) introduced a so-called transfer tax in 2017. Any clubs that were in the red and were ready to spend over US$7 million on a foreign player would have to pay the same amount into a local football development fund. This reduced demand almost immediately and also helped to reduce the flow of currency overseas. 

There is still plenty of money in the Chinese game, but for the next year or two the relative calm should endure. With the start of a second five-year plan in 2020, things may pick up again. The headlines may not be as eye-catching and the amounts may not be so big going forward, but China still has plans to become a football superpower, and with government and business working closely together it should just be a matter of time.

Words: John Duerden Images: Yiran Ding; Offside