English football fans often use the phrase ‘it all kicked-off’, which essentially means ‘when the trouble started’. In the never-ending soap opera that is Chinese football, it has all kicked-off once again over the last month or so. During the politically induced damp squib of the last Chinese Super League (CSL) transfer window (which closed mid-July), rumours circulated that a host of China’s investors in football were in trouble with the government.
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At the end of June, the China Banking Regulatory Commission requested information from financial institutions regarding loans made to companies including Dalian Wanda Group Co. (owner of a stake in Spanish club Atletico Madrid), Fosun International Inc. (owner of English club Wolverhampton Wanderers), and Zhejiang Luosen (owner of AC Milan).
Dalian Wanda Group purchased a stake in Spanish Primera Liga outfit Atletico Madrid. Photo: Reuters
Thus far, no action has been taken by the Chinese government against any of these companies. However, the state’s moves can be interpreted as a warning shot across the bows of corporate China’s excesses, particularly with regards to what the government has called ‘irrational investments’.
This phraseology has hung around the vicinity of Chinese football throughout 2017 without the government having ever publicly clarified what it means. Having spoken to several officials associated with football during a recent visit I made to China, I now have a stronger sense of its meaning. Likewise, I have been able to better understand the reasons why some football investors appear to be in the spotlight, whilst others are not.
At one level, ‘irrational investments’ can be explained as a Chinese government concern that more of China’s currency is flowing out of the country than is flowing into it. This is bound up in a view that investments being made in, for example, European football are economically unproductive and have failed to contribute to inward currency flows.
Fosun Group bought English Championship side Wolverhampton Wanderers in 2016. Photo: AFP
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At the same time, it is felt that companies such as Wanda and Fosun have funded their overseas investment programmes by incurring considerable domestic debt, which in turn has exposed China to significant financial risk. This is problematic as Chinese economic growth has slowed considerably in recent years.
