A China deficit that keeps the ball rolling

In its efforts to build a brand, the Chinese Super League has posted large trade deficits for player transfers in the last two transfer windows.
Alberto Gilardino playing for Evergrande
Alberto Gilardino playing for Evergrande

China may possess the world’s second-largest economy already but there is mounting evidence the country actually matters much, much more.

During the latest summer football transfer window – where teams buy and sell players – the fledgling Chinese Super League (CSL) posted the third-biggest trade deficit behind the all-powerful English Premier League and German Bundesliga.

This follows January’s window when the 10-year old CSL posted the biggest deficit of all at £36.6 million  – £15.4 million more than even England, home to the world's richest league and biggest overall spenders.

“The Chinese Super League is emerging as a net importer of overseas talent as its premier football league continues to evolve and mature,” Barclays said in a research report on Thursday.

China is spending much more on importing players (£13.9 million this summer) than it recoups through exporting talent (£6.5 million), which of course is hardly surprising.

Players from Brazil, Italy and – increasingly – South Korea are making the move to China in droves Meanwhile, home-grown players are hardly in demand elsewhere. China's national football team has only ever qualified once for the World Cup Finals, in 2002, when it lost all its games.

The growth in investment, while still tiny compared with European levels, underlines that Chinese football is going places, even if Chinese footballers aren't yet good enough to warrant international attention. That's because all that extra money and star appeal will help to develop the domestic game, generating greater sponsorship, international attention and, ultimately, lucrative media rights.

According to Statistica, the average annual salary for an overseas player in China was €1.3 million in 2012, compared with €233,000 for a local player of international standard. For the league to truly develop this dichotomy needs to change.

Foreign coaches are also making the move. Marcelo Lippi, who won the World Cup with Italy (as well as five domestic Italian league titles) is reportedly paid €10 million per year at Guangzhou Evergrande, which he joined in May 2013.

The team won the Asian Champions League last year under Lippi and currently sit atop the CSL – what do you expect for €10 million per year?

“China will need to splash cash to attract the big names; why else would a star name go there to play [lower league] level football?” David Newton, creator of football data website WorldCupStory, told FinanceAsia.

It is apt, therefore, that the CSL is grabbing the attention of China’s ultra-rich. Alibaba's Jack Ma, for example, bought half of Guangzhou Evergrande this summer from property tycoon Xi Jiayin. Other billionaires are also reportedly looking to invest.

Attracting foreign talent – usually for big bucks – is typically regarded as a barometer for how progressive, competitive and entertaining a league is.

In fact, the top 10 transfers of all time globally involved players being brought in from overseas leagues, including Real Madrid's capture of Welshman Gareth Bale, Colombian James Rodriguez and the Portuguese Cristiano Ronaldo, which together totaled more than £220 million. 

European hegemony

Italy in the late 1980s and Spain since the 2000s both spent massively to bring in expensive talent from overseas.

England, meanwhile, has been importing expensive footballers since it set up its Premier League in 1992, although the trend has in recent years permeated down to the next division (or two) rather than being restricted to a handful of top clubs.

In the latest transfer window England outdid itself, running up by far the biggest trade deficit globally (£379.1 million) as its clubs spent even bigger amounts than usual on talent (£579.3 million).

Notable transfers included Manchester United’s £59.7 million purchase of Argentinian Angel Di Maria from Real Madrid, Arsenal's £35 million acquisition of Chilean Alexis Sanchez from Barcelona and Chelsea’s £32 million acquisition of Spanish-Brazilian Diego Costa from Atletico Madrid.

“While English football has run up the biggest trade deficit in world football transfers, the overall income it generates far outstrips the cost of importing players from overseas,” wrote Chris Lee, head of professional sports banking at Barclays in the report.

England ranked as the second biggest recipient of transfer fees (£200.2 million) in the latest window behind Spain (£363 million). Spain, meanwhile, was the second-biggest spender, leaving it with a trade surplus of £47.6 million.

Chinese deficit

China is not in the same league as England, Spain, Italy or Germany in terms of market maturity and the total value of its player imports and exports are small. The country nonetheless spent more in the last transfer window than the US, Argentina, South Korea and Japan, where football is much further along in terms of development.

China’s leagues have a history of scandal and violence with an investigation in 2006 finding corruption at almost every level, leading to efforts to clean up the sport. That said, Italy, Spain and other leagues have also faced corruption scandals at different times – including match-fixing allegations.

However, according to FIFA only 0.3% of China’s population attend soccer matches compared with 24.4% in England, 24.6% in Spain and 1.7% in the US.

In recent years China has tried to attract a multitude of stars to draw attention to its league, including Premier League stalwarts such as Didier Drogba (pictured left), Nicolas Anelka and, erm, Fabio Rochemback. Big name transfers in the latest window included Alberto Gilardino's €5 million move to Guangzhou Evergrande from Italy's Genoa.

But some players have been lured back to Europe after finding that a lucrative contract failed to make up for the lack of a passionate footballing culture. Anelka, for example, played 22 games for Shanghai Shenhua (scoring three goals), while Drogba played 11 games for the same team (scoring eight goals).

European clubs, including London club Arsenal – China's favourite international football team, according to a survey by Coventry University's Center for the International Business of Sport – have also toured parts of the country to raise the game's profile. 

Some in China are attempting to develop the grassroots game to lessen the need for foreign stars. Property tycoon Xi spent £115 million on building the world’s largest soccer academy, Guangzhou Evergrande International Soccer School.

Grassroots development is an issue that even developed markets find tough to implement, with many in England criticising the influx of foreigners at the expense of local players.

But, at least in terms of spending power, England continues to score.

“The attraction of England’s ‘beautiful game’ continues to ensure its huge success [in importing players]. England truly remains the business home of football,” Lee wrote.

It’s just a shame the national team is rubbish, although not as bad as China's – possibly.

¬ Haymarket Media Limited. All rights reserved.
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