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August 29, 2017

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China’s overseas capital curbs to hit Europe clubs

CHINA’S crackdown on overseas investments is expected to herald a slowdown in splurging on European clubs and impact teams where it hurts fans the most — on the pitch.

It is unlikely that supporters in Italy, Spain and England were aware earlier this month when China’s State Council moved to restrict Chinese companies from investing in foreign sports clubs in a wider campaign to curb capital outflows.

But fans of the dozen European clubs that are Chinese-owned or part-owned may want to pay attention, especially if they are expecting lavish spending on players before the transfer window closes in most of Europe on Thursday.

“I think it will have an impact on current ownership. Most of them will have to make continued significant investment into playing staff and all other areas of the football club in order to compete,” said Ji Zhe, director at London-based sports marketing firm Red Lantern and an expert on Chinese football.

“This impact could then have a knock-on effect to the clubs as investment dries up. Chinese owners could realign their focus and the clubs can suffer both on and off the pitch.”

Wealthy Chinese have been investing in or simply buying up some of the biggest clubs in football including Atletico Madrid, AC Milan, Inter Milan and Manchester City.

Several teams in the Midlands area of England fell under Chinese control: former European champions Aston Villa, Premier League side West Bromwich Albion, Wolverhampton Wanderers and Birmingham City.

In China, clubs that many football fans across the world had never heard of began shelling out huge amounts of money to lure the likes of Oscar, who moved from Chelsea to Shanghai SIPG for 60 million euros (US$72 million).

“But the mood music has changed dramatically in the past three months,” said Ji, pointing to how Chinese clubs were reined in during the recent domestic transfer window, which fizzled to a close last month after a 100 percent tax was slapped on foreign players.

“The Chinese government has put a firm brake on the football boom as it continues to tackle the outbound flow of money.”

Zhang Qing, chief executive of Beijing-based sports consulting firm Key-Solution, agrees there will be an impact on future potential purchases of clubs and existing Chinese ownership.

“Companies will be more cautious and they have to consider the difficulties of buying clubs,” he said.

“I think current owners may ease up on adding more investment or will be more cautious,” he added, saying that will benefit Chinese football. “I think they might exert more effort in developing the domestic market.”

Supporters should not anticipate their Chinese benefactors spending big money on new players in the final days of the transfer window, said Simon Chadwick, professor of sports enterprise at Britain’s Salford University.

“It’s a bit like a Chinese state-enforced financial fair play — you can only spend what you earn,” he said.

“So the likes of West Brom or Aston Villa fans or Nice (in France) or Granada (in Spain) shouldn’t expect massive spending sprees on players because that’s what the controls are intended to prevent — wild expenditure without any financial or economic return.”


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