The long Chinese march into football

China's long march into football forms part of a 'soft power' strategy, but it may not pay off and Chinese investment in European clubs may now be past its peak.

Chinese tycoons have invested more than $2.5bn in European clubs over the past three years from giants like Manchester City and AC Milan to smaller outfits such as FC Sochaux in France and Northampton Town. The most expensive investment was $797m to buy AC Milan, followed by $400m for a 13 per cent stake in Manchester City and $270m to buy Southampton.

For the Chinese government it's part of a wider strategy to increase the country's soft power and earn China its rightful place on the world stage. Powerful leader President Xi Jinping told the Communist Party's five-yearly congress last month that the 'extensive development' of competitive sports had helped boost the appeal of China's 'underlying values', increasing its 'soft power and influence'.

However, exporting soft power is not easy for China's communist party because of its overt rejection of democratic values, its record on human rights and intensifying clampdown on criticism. Even so, supporters of a club successfully backed by a Chinese investor may be prepared to disregard this harder edge to its policies.

However, previous waves of football club acquisitions by US, Russian and Middle Eastern buyers have done little to improve perceptions of these countries. In some cases, they have damaged them.

What are the motives of the individual Chinese investors? An important one is to win political credit with Mr Xi and the party hierarchy. It is thought that the overseas investments would help China to gain experience and expertise to develop its domestic game.

Some purchasers had a more commercial motivation. They hoped to use cheap financing to buy clubs before selling them on for a profit.

The motivations of some investors is clearer than others. CMC, Wanda and Fosun see European football as a high profile element of a growing media and entertainment business. When Rastar Group, a manufacturer of remote controlled cars, acquired Barcelona's second team Espanyol, it was seen as a part of a broader expansion into entertainment, along with the purchase of a gaming company. After rescuing the club from financial difficulties, Rastar restored it to profitability.

However, the Chinese Government became concerned about the high capital outflows resulting from the purchase of foreign clubs. Mr Xi grew wary of his name being linked with questionable deals. If a Chinese owned club ran into financial difficulties, that would be damaging for the country's reputation. Analysts expect the flood of Chinese football deals to slow to a trickle over the next couple of years, unless there is a change in government policy.

The Chinese Super League

Tycoons have also pumped several billion dollars into the Chinese Super League in response to President Xi's call to transform the game. CSL teams spent more than $450m on transfer fees last year, more than double the figure in some European leagues including France.

Average attendances have risen by more than 60 per cent to 25,000 since 2010 and more fans attend the average CSL game than top flight matches in the French and Dutch leagues. Sky Sports started showing the CSL last year in a sign of growing global interest. However, all clubs continue to be loss making.

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The Political Economy of Football V2

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