This article first appeared in the Nikkei Asian Review on January 5th
The installation of a new president can lead to revolutionary changes in international relations. So it was with the advent of President Xi Jinping in 2013, who decided that China should become a global soccer superpower.
Xi has moved quickly to achieve his ambition. In March 2015, the government announced plans to hire 120 foreign coaches to train up to 50,000 Chinese soccer teachers. Clubs in the Chinese Super League have gone on a spending spree that has raised the aggregate transfer market value of players in the league fourfold, from around $80 million to $320 million, according to the website Transfermarkt.com.
Meanwhile, Chinese entrepreneurs have bought heavily into European soccer. In the English Premier League Chinese business interests have full ownership of Aston Villa and West Bromwich Albion, and a 13% stake in Manchester City. Chinese investors also own 20% of Atletico Madrid, 56% of Espanyol, a Barcelona-based club, 100% of Granada Club de Futbol, and stakes in soccer clubs in Italy, France, the Netherlands and the Czech Republic.
While change has been rapid, China is starting from a low base. The level of professional soccer was poor until recently, and the aggregate transfer value of players in the CSL remains quite low — ranking below the Belgian Jupiler Pro League, for example, and far behind the $5 billion valuation of players in the EPL.
Nonetheless, the CSL’s transfer value matches that of America’s Major League Soccer, and if current growth rates hold, it will reach parity with the English league within six years. That might be a little too optimistic, but if investment levels are maintained, China will clearly be a force in global soccer within a decade — a pace that is not out of line with the nation’s progress on other economic fronts in the last 30 years.
Becoming a global soccer power is essentially an economic challenge. Soccer is perhaps the earliest manifestation of globalization. It took only 50 years for the sport — which is unconnected to the ancient Chinese game of “kickball” (cuju) — to spread from England, where the rules were codified in 1863, to most parts of the world.
Leagues were established across Europe and the Americas by the 1930s, and after World War II decolonization expanded the number of participating nations to include all of Asia and Africa. There is almost no other form of entertainment that has achieved such universal reach, facilitated by broadcast technologies that make games accessible anywhere on the planet.
There is a global market for playing talent, with about 60,000 professional soccer players worldwide, according to FIFPro, the world players’ union, and about 10,000 international transfers every year, according to FIFA TMS, a subsidiary of the Federation Internationale de Football Association, the sport’s global governing body.
With thousands of professional clubs competing for talent neither buyers nor sellers possess much market power. In almost every trade clubs and players have alternative options, so players get paid what they are worth. This contrasts significantly with the monopolized major leagues of North America — the National Football League, Major League Baseball, the National Basketball Association and the National Hockey League — which dominate their sports globally.
In most countries, soccer clubs that want to be successful internationally must pay the going rate for playing talent. Big clubs compete to hire the best players, often driving themselves to the edge of bankruptcy or even out of business in pursuit of sporting glory. This arms race for talent eradicates profits but yields attractive and exciting games.
In the U.S., by contrast, MLS acts as if it has monopoly power, restricting competition among the clubs and holding down wages. As a result, it is struggling to offer attractive events, and its share of the U.S. TV soccer market hovers around 7%, dwarfed by overseas leagues such as Mexico’s Liga MX (33%) and the EPL (22%). As business ventures MLS teams are struggling.
The problems of MLS and the CSL are similar in many ways. Both are trying to compete in a global market where established leagues can rely on a committed fan base to support their teams, and to pay handsomely for the privilege. Both leagues need to persuade a hesitant public to thrill to the sport before they can generate significant revenues — a problem that looms largest in U.S., since Americans are already attached to a range of other sports.
The path China has adopted is more likely to succeed than the American strategy. Wealthy entrepreneurs (China now boasts over 500 billionaires) are choosing to invest in soccer clubs not in the hope of financial returns but for the prestige that ownership confers.
In another smart move, China has adopted the principle of promotion and relegation to and from the CSL, ensuring that intense competition will reward success and penalize failure, raising standards overall. Investing in Europe, the powerhouse of world soccer, will facilitate technology transfer.
Asia has long been a poor relative in the soccer world. While the game has more than a century of history in the region, and many infatuated Asian fans, the standard of domestic competition has languished because of a refusal to match the financial commitments of European and South American clubs.
Japan and South Korea have flirted with the creation of competitive leagues but have fallen into the same trap as the Americans — the desire to turn a profit from the sport, known to many fans as the beautiful game.
The wealthy oil states of the Gulf have decided, perhaps wisely, that investing in Europe is a better option than creating domestic leagues for their small populations. Indian soccer has potential, but is underfunded, and soccer-crazy nations such as Malaysia, Vietnam and Indonesia lack the purchasing power to compete on a world stage.
China, alone among the Asian nations, seems likely to produce a globally competitive national league in the next decade, largely because it is faithfully copying the model that has made Europe the dominant soccer power: spend, spend, spend.