China, Football and Business – What’s Going On?

The football off-season, after Euro 2016 and before the start of the 2016-17 calendar, is always exciting, with transfers, appointments and resignations sustaining the interest (and newspaper back pages) before the actual football matches resume. But for those with an interest in China and soccer, this summer has been unusually interesting. China has been getting into European football in a big way. We have started to become accustomed to big-money transfers to the Chinese Super League, with big-name managers and players arriving first in a trickle but now in a flood. These once tended to be professionals on the downwards slope of the career, such as Nicholas Anelka or Paul (“Gazza”) Gascoigne, avowing their excitement at building the game in the world’s most populous country, and more often just seeking one final big payday. But now we’re seeing Chinese businesses take over top-level football teams wholesale, in a way that suggests a concerted strategy, and elite players are now coming to play in the Chinese league at the peak of their career. So what’s going on?

Football is of course big business, and has been since 1992, when the UEFA Champions League was inaugurated, giving a mid-week European league sold around the world. Many clubs turned from sporting associations to PLCs. Since then income and spending have boomed: the world record transfer has risen on average by 37% every year, or 19.5% adjusted for inflation – from £10,000,000 in 1992 (for Jean-Pierre Papin from Marseilles to AC Milan) to £89,000,000 in 2016 (for Paul Pogba from Juventus to Manchester United). Financial clout has until now been restricted to the major European teams, who have the ticket sales, TV money, sponsorship and commercial revenue (sales of replica kits, etc). Real Madrid, for example, is the world’s richest team, with turnover of €577m (£439m) in 2014/15.

But this looks to have changed, as the Chinese league has invested major cash on players in their prime. Shanghai SIPG splurged £46million on Brazilian striker Hulk, making him the third highest paid player in the world (behind only Messi and Ronaldo), at £340,000 a week; Jiangsu Suning signed Alex Teixeira for £38million move, and added Chelsea’s Ramires at £25million; Shandong Luneng spent £13million on Southampton’s Graziano Pelle (he’s now the world’s fifth highest paid player); and Guangzhou Evergrande splashed £35m to prise Jackson Martinez from Athletico Madrid. This is serious investment: and unlike players lured to Qatar or the US Major League, they are all in their prime, all being internationals and having been starring for their former teams.

Where’s all the money coming from? Most teams have heavyweight corporate backing. Nanjing’s Jiangsu Suning are, not surprisingly, owned by Suning Appliance Group; Guangzhou Evergrande is fully titled Guangzhou Evergrande Taobao, reflecting the two owners, Evergrande Real Estate Group and Alibaba Group; Shanghai SIPG is a shortening of Shanghai International Port Group Football Club, in deference to their owners. Also, the value of TV rights for the Super League is increasing exponentially. Media tycoon Li Ruigang raised many an eyebrow when he paid eight billion RMB (US$1.3bn) for five year’s coverage of the Chinese league, but online video company LeEco announced in February it had paid Li RMB2.7bn for just the first two years).

Investment by local industry is nothing unusually in football, of course, and rich proprietors are also common, with Chelsea’s Roman Abramovich being perhaps the modern game’s foremost oligarch. What is unusual is to see such investment so concerted, to so many teams at the same time. But this is only one pincer in the Chinese effort. Numerous European clubs are being bought by Chinese businessmen. Chinese investors have bought both AC Milan and Inter Milan. In the English league, Aston Villa, Wolverhampton, and West Bromwich Albion have all been bought by Chinese investors, whether individually (Villa’s Tony Xia) or by an investment group or business (as with international conglomerate Fosun International buying Wolves). In France, electrical components manufacturer Tech Pro bought FC Sochaux, while a Chinese/US consortium bought OGC Nice. In Spain, probably the world’s best league, Espanyol sold a 56% stake to auto manufacturer Rastar Group, while Chinese firm Link International Sports bought Granada CF.

So many acquisitions show that China really means business in football. Interestingly, none are buying at the top of the market. Only one of the English teams is in the top division, and while the Milanese teams are big names, Italian football is the poor relation of the Big 5 European leagues, with aging stadia and moribund attendances. This may just reflect a dipping a toe in the water of foreign football ownership. After all, many would-be proprietors have been exhausted by the insatiable demands of the game – even billionaire Randy Lerner found Aston Villa too much for him – just as companies making international acquisitions do best when they start small. But the ambition is clear. China wants to do football, do it big, and do it well. It wants the Super League to attract the best players, and for this to improve the standard of domestic players for the international team. The question, for Chinese domestic football, is how sustainable this is. The fans will have to buy into it, and be willing to spend sharply increased amounts to watch what is for now a curious mix of international stars, journeymen imports and domestic players. How willing is Chinese industry to pump cash into domestic clubs? The fact that so many have do so at the same time suggests a national strategy, from the very top. Will this improve Chinese players? With facilities, coaching and competition, they can only improve from their lowly position in the FIFA rankings. They are starting from the bottom, so the only way is up. How far they can go is however anyone’s guess.

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How (Not) To Write About China

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Attention new writers on China, and writers new to China, too. No doubt the Middle Kingdom is so dazzlingly different, so esoterically exotic, so alliteratively awesome, that you’ll want to write about it. Here, then, is a cheat sheet that should enable you to write an article for the local media after you have visited for a week.

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China is “on the rise”, so talk about the good things you have seen, like the new buildings in the center of Beijing or Shanghai, and the new airports and subways, rather the bad things you have seen, like the toilets and the lack of drinkable tap water. Thomas Friedman’s New York Times columns are a great exemplar here: come in, rhapsodize about new infrastructure, leave. The new transport infrastructure you can equate to a country “on the march” – that sounds great, sort of Marxist or something. Don’t mention the vast differences between urban and rural life, or between the different provinces. Most people won’t know about them anyway. If you need to talk about agricultural areas, mention “paddy fields”. Don’t mention the fact that China is the world’s largest producer of potatoes. Keep to that narrative!

China is “a big country”. But if you want to describe people you met, keep to a few familiar types. The retired man hanging out in a hutong will be perceived to have some sage-like wisdom. It’s a shame he won’t have a beard, but no matter. A female university graduate, ideally pictured using with her iPhone outside Starbucks, will represent the young cosmopolitan urban professionals. A middle-aged male middle-manager would round things out nicely – but these guys drive rather than taking the subway, so they might be hard to find. So go with a taxi driver, they always know what’s happening. Don’t ask them what they think about Didi. And don’t start confusing readers with less familiar types, like the rich bored housewife (might seem too Western) or the diaosi guys (what’s up with them anyway?).

In your descriptions of ordinary people, they should be “striving”, “busy”, or “on the move”. Don’t write about the epidemic of childhood obesity. Don’t mention the retired guys sitting outside the apartment complex playing cards all day, and how they sing songs of praise every Sunday to the Communist Party for selling off housing stock and making them fabulously wealthy. Write about students studying, or about workers working, because that’s all that Chinese people are known to do – they just work so damn hard compared to the idle west. This helps to play up on fears of China having the largest economy. Don’t describe shop staff who refuse to help or threatening chengguan.

China is known to produce great businesspeople and negotiators. (You can add something about the Chinese game “Go” here, if you like). Where better to describe this than Beijing’s Silk Market? Here you can perfectly describe how you got a great deal on a knock-off Gucci handbag, just two-thirds the price of the real thing. Here too you can meet and describe how many foreigners come to China. Why are there so few locals there? (But that’s a question for another day). You can also talk about the scams you fell for: the teahouse scam, the art-exhibition scam. Advanced writers (especially on business), talk about business etiquette, like how to receive a business card or how to comport yourself during a banquet. Ignore the fact that Chinese businesses look to profit first and foremost, and that customers reading your book won’t learn much about how there are fresh fish to be feasted upon.

Chinese may be “developing fast”, but is known to “lack innovation”. You can describe Baidu as a “Google knock-off”, WeChat as comparable to WhatsApp, and Weibo as “Twitter-like”. Don’t mention the new services these products offer, from translation to ticket-purchasing. If you talk about Chinese industries, keep to the low-cost manufacturers, and make them sound as dreadful as possible. Ignore the fact that most workers there were happy to escape their agricultural jobs. Don’t write about high-tech companies like Lenovo or Tencent, who are in the vanguard of Chinese innovation. They just confuse things.

China has a “rapidly growing middle class”, so feel free to talk about the “new consumer class”, and the developing “domestic demand”. Write about all those “glittering malls” and hotels, and the “luxury” restaurants. Don’t mention how empty most of them are, unless you are writing about the ghost towns, or the fact that domestic consumption is still remarkably low by international standards. You can mention these things if you want to be a China bear, always predicting collapse and chaos, but be warned that you might end up forever forecasting apocalyptic turmoil, with China still stubbornly growing at a decent clip.

Finally, don’t write about you know what, or – well, you know what.

“A Decent Bottle of Wine in China” by Chris Ruffle

With Chinese wine on the up and up, and vineyards in Ningxia, Xinjiang and Shandong producing bottles that can compete with the best, there are surely many stories to hear about the nascent wine industry’s fledgling steps, occasionally ungainly as they might be. This book, A Decent Bottle of Win in China, is a fine example of that, as a Yorkshireman decides after business success in China to set up a winery from scratch in a valley in Shandong province. That in itself might be brave enough. But author Bradford-born Chris Ruffle and wife Tiffany, from Taiwan, also decide to build a Scottish style castle (rather than the usual French chateau), having had experience of renovating a crumbling castle in the Scottish Highlands and wishing to also make the winery a destination for weddings and events. But as they were starting from scratch, with only a taste for wine and a perhaps fortunately minimal idea of the difficulties they would face, endless difficulties and roadblocks lay ahead.

The book is therefore filled with endless business missteps and pratfalls, of staff disputes and interactions with officialdom, of inclement bureaucracy and weather, and misapprehension, bungling and coaxing. A Decent Bottle of Wine in China thus is a sort of Year And A Half In Province travelogue of the Ruffles’ struggles in a strange land. Readers will enjoy a certain schadenfreude as every sort of misfortune seems to bedevil their ambitions, while anyone with more than a passing interest in wine will greatly enjoy the struggle to bring their ambitions to fruition.

As the book is a memoir of building the winery and castle, it is organised by time rather than by theme. This makes it episodic, which can work well when there is dramatic stuff going on (such as the failed first harvest), but perhaps less interesting at other times (such as discussions of yields). Also, while well edited, the writing is clearly by a keen amateur rather than a professional. This doesn’t inhibit the book, but sometimes you wish for greater scene setting and characterisation.

Published in Business Tianjin

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“The China Factor” by Amy Karam

China Factor

Business strategy books seem to come in one of two camps. There’s the micro level book, focusing on manners and negotiations and contracts. Then there are books at the macro level, looking at the China effect on government, markets and the global economy, and how to adapt your business accordingly. Both have their uses, but for the general reader, the latter category is usually the better to read. The issues are deeper, the outlook broader, and the connection of individual businesses to the macro-environment more intriguing, for in that we see their connection to the broader historical sweep of our time.

The China Factor, then, is a book definitely in the macro level. It aims to show how Chinese business and government operate together to great success in world business, how this has left Western (especially US) business trailing, and suggests remedies and strategies to compete successfully. The book opens with a brief but sweeping historical overview of Western economic dominance and then of China’s resurgence as a major power. Then we come to the meat of the book, where Karam analyses the traditional “Four Ps” of marketing (price, product, placement and promotion), adding a fifth P – politics, for the Chinese government is an active participant, persuading, financing and cajoling as necessary. Karam then explicates how these are performed by China, and then how these should be implemented by Western businesses striving to compete.

The material is well organized, like a series of lectures (perhaps from which it was developed), with bite-sized chapters, outlines, take-aways, and case studies. The convergence of business and government is a good insight, and we may be seeing the roots of a new economic methodology in that – with the state no longer content to establish open markets and essentially leaving businesses to operate within that. However, the macro perspective can occasionally be frustrating, as the reader wants to hear about specific, concrete examples, rather than the generalized overview.

This book may be one of the first American attempts to react strategically to the Chinese economic challenge, and is worth reading for that alone.

Published in Business Tianjin

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