Xi Jinping’s Soccer Dream MO

Recent manifestations of Xi Jinping’s “Soccer Dream” (中國足球夢) have generated substantial attention outside of China. One might even get the impression that China and the Chinese government have only just discovered the game. Yet Xi’s efforts are merely the latest attempt to reform the organization and infrastructure of the sport. In fact, the Chinese government has been trying to reform Chinese soccer since the early 1950s. And the ambition has always been the same: to have a national team to make the country proud.

That ambition unequivocally underpins the latest iteration of China’s football reforms. What has changed is that the government now has multiple ambitions for football, and different mechanisms for pursuing them. In addition to a strong national team the Chinese government is seeking influence in global governance of the game, overseas acquisitions with strategic value, and a strong Chinese Super League as a symbol of modernity and as a lifestyle product.

For a country with a long history of investing in football, the futility of the men’s national team appears to be a rebuke to earlier reform efforts. Elite sport did not escape the devastation and chaos of the Great Leap Forward and Cultural Revolution, and the football architecture was decimated like many sectors of the economy and society. But 40 years into the reform era (a decade longer than Mao’s rule), the dream of a men’s national team to make the country proud is as far away as ever. (The women’s team meanwhile is a regional and sometimes world power).

Clearly a different reform strategy was needed. There are two distinguishing components of Xi’s reform effort: the coalescing of the bureaucratic apparatus, and the marshalling of private investment.

The current reforms are a “team effort”, involving not just the Chinese Football Association (CFA) and the General Administration of Sport, but also the Ministries of Education and Finance, the National Development and Reform Commission, the State Administration of Press, Publication, Radio, Film and Television, and the Communist Youth League. The State Council (the equivalent of China’s Cabinet) has assumed responsibility for the coordination of relevant departments as they try to flesh out and implement the government’s ambitious development plans.

Xi set out his intentions and modus operandi in 2008, when the Control, Ethics and Disciplinary Committee of National Football Leagues was founded under his direction to address the match fixing, bribing, gambling and organized crime involvement in elite soccer that caused the former Jia-A League to be wound up and threatened the young Chinese Super League that replaced it. The Committee was led by the General Administration of Sport and composed of the Ministries of Public Security, Civil Affairs, and Justice, People’s Bank of China, and the State Administrations of Taxation and Industry and Commerce. In short, an institutional team effort signalling the gravity of the problems then facing Chinese football and Xi’s determination to mobilize institutional capital (financial, political and human) to fix them.

The work of the different organizational parts of Xi’s reform are overseen by the Leading Small Group for Soccer Reform (足球改革领导小组) led by Liu Yandong (刘延东). Liu is a long-time member of the Politburo and she is a convenient conduit for channelling Xi Jinping’s wishes to the CFA. Liu, who holds the health portfolio, set out her own position on football in 2009, stated that ‘raising the profile of the Chinese football is a significant part of the construction of a global sports power.’ The goals of Xi’s then-nascent reforms she said were to ‘boost the healthy development of the sports industry, satisfy the spiritual and cultural demands of the people, and enhance China’s soft power’.

A second distinguishing component is the enlistment of private investors and the extent to which they have responded to encouragement from the top. Elite football development and investment in the grassroots requires substantial sums of money, and there has been a concerted effort to share the financial burden with private business (in addition to state owned enterprises, provincial and local governments). In 2011 the State Council convened a conference on how to attract private investors into football. Dalian Wanda Group president, and one of China’s wealthiest entrepreneurs, Wang Jian-Lin subsequently agreed to a strategic partnership with the CFA and a RMB 500 million investment. Wanda Plaza, the commercial property development arm of Wanda Group, paid RMB 200 million for the title sponsorship of the CSL from 2011-13. Resurrecting an earlier CFA policy of sending talented young Chinese players overseas to train, Wanda funded the studies of “Chinese Football Stars of Hope”, having signed a deal to use the facilities and expertise of La Liga clubs Atletico Madrid, Valencia and Villarreal.

Wang has subsequently been invited to consult for the CFA and has used his wealth and connections to increase Chinese influence in global football governance. In 2016 Wanda Group became a FIFA commercial partner, and Wang facilitated a meeting between FIFA boss Gianni Infantino and Xi Jinping, at which they discussed Xi’s ambition for China to host the FIFA World Cup.

Although Wanda has signalled a substantial sell-off of assets in recent days to reduce debt, Wang’s participation in Xi’s football reforms is important financially and symbolically. Wang had previously been closely involved in Chinese football a decade earlier, to the extent that he financed the Dalian Wanda club that won five Jia-A titles between 1994 and 2000. Wang famously pulled out in 2000 because of the corruption afflicting the sport, from referees to CFA officials, and did not return until 2011. Wang said his return was due to ‘Xi’s direction, social demand and my passion’.

Wang is far from the only entrepreneur to be enticed into the football revolution. Evergrande Real Estate Group president Xu Jiaying bought the Guangzhou club in 2010 following its relegation for match-fixing. Xu’s investment quickly paid off on the pitch: the team was promoted in 2011 and has gone on to win six consecutive CSL titles. It paid off financially too; Xu sold a 40% stake to Alibaba for many times his original investment. Evergrande is the most successful and lucrative club in the CSL. Evergrande signed a deal with Real Madrid to help establish the world’s biggest football academy, and pledged RMB 100 million to youth development over ten years. Alibaba, Suning, Fosun, Sina and many other private companies heavily involved in different aspects of the football industry.

In Wang, Xu and other entrepreneurs’ enthusiastic embrace of the “soccer dream” there is a suspicion of courting favour with Xi Jinping. But there are also more prosaically strategic incentives, such as facilitating the acquisition of land for development and integrating football into existing entertainment, real estate and other commercial businesses.

But whereas the Chinese government ultimately prioritizes development of the national team, investors and owner have their own ambitions. One of the unforeseen consequences is that clubs’ spending on transfer fees and wages has rapidly spiralled out of control, to the extent of outspending the English Premier League in the last transfer window. It is not just privately owned clubs that have been on a spending spree: the two most expensive imports in CSL history, the Brazil internationals Hulk and Oscar, play for a team owned by Shanghai International Port Group which in turn is majority owned by the Shanghai government.

As I discussed here, the government has recently issued drastic new rules to curb spending during the current transfer window. There are good reasons for doing so.

While China is experiencing an economic slowdown and an ongoing anti-corruption campaign, the astonishing sums paid for foreign players could easily become a cause of social discontent (as it was in the 1990s albeit with much smaller amounts), especially when players perform poorly or behave badly. The potential for ‘social contradictions’ to arise and manifest in riots or protests (which the government is mindful could turn into anti-government protests) is good reason to care about the optics. The Argentinian Carlos Tevez for instance, earns £600000 a week while underwhelming for Shanghai Shenhua (China’s per capita GDP is around $8000).

More sensitive still is the suspicion that football acquisitions, including player purchases, were being used to move capital offshore, avoid currency exchange restrictions and other potentially problematic financial manoeuvres. The margin between marquee foreign players’ nominal market value and the actual transfer fees that have been paid look less like a “China premium” (the extra funds needed to attract top players to the less illustrious CSL) than a potential financial manoeuvre.

For teams in the top half of the CSL the end of big money foreign player transfers (in the short term) doesn’t really matter because they already have their quota of marquee foreigners (new rules limit teams to fielding 3 foreigners in a match). But it may consolidate the differences between teams like SIPG and Evergrande that have their foreign stars in place already and others like Tianjin Quanjian that would like to sign a star foreigner but are now effectively unable to do so. That may not be positive for the league over the longer term, but policy in the reform era has always been flexible and there will be further changes to the regulations. Striking a balance among all the competing ambitions and interests is not easy, but there is no doubt that emphasis on Xi’s “football dream” will continue into his second term.

No more superstars for Chinese Super League: That’s a good thing

The Chinese Super League summer transfer window opened on June 19, but there is none of the excited speculation that surrounded the previous few iterations. In the past two seasons, news of a disgruntled Cristiano Ronaldo, a Wayne Rooney ready to leave Man Utd for a retirement home, or a Diego Costa rendered superfluous by the Chelsea manager’s text message, would cause hyperactivity in CSL club boardrooms and frenzied speculation in the press.

Eager to attract foreign stars, CSL clubs have paid well over market price transfer fees and provided astonishing remuneration packages to a range of aging talents (Tevez, Lavezzi, Ba, Pato), one-time prospects who didn’t quite make it to the very top (Witsel, Guarin, Hernanes, Teixeira) and Premier League journeymen (Ighalo, Pelle, Jelavic, Mikel). The spending spree has also delivered some top players at the peak of their powers (Oscar, Hulk, Jackson Martinez), but it is unlikely they will be joined by any high-profile peers this summer.

The football authorities had been vaguely threatening to reign in CSL clubs’ overheated spending since the last transfer window in January, when CSL clubs outspent their counterparts in the notoriously spendthrift Premier League. Rules were adopted to encourage clubs to invest in youth development programmes, regulate the number of foreign players on squads and on the pitch, and stipulate a minimum number of Chinese Under-23 players. And earlier this month the Chinese Football Association got very specific about transfer fees.

Per the latest regulations issued by the Chinese FA on June 14 (and reiterated directly to CSL clubs by the League on June 20), the rules governing the summer 2017 CSL transfer window impose drastic restrictions. First, if a single foreign player costs under 45m RMB (~ 6 million Euros), or a Chinese player costs under 20m RMB (around 3 million Euros), the club must pay an equal amount, as an additional contribution, into the club’s existing youth development fund. Second, and more significant, if a foreign player costs over 45m RMB, or a Chinese player costs over 20m RMB, the club must pay an equal amount into the Chinese Football Development Fund. In effect, transfer fees will double overnight.

For the moment, these new regulations almost certainly end CSL clubs’ competition for “A-list” foreigners. A player like Diego Costa, a combative striker near the peak of his powers, might represent decent value for a CSL club at the rumoured valuation of £75 million. But not now the outlay would be £150 million (before taking a hypothetical remuneration package into consideration). CSL clubs are loss-making, but many of them are backed by cash-rich companies, so theoretically big money transfers could still happen in this window. And Chinese businesses are adept at finding room for manoeuvre in restrictive environments. I don’t think they will though, because more than just the regulation itself, it is the now-unequivocal message from on high that clubs need to reign in their spending.

Naturally, the government would like to see CSL clubs winning the Asian Champions League or doing well in the World Club Championship (which a hypothetical superstar signing like Diego Costa might help facilitate), but there are greater priorities. Prime among all priorities is for the Party to stay in control and avoid anything that might cause ‘social contradictions’ or other negative reactions in society.

The broader context to club’s extravagant spending is a slowing economy, growing inequality and an ongoing anti-corruption campaign that has brought down thousands of Party officials. Conspicuous spending right now is a taboo for public figures. Across Chinese society there is a huge amount of anger around inequality, injustice & corruption, and the Party (sensibly) wants to keep a lid on conspicuous manifestations thereof. One example is capital flight: Party officials and other well off Chinese are suspected of secreting billions outside the country in real estate and whatnot, which raises the uncomfortable spectre of football investments becoming a way of getting money out of China.

The government has multiple strategic goals relating to football, and the strength of the CSL (as might be advanced by the recruitment of expensive foreigners) is a relatively minor one. The government wants China to be a major player in the global soccer industry (another form of engagement and influence); it wants to develop a national team that can compete on the international stage without embarrassing the country and sometimes deliver successes like qualifying for international tournaments; it wants a strong domestic league ‘product’ for its consumption, entertainment and ‘middle class’ value; and it wants to develop grassroots infrastructure to promote soccer as a healthy activity not just for the ultimate good of the national team but to stave off the coming obesity and public health epidemic.

Policymaking in China is a process. It is flexible, experimental and reactive. The policy regulating soccer activity today will likely change in the future. But a period of consolidation, minus the distraction of another influx of foreign stars, may be a good thing for the CSL. The authorities and clubs need to figure out what regulations work best for all concerned, including fans, the development of Chinese players and the quality of the on-field product. There is a concern that the CSL is a two-speed league with some exceptional foreigner talent amid a morass of players who would struggle in the lower leagues in Europe.

Furthermore, for various reasons, high-profile, high cost “A-List” foreign players have often flopped in China (from pioneers like Nicolas Anelka to the recent travails of Carlos Tevez). On the other hand, the most successful foreign imports are relatively unknown Brazilians like Guangzhou Evergrande’s Elkeson and Ricardo Goulart, top scorers and MVPs in the last 3 years. Elkeson was bought for £4million from Botafago and Ricardo Goulart was £10 million from Cruzeiro (a record fee for CSL in 2015, but exceptional value in the grand scheme of things). This season’s revelation also fits this mould: Paulinho, another £10 million purchase for Evergrande. An underwhelming performer at Spurs, Paulinho has been such a standout figure in CSL he is rumoured to be on Barcelona’s radar.

For a growing league like CSL, the value in performance lies in the kind of foreigner players you can pick up for fees near or under the CFA’s new threshold. Under the current regulations scouting mid-level talent and keeping existing superstars happy and locked down are key. No doubt the super-agents who negotiated astronomical packages for Tevez, Pelle et al are aware of the CSL’s effective self-imposed superstar transfer ban.