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Football: No end in sight to Chinese spending spree, say experts

Tuesday, June 7, 2016 - 18:50

[BEIJING] China's extraordinary spending spree on football assets shows no sign of slowing down - but the bubble is also unlikely to burst for some time to come, experts say.

Clubs, players, coaches, media assets and high-profile sponsorships have been eagerly snapped up by Chinese teams and investors, shifting the goalposts for football's economics.

On Monday, Italy's Inter Milan became the most prestigious club to come under Chinese ownership, when the Suning group's billionaire chairman Zhang Jindong announced a 70 per cent takeover.

It follows earlier swoops on Spain's Atletico Madrid, 20 per cent owned by the company of Asia's richest man, Wang Jianlin, and Espanyol, which was bought out by a model car-maker owned by billionaire Chen Yasheng.

A state-backed Chinese fund owns 13 per cent of Manchester City, Aston Villa have accepted a takeover offer from China's Tony Xia, and last month Chinese investors bought a controlling stake in international media rights company MP & Silva.

Earlier this year, Chinese Super League clubs indulged in a world-leading 331 million euros (S$508 million) binge on players, breaking the Asian transfer record four times in quick succession.

One key impetus is football-loving President Xi Jinping's ambition to turn China into a world soccer power, with successful clubs and a winning national team.

Chinese companies are also keen to gain global reach and visibility, and diversify away from their core businesses at a time of uncertainty in the Chinese economy.

David Hornby, sports business director of the Mailman brand management group in Shanghai, said China's football investment craze didn't seem likely to peter out soon.

"These deals have been coming thick and fast therefore are certainly part of a bubble, but it's a bubble unlikely to burst anytime soon," he said.

"This outbound investment into football will continue for at least the next two years."

In the next few years, Chinese firms will begin reassessing their investments based on returns, Mr Hornby added, which could change buying patterns.

Appliance retailer Suning agreed to pay 270 million euros for its 70 per cent stake in Inter, a price which looks substantial, but not exortionate, he said.

"The Inter valuation is somewhat higher than expected, but not dissimilar to the figures being paid by groups out of the Middle East for top European clubs," Mr Hornby said.

China's big spend comes as the country tries to raise its football game to a level commensurate with its growing economic and military might. China lost all three of its World Cup matches in 2002, its only appearance, letting in nine goals and scoring none.

"All this craze and investment has come with the appointment of a football-loving president," Rowan Simons, an author and prominent commentator on Chinese football.

"But the question is does this have long legs? Will it remain once he steps down, and will it actually promote the sport at home?"

China's national team is ranked a lowly 81st in the world, but President Xi has declared his hopes of the country one day hosting and winning a World Cup, prompting a flood of money into its top professional teams.

Chinese business magnates openly acknowledge that their footballing investments also have political calculations.

"In general there's a feeling that the Chinese have been overpaying, especially in some of the player and coach acquisitions," Mr Simons said.

But beyond the cash paid for the teams and players, Chinese firms are chasing prestige and visibility for their products.

Where previously brands would sponsor teams or events, Chinese companies like Suning and Wanda are hoping their investments will further their international expansion plans.

"Buying Inter Milan is part of Suning's overall layout in the sports industry," Mr Zhang, chairman of the Suning Holdings Group, told a ceremony announcing the purchase on Monday. "It is an important part of Suning's international development."

Meanwhile, there is little evidence big purchases are helping the development of football in China, Simons said, where the focus should instead be on grassroots development and encouraging kids to play, if China ever hopes to fulfil Mr Xi's football dreams.

AFP