Chinese Soccer Teams Set to Be Bailed Out as Evergrande Flails
(Bloomberg) -- China plans to reform its professional soccer league, with some local governments preparing to step in to insulate teams from growing financial pressure on their corporate owners.
Governments at the city or provincial level are considering taking minority stakes in Chinese Super League teams including the Guangzhou Football Club, owned by besieged property developer China Evergrande Group, according to people familiar with the plans. Rescue measures will vary depending on the specific political and financial situations at play, the people said, asking not to be identified discussing matters that are not yet public. They could come before the end of the year, one of the people said.
China has wanted to shake up its soccer industry since 2015, but the business troubles of some teams’ high-flying owners have brought new urgency to these efforts. In February, roughly 100 days after winning the 2020 Super League championship, Suning Appliance Group Co. disbanded its team, Jiangsu Suning F.C., citing financial difficulties.
The uncertainty swirling around China Evergrande has bled into the operations of Guangzhou F.C., disrupting training for top-level and junior teams. Last week, as the company’s debt crisis worsened, the club appealed to the local government for aid. Under one possible scenario, the government of Guangdong province would assume around 10% to 15% of Evergrande’s stake in the team and a local state-owned enterprise would acquire the rest, according to one of the people. The team could also be disbanded, the person said.
Meanwhile, Guangzhou F.C. is looking at trying to sell its professional players to raise money, according to one of the people, and some of its best athletes are eyeing their own exits.
Guangzhou F.C., the Guangdong Sport Bureau and the Chinese Football Association didn’t immediately respond to requests for comment by phone or email.
Evergrande loses about 1 billion to 2 billion yuan ($155 million to $310 million) on its soccer-related businesses annually, according to a report by Bloomberg Intelligence analysts Dan Wang and Daniel Fan. “We assess the current value of that business activity at zero,” the analysts wrote Sept. 9.
Not long ago, property developers were the biggest champions of China’s drive to become a powerhouse in President Xi Jinping’s favorite sport. Owning or sponsoring a club gave companies local brand recognition and regular access to politicians, critical to securing land deals and maintain banking support in China’s provinces, Fan and Wang wrote.
Easy access to credit in the mid-2010s also enabled them to spend lavishly. Then called Guangzhou Evergrande, the team made veteran Italian coach Marcello Lippi one of the highest-paid managers in the world. Other clubs shelled out above-market fees to imported stars from Europe and South America. At one point, Guangzhou Evergrande was valued at more than $1 billion. In 2014, Chinese e-commerce giant Alibaba Group Holding Ltd. agreed to pay 1.2 billion yuan for a 50% stake.
At least seven Chinese clubs are owned or sponsored by private real estate firms. China Fortune Land Development Co., one of the first casualties of the property sector crackdown, owns Hebei F.C., while Guangzhou R&F Properties Co. -- an investor in Guangzhou City F.C. -- and Central China Real Estate, which owns the Henan Songshan Longmen club, also face rising concerns over their financial health.
Beijing Sinobo soccer club, owned by real estate developer Sinobo Group, has failed to pay salaries to players on their top team for some months, one of the people said. A spokesman for the club said players’ salaries have been paid normally.
China’s central government has been trying to separate business and political interests from soccer, in part to bring the Super League more in line with its global counterparts. The reforms outlined in 2015 encouraged mixed ownership groups that would include local governments, enterprises and individual investors. Municipalities could build football stadiums and use the assets to obtain stakes in the clubs. The policy also said that clubs shouldn’t be named after corporate owners.
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The Chinese Super League’s “club expenditure is about ten times higher than South Korea’s K-League and three times higher than Japan’s J-league, but our national team is lagging far behind,” Chinese Football Association President Chen Xuyuan told the Xinhua news agency in February after Suning disbanded its team. “The bubbles not only affect the present of Chinese football, but also hurts its future.”
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