When China’s premier football competition, the Chinese Super League (CSL), kicks off on April 20 many things will be different on and off the pitch, notwithstanding the changed league format in which games will be played in two bio-secure ‘bubbles’ in Suzhou and Guangzhou due to the ongoing pandemic. In what is arguably the biggest transformation since the start of the national football reform program in 2015, many football fans find their club in a vastly changed business environment, with corporate-free club names and logos, many star players leaving the country, an extensively reduced broadcasting deal, and for many clubs a new ownership structure, if not dissolved altogether. In this turbulent business environment, club investors – the single most important income source for most clubs – are encouraged to continue their support.
Shortly after the vanishing of current CSL champion Jiangsu FC in March this year, the president of the Chinese FA, Chen Xuyan, chose a somewhat candid hold-out slogan to encourage investors to continue their support for China’s most popular sport. When talking about the case of retail conglomerate Suning being not able to find a willing investor to take over a heavily indebted Nanjing club, he explained “it is the big companies that can afford to play in the CSL. The Chinese football market is not robust. Because it is not robust, more companies need to have a sense of social responsibility and be responsible. They need to treat football as public welfare and accept the non-profitable business situation”. This statement very strikingly exposed the current financial difficulties faced by Chinese football clubs and the far-reaching implications this has on the sport’s overall development in the country.
When the Chinese government in 2015 issued a series of reform programs to transform China into a leading football nation by 2050, a large part of its attention was devoted to China’s professional football clubs, which they hoped would not only serve as the breeding ground for the national team’s core talent, but also further commercialise the sport. In the years since, many club investors followed the business model known as ‘Golden Dollar Football’ among Chinese fans, which has been extensively used by real estate company Evergrande at Guangzhou FC since 2011, and describes heavy, unsustainable investments in foreign and local star players to win titles. But as this model paid off for some teams on the pitch – Guangzhou FC won eight league, two FA Cup and two Asian Champions League titles between 2011 and 2019 – for most clubs, this rat-race meant they had to spend astronomic sums to be able to fill-up their squad with players in order to compete and stay in the league.
Even with increasing commercial money pouring in since the reforms in 2015 – CSL’s income from TV-rights and sponsorships rose 14-fold and threefold, respectively – the investment flowing into clubs is often no more than a tiny fraction of their total expenditures. Even top clubs like Beijing Guoan FC, Shanghai Port FC or Guangzhou FC earn no more than 25 million euros per season from traditional income sources like TV-rights, sponsorships, tickets and merchandise (not including financial support from their investors), while at the same time spending 190-250 million Euros operating their club, with player salaries often making more then 70% of the total expenditures.
Before the reforms, only a handful of clubs operated their own youth academies to develop homegrown talent and general football participation among the public, and the practice has only recently picked up. As a result, the demand for professional football players has exploded throughout the past six years, leading to a situation in which the average annual salaries in 2019 for domestic players was 709,000 euros (5.53 million yuan), compared with 7.5 million euros (58.47 million yuan) for foreign players. Some of the highest paid players, like Oscar at Shanghai Port FC or Bakambu at Beijing Guoan FC, earn around 20 million euros per year, singlehandedly exhausting almost all of their clubs’ income generated from non-investor sources. These salaries are more than double that of domestic players in Japan’s J-League, a well-established football nation, where players’ yearly earnings averaged around 300,000 euros (2.35 million yuan) in 2019, not including Vissel Kobe.
Almost completely dependent on their investors’ continuous cash injections, these clubs tend to rise and fall with their parent company’s business success, as witnessed in the recent case of crowned champion Jiangsu FC. Following financial difficulties in recent years, which were exacerbated by the Covid-19 pandemic, the club’s previous owner Suning first tried to sell the club and as no buyer wanted to take over the heavily indebted team, completely discarded their investment in Chinese football. Similar cases are plentiful and leave clubs, players and fans at the mercy of their investor’s commitment to operate a business that in the near future does not guarantee any profits. These investors are often driven by favourable treatment from the local government in exchange for pushing the proclaimed national goal of football development, and often only stay as long as they can receive favours.
A series of expenditure and salary cap regulations imposed by the Chinese FA in 2019 tried to promote a more healthy and ultimately self-sustaining business model for Chinese football, but so far without much success, as many clubs did not follow the new rules. Known as the ‘Four Caps’, these rules impose a limit on club spending, investor capital injection, club losses and player salaries. For example, the new rules cap annual domestic player salaries at 641,000 euros (5 million yuan) and foreign player salaries at 3 million euros (23.49 million yuan), causing an exodus of many foreign star players ahead of this year’s season. Nonetheless, if properly implemented, these rules promise to have a positive impact on clubs’ sustainability and the overall football market. However, even if these regulations are more strictly followed in the coming years, Chinese football will require time to balance at a healthier level where expenditures match income. Until then, big companies shall continue to carry the burden and are encouraged to accept the non-profitable business situation instead.