Can China Win the FIFA World Cup?

China has invested billions of dollars to acquire European football clubs and bring international players home.

Can China Win the FIFA World Cup?

By: Abdullah Saeed Qureshi Published:

China has invested billions of dollars to acquire European football clubs and bring international players home

China, the world’s second largest economy, is yet to a make a mark in the world of football, qualifying only once for the most prestigious and biggest event of the sport, the FIFA World Cup. However, for the past few years, amid a consistently bad economic outlook, falling oil prices, and growth reaching subpar levels, the country is making headway in other significant sectors including sports, services, and tourism.

Earlier on Friday, China’s official CCTV reported that Baidu Inc (NASDAQ:BIDU), the Chinese Internet giant, is looking to buy a major stake in Italian football club, A.C Milan, for about $437 million. According to Italian media, China’s search giant is looking to acquire a 70% stake in the club, which will value the club at $624.3 million.

However, on Monday Baidu’s officials denied the reports. The company’s representative Whitney Yan said: “A Chinese consortium has since April been in exclusive talks about taking over Milan, which suffered from a lack of investment and success in recent years. That group doesn’t include Baidu or its CEO.” Robin Li, the company’s CEO, is the world’s 84th richest person, according to the data compiled by Bloomberg Billionaires Index.

Last month, China’s Suning Holdings Group Co. announced it would purchase a major stake in Inter Milan — about 70% — worth $306 million (270 million euros). The company’s chairman Zhang Jindong said about the deal: “Buying control of the Italian club “helps Suning to capture the trend of sports and fitness interest in China, raise the standards of local football, and also raises Suning’s profile as it expands globally.”

Similarly, on May 19, 2016, China’s Recon Group said it would purchase the English Football Club, Aston Villa, for an undisclosed amount. The deal would make Tony Jiantong Xia, controller of Reckon Group the owner of the English football club. Aston Villa, which has been regulated by the Premier League, England’s top’s most sports league, went down under the ownership of Randy Lerner, the US billionaire, who invested millions of pounds in the club, without receiving any significant reward.

Other major investments in the European football teams include the following:

On March 18, 2018, China’s property giant Dalian Wanda Group also entered into an agreement with Football’s top governing body, FIFA, becoming the body’s top sponsor. The collaboration with FIFA will give Dalian Wanda all the rights to FIFA’s tournaments as well as corporate events for the next four World Cups.

The Chinese government is committed to developing more than 70,000 football pitches in the country and by 2020, the country is aiming its national football team to be among the top 10 Asian sides. Back in June, China Business News reported that the Chinese government has solid plans to resuscitate the sport, including grassroots development, education and soccer reform.

Back in March 2015, the world’s second largest economy also announced its future plans to develop and expand the country’s football industry. Some notable reforms included the separation of country’s Football Association from the sports regulator, and increasing the number of football academies to 20,000 by 2020 and 50,000 by 2025. To this end, it is important for the Chinese government to fully function from the grassroots level and ensure that the country’s younger generation takes part in sports. But for such initiatives, a large number of incentives are required.

However, analysts believe that the development of China's football sector starts from raising public awareness and perception, infrastructure development, education and private funding, and targeted investments.

Many of Chinese billionaires and companies making investments in international football clubs either have a significant stake in local football clubs or own one of them. As a result, many of them are pushing hard to bring top European footballers to China and most of them have also succeeded in doing so. The Chinese Super League, country’s top football league, has attracted many leading international players, who are also paid a hefty amount by owners.

We believe that this move could act as a huge catalyst in improving the country’s overall football setup. Similarly, the presence of leading international players would also give both the younger and current football players in the country a great learning experience.

Growth Prospects for Sportswear Brands

On the other hand, analysts opine that brands like Adidas (OTCMKTS: ADDYY) and Puma are also expected to benefit from the recent developments in the sports industry. Barclays’ analyst Vaneet Sharma says: “The recent sports campaigns and initiatives introduced by the China government have created large pockets of opportunities in the region for brands such as Adidas and Puma SE (OTCMKTS: PMMAF).”

Back in March, Adidas announced that it is bullish on China’s sports industry and plans to expand its operations in the world’s most populous nation. Its planned investment included an additional 3,000 outlets to be opened in China by 2020.

Adidas’ performance in the world’s second largest economy is well above the analysts’ expectations. In times of uncertainty when leading food chains, beverages makers, and luxury labels are fighting for survival, the sportswear maker is planning to expand its operations in the country.

Adidas is growing at a higher pace in the region and, said Colin Currie, Managing Director Adidas group. He said: “Adidas’ sales in the region grew by about 18% to $2.7 billion (2.47 billion euros), which is as much as the combined sales of Portugal and Poland.”

Like its archrival, Nike Inc’s (NYSE:NKE) keenness to expand in the Chinese sports industry also seems prominent. The US-based sportswear maker has already made a sparkling entry into the Chinese market by winning the bid to sponsor all the 16 teams in Chinese Super League. In addition, the company is the chief Nike sponsor of China’s national football team.

Like foreign brands, there is also enough potential for the local firms to grow into the sports industry. The local sportswear brands are also eager to expand and make a mark in the mainland territory. For example, Anta Sports, China’s home-grown branded sportswear maker is going to benefit from the recent sports developments. With no exposure to football, “Anta is targeting to reach soccer sales in the high single digits in 3-5 years, driven by promotions, increasing point of sales (POS) accessibility to soccer products, a widening of its product portfolio, construction of soccer pitches and promotion of cage soccer.” By the end of 2016, Anta aims to sell 1 million pairs of football shoes.

Prof Chadwick was quoted by the BBC as saying: “I think China can win a World Cup. It has the resources, scale, and state backing to fast forward 150 years of football development into 10 years."

The statement made by the professor is a bold one and many analysts disagree to it; however, with the pace the country’s football industry is growing anything seems possible right now. The future is yet to be seen, but many analysts opine that the recent foreign investments and rapid developments provide tremendous growth opportunities for both foreign and local brands. We believe that the future of China’s football industry is bright, thanks to the country's huge foreign investments in European football clubs and efforts to bring in top international football players home.