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International soccer has a new power broker. During this year’s winter transfer window, Chinese soccer teams signed some of the world’s best players to deals totaling $360 million, outspending the English Premier League, the world’s richest league, by almost $100 million.
Over the course of the last two decades, China has become the world’s second sports superpower: Chinese athletes won 88 medals at the 2012 London Olympics compared to the 103 medals of the United States. At the 2008 Summer Olympic Games in Beijing, China won fewer medals than the United States, but won more gold medals and took first place overall.
Serious money began to flow into the Chinese Super League—the country’s top league—in the 2000s, after a series of international successes, including China’s first-ever appearance in the World Cup in 2002. Investment accelerated in the late 2000s and early 2010s, after Chinese law enforcement agencies were told to arrest and purge corrupt officials. Between 2009 and 2011, about a hundred people implicated in illegal activities were imprisoned.
Talent soon followed. In 2013, David Beckham, the world’s biggest soccer star, signed a five-year contract worth 50 million British pounds to be an ambassador for Chinese soccer. China’s leading companies began to acquire Super League clubs, which sent scouts all over the world to look for foreigners willing to play in China for hefty salaries.
Until this year, the Super League was seen as a good place to earn some retirement money. But when the transfer window in Europe opened on New Year’s Day, the Chinese quickly dominated the market, with almost every Super League team bankrolling at least one European star.
Perhaps the most remarkable deal was Jiangsu Suning’s acquisition of Shakhtar Donetsk’s Alex Teixeira of Brazil for 50 million euros, outbidding Liverpool, one of the world’s most prestigious clubs, by one and a half times. Teixeira will now make 10 million euros per year. He chose Nanjing, a city he probably didn’t know existed a month ago, over Liverpool, one of the soccer capitals of the world.
Another team that Europeans have likely never heard of, Shanghai SIPG, is preparing a 100 million euro per year offer to Wayne Rooney, the superstar forward for Manchester United and the British national team. That’s almost five times the salary of the best soccer player in the world, Lionel Messi.
At first glance, China’s soccer boom seems to resemble the Russian professional sports frenzy of the late 2000s and early 2010s, when newly-rich oligarchs sought to build massive sports empires.
Soccer and other sports franchises quickly became a political instrument for the first generation of Russian capitalists. Private sports ventures could advance team owners’ social status by creating political and business relationships with government officials. State-financed sports ventures were—and are—a good opportunity to siphon money from the federal budget. The Russian government wants to spend money on athletes because sports events are seen as an opiate of the masses, a circus to distract the general public from the challenges of quotidian life.
The recent developments in Chinese soccer likewise seem to have little to do with profits. For example, the Nanjing soccer club would need to earn an additional 80 million euros to justify hiring Alex Teixeira for three years. With an average ticket price of 15 euros for Super League games, this isn’t realistic.
Chinese soccer’s winter shopping spree appears to have been ordered from above. Some point to a State Council resolution dated October 20, 2014, which stipulates that a company’s taxes will be lower if it sponsors a sports team. Europeans believe that Chinese corporations and the teams they control were ordered by the government in Beijing—perhaps by Xi Jinping himself—to shell out cash for foreign stars.
The best evidence that clubs are being instructed to lure talent by the government is the Super League’s new $400 million TV contract. The deal, which is 20 times larger than the previous one and was signed long before China’s European campaign, bears no relation to market value.
Yet there is still reason to believe that China will succeed where Russia has not (and is unlikely to in the near future), creating a sports entertainment industry based on capitalist principles. The average ticket to a soccer game already costs three times more in China than in Russia. Attendance at Super League tournaments was more than 20,000 per game even last year, before the new batch of European stars signed. That’s twice as high as in Russia and right up there with France and Italy.
Financial incentives are not the only driver of the growth of soccer. Perhaps more importantly, Beijing is hoping a strong soccer league will help cultivate national unity and a shared passion for the game among China’s growing middle class. As always in China, the grand, national idea comes first, and business follows.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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