The prices being paid for Chinese soccer teams have been increasing at a fast clip due to a government mandate to grow the sport.
Two years ago, Jack Ma’s
Group paid $192 million for 50% of the Guangzhou Evergrande Tabao soccer team. The lucrative deal yielded an annualized return of 120% for Evergrande Real Estate Group, which is led by property tycoon Xu Jiayin, currently worth $2.3 billion. He bought the then-struggling team in 2010 for only $16 million. Similarly, Suning Commerce Group, a leading domestic appliance retailer in China, announced last year that it had acquired the Jiangsu Sainty Football Club from Guoxin Investment Group for approximately $80 million.
In March 2015, the Chinese government unveiled a 50-point reform plan for Chinese soccer that calls for grass roots youth development, as well as for China to ultimately host and win the World Cup. President Xi Jinping, a confirmed soccer fan, announced his intention for China to become a ‘soccer powerhouse,’ encouraging investments in the sport from private, public and national sectors. A crucial aspect of his plan is to develop the Chinese Super League into one of the best leagues in the world, so that it can be the driving force for an improving domestic sports industry.
Simon Chadwick, Professor of Sports Enterprise at the University of Salford Manchester, describes the government’s plan as a two-pronged approach with “large amounts of spending from the top and focusing on youth development from the bottom up.” He argues that going forward, the best measure of success is the “extent to which Chinese soccer will be able to produce its own heroes and icons that fans can engage with, as opposed to teams having to import foreign players.”
The Chinese Super League, the top division in Chinese soccer, has yielded a rapidly increasing number of broadcasting and sponsorship deals in recent years. In 2015, Chinese broadcasters paid only $13 million to show local league games. In 2016, Li Ruigang’s China Media Capital purchased broadcasting rights to the Super League over the next five seasons in a deal worth $1.3 billion. This is monumental when compared to the MLS, who had a similar average league attendance of approximately 22,000 in 2015, but receives just $90 million annually from its domestic TV deals.
Chinese Soccer’s ten most valuable teams are worth an average $130 million (our valuations were based on estimated revenue, squad market value, consistency of success, team brand power, ownership wealth and market size). That’s not too far off the average worth of the ten most valuable MLS teams ($197 million). In the 2015 season, Chinese teams generated an average estimated revenue of $28 million.
The most valuable team by far is Guangzhou Evergrande, valued at $282 million. League winners for the last five years and two-time Asian Champions Cup winners, Guangzhou have started to build a well-known soccer brand that earns China international recognition. Although the team’s previous purchase price may suggest a higher valuation, our analysis accounts for inflated costs in team transactions.
Most teams in Chinese soccer are backed by large companies or wealthy billionaires, many of whom have openly acknowledged that their investments often have political calculations. With the recent privatization of the domestic league, actual team ownership has started to become more diversified. A good number of teams are still owned by real estate companies who acquired fortunes in the property market, like Evergrande. Another example is the Greenland Group, who own Shanghai Greenland Shenhua, a historic Chinese team valued at $106 million. Hebei China Fortune, valued at $90 million, is owned by China Fortune Land Development, an industrial construction company. It is led by Wang Wexue, a self-made real estate tycoon worth $3.9 billion.
A total of four teams in the top ten list are owned by billionaires such as Jack Ma, the second richest man in China who has a net worth of $25.9 billion. Zhang Jindong, who chairs Suning, is valued at $3.9 billion. The Jiangsu Suning team is China’s fourth most valuable team, worth $144 million. No. 9 team Chonqing Lifan, valued at $76 million, is owned by the chair of Lifan Industry Group Yin Mingshan, who has a net worth of $1.9 billion.
New owners are often interested in using teams as a means of extending their brands and influence, according to Mailman Sport, China’s leading sports digital and consulting agency. What Chinese companies have learned from Guangzhou Evergrande’s success is that there is huge potential for brand recognition in soccer, which allows for increased diversification.
In the transfer window, where teams can buy and sell players, wealthy owners have been spending like mad on big-name foreign players, many of which compete in the prestigious European and Latin American leagues. January 2016 was when Chinese soccer first began to receive global exposure from the Western media, although its development process has quietly going on behind the scenes for almost two years. China outspent every every other league in the world – Its top two domestic leagues spent a combined $430 million in the transfer market – $315 million of which was spent on foreign players alone. Marquee signings such as Alex Teixeira, Jackson Martinez, Gervinho and Ramires all joined some of China’s top teams for astronomically high fees and wages.
During the Chinese transfer window this summer, Chinese clubs in the top division shelled out another $146 million. Former Southampton FC striker Graziano Pelle has become Italy’s highest paid player with his $17 million transfer to Shandong Luneng, China’s fifth most valuable team at $126 million. Werder Bremen’s Nigerian striker Anthony Ujah also moved to Liaoning Whowin FC for $13 million, and Guangzhou R&F recently bought star Israeli midfielder Eran Zahavi for $8 million.
Shanghai SIPG spent $63 million, or 43% of total league spending, when they bought Brazilian superstar Hulk and yet again broke the league transfer record. Last year, shipping and transportation company Shanghai International Port Group bought out Shanghai SIPG, who now rank as China’s third most valuable team at $159 million.
The improved talent on the pitch in the Super League can be reflected in its increasing fan base. Since the CSL was founded in 2004 and has increased to 16 teams, total league attendance has gone up from 1.4 million to well over 5 million last season, in 2015. Chinese soccer has been plagued by a history of corruption and match-fixing, and combined with the low number of iconic Chinese players, fans have long been dreaming of success for China’s national team and domestic league. Senior Client Manager Tom Elsden and Director of Sport David Hornby at Mailman Sport describe the big push to improve Chinese soccer as a “positive movement that is very popular amongst the people, yet the biggest challenge to date is to change cultural mindsets.”
The investment in soccer has come at a steep price: a vast majority of Chinese soccer clubs often report huge operating losses each season. Guangzhou Evergrande, China’s most valuable team, reported losses of over $200 million last year. Chinese clubs are able to sustain themselves, however, because of the wealthy tycoon owners who invest in the sport to potentially gain political favors.
Chadwick ultimately calls the growth of Chinese soccer, “a state-level policy and strategy for sport that is unique and unprecedented when comparing it to other leagues around the world.” The real question that remains to be seen is whether domestic soccer would still be able to sustain itself without government support in the future.