Chinese football clubs and their lavish spending on players commanded the headlines in the last winter transfer window. Expenditure totalling EUR 331m, including the acquisition of marquee players such as Ramires, Ezequiel Lavezzi, Jackson Martinez and Alex Teixeira, surprised many people, but to close followers of Chinese football, this signalled the next phase in the evolution of one of the game’s fast- emerging markets.
The Chinese Government has pioneered the growth of football in the country and provided the sport with both financial and policy support. In 2015, China’s President Xi Jinping released an ambitious 50-point plan to reform sport in China, with special emphasis on improving its status in world football to such an extent that it could host the World Cup in 2026 or 2030. Major steps planned by the Government included the creation of 50,000 soccer schools by 2025. In addition, in February 2016, the Chinese Football Association was made autonomous, a major restructuring expected to improve football governance at a national level.
The determination of the Chinese Government in driving these reforms has, arguably, been one of the key factors encouraging Chinese corporations to invest in football. Since 2014 Chinese companies have acquired stakes in six European football clubs. Spanning all major footballing countries, with the exception of Germany and Italy, the investments have varied from the full ownership of French club FC Souchaux-Montbeliard to minority stakes in Atletico Madrid and Manchester City’s parent firm City Football Group.
The acquisition of an Italian entity may be just a matter of time as various clubs have reportedly been involved in discussions with Chinese investors. By contrast, German clubs are less likely to be considered as targets, due to the Bundesliga’s clause commonly known as the ‘50+1’ rule, which ensures that the club’s members retain majority voting rights.
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In commercial terms, ownership by Chinese corporations can provide European clubs with unique access to a relatively under-penetrated market, creating new revenue streams and increasing the value of the club.
Aside from purchasing assets, Chinese investors have also prioritised the acquisition of international standard coaching and cultural knowledge of European football. This trend has been observed in the majority of recent investments, which included conditions aimed at providing opportunities to young Chinese footballers and improving the quality of coaching - and the sport overall - throughout the country.
For example, according to media reports, Chinese conglomerate Dalian Wanda’s investment of EUR 45m in Atletico Madrid commits the Spanish club to support three football schools in China, host young Chinese players to train regularly at a youth centre in Madrid and for the club to play friendly games in China on an annual basis.
In addition to the acquisition of ownership stakes, European football has also received from China major investment in the form of sponsorship. This is especially evident in Spain’s La Liga, where the number of Chinese companies acting as primary shirt sponsors has risen from zero in 2011-12 to five in the current season. While the strategy of some corporations, such as Huawei’s sponsorship of eight high-profile European clubs, may generate immediate returns, the purpose of several other deals appears to be beyond strict short-term commercial returns.
In some instances, sponsors from China insist on the participation of Chinese players in club competition. The sponsorship of the Portuguese second-tier, LigaPro, by Chinese LED-manufacturer Ledman, and the agreement between Rayo Vallecano and the Qbao group are just two examples of this development. While these cases led to discussions around the extent of sponsors’ involvement in club decisions, they also demonstrate a strong interest in providing greater exposure for Chinese players with the objective of raising the quality of football played by China in international competitions.
China has made no secret of its goal to become a global football powerhouse and to eventually win the World Cup. But the nation’s only appearance in a World Cup, the 2002 competition held in South Korea and Japan, ended with three defeats and an early exit. On a regional basis, China has never won the Asian Football Confederation Cup, the best performance being runners-up in 2004 and 1984. China is currently placed eighth in Asia and 82nd in the world, according to FIFA rankings.
China’s pursuit of expertise in the football industry, and the level of engagement of companies like Dalian Wanda, which recently signed a sponsorship deal with FIFA until 2030, suggest European football’s stakeholders are likely to continue benefiting from Chinese investment over the long term. Europe, one of the traditional homes of association football, represents an attractive market for Chinese investors, while China itself offers the opportunity for European clubs to broaden their investor base.
For Chinese investors targeting an acquisition of a European football club, or in cases where a club wishes to secure investment from China, KPMG’s Football Benchmark team can assist at every stage of the transaction, from the initial analysis of strategic options and deal evaluation, through to execution and post-acquisition integration.
