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    30 Years of Chinese Pro Soccer: Can Clubs Make a Comeback?

    With a record number of teams dissolving since 2020, can Chinese soccer clubs find a sustainable model for development after three decades of play?
    Jul 09, 2024#sports#history

    Editor’s note: This year marks the 30th anniversary of China’s first professional National Football Jia A League, whose founding in 1994 symbolized the professionalization of the sport in the country. The move has yielded mixed results, with Chinese clubs winning their first AFC Champions League title in 2013 but struggling with operations in recent years. In this article, Tobias Ross, a soccer industry specialist with over a decade of research and work experience with Chinese clubs, leagues, and associations, shares his thoughts on the fiscal side of the sport, asking: What are the challenges and opportunities facing Chinese clubs today?

    The inception of the Chinese professional soccer league in April 1994 marked a significant shift in China’s approach to sports, catalyzed by the economic and administrative reforms initiated by former leader Deng Xiaoping in the late 1970s. The sports industry was at the forefront of state efforts to make China’s economy more market-oriented, with soccer’s popularity domestically and worldwide making it symbolically important for the reforms.

    Much has happened in the three decades since. Chinese clubs made breakthroughs in the Asian Champions League before struggling to overcome financial predicaments. More than 100 clubs have folded in the country’s top three divisions, with more than 40 clubs dissolving after 2020. Earlier this year, the Chinese government issued a reform plan for juvenile soccer, calling for professional clubs to play a “pioneering” role in the cultivation of youth players — a tacit acknowledgment of a major problem that plagued the professional game from its early days to today: prioritizing short-term goals to sustainable development.

    The development of professional soccer in China can roughly be divided into three periods in which there has been dynamic interplay between state and private actors. Before 1994, elite soccer was almost entirely governed and funded by the state — in common with other socialist countries. Local sports administrations operated centralized training centers, which identified talented athletes at a very early age. Though they were technically amateurs, they were full-time athletes paid, housed, and fed by the state, which also provided them healthcare and equipment. There were no transfer markets, and salaries generally matched those of state employees.

    Athletes mostly represented their municipality or province and competed at state-organized national competitions, above all the quadrennial National Games of China, while elite athletes were picked for the national team. Infrastructure, primarily national training centers, was prioritized to train elite athletes to become international champions.

    This national push for gold medals was reflected at the local level, where authorities mostly invested in elite athletes, while grassroots structures, like providing enough quality coaches or matches for teen players, were largely ignored. And with national officials identifying soccer as a priority for professionalization, local officials were incentivized to support soccer programs of potential benefit to their region’s reputation and their own career prospects.

    In the first period of the professional era, roughly from 1994 to 2010, the top three leagues were professionalized and clubs were opened up to private investment with the aim of increasing infrastructure investment and talent development. This saw the transformation of teams like the Dalian municipal team into the first fully privately-owned club in China when it was acquired by real estate firm Wanda in early 1994, which went on to secure eight league titles between 1994 and 2005, symbolizing the success of private clubs.

    However, the influx of private capital was met with widespread inexperience in market-based soccer governance and club management. In particular, there was no consensus on private investors and local authorities’ respective roles in the management of clubs from finance to training.

    Meanwhile, state-owned enterprises were the major backers of many local clubs during the 2000s, a phenomenon often referred to as “SOE Soccer.” In an era when professional soccer was still taking baby steps, well-financed SOEs were seen as a stabilizing force in the industry. The downside was that under what economists termed the “soft budget restraint,” these clubs lacked the drive to achieve financial sustainability, leading to the gradual accumulation of debts caused by rising player salaries now determined by the market — a problem that would continue to plague the industry until regulators stepped in in 2017.

    All of these exacerbated the problem of short-termism: The bulk of investment in clubs was channeled towards short-term results, not youth academies that could produce new talent. Chinese soccer’s “golden generation” of players who participated in the 2002 World Cup — still the only time China has qualified — is largely considered the product of the old state-planned sports system pre-1994.

    Overall, the first decade and a half of Chinese professional soccer saw a mix of rising private capital and dominant state actors, and a management system that was yet to be professionalized. As a result, the game was impeded from reaching its full potential.

    The second period of the professional era, roughly the decade of the 2010s, began with the official call for China to qualify, host, and win the World Cup. This ambitious vision, laid out along with a raft of high-level reform papers, helped restore confidence in an industry reeling from a decade of high-profile match-fixing scandals, which had led to a mass anti-corruption campaign.

    By 2012, for the first time ever, the majority of clubs in the Chinese Super League, China’s top division, were owned by private investors. However, the age-old problem of short-termist behavior proved difficult to eradicate as private investors, especially those whose core business was not soccer itself, continued to have close ties with local officials and use the sport to improve government relations.

    The consequence for the sport itself was that, while Chinese clubs began attracting international star players for the first time, neither the overall talent pool nor club incomes improved significantly. Reforms to school soccer programs were increasing overall participation numbers — the number of schools with special soccer programs in the country increased from less than 3,700 in 2020 to over 5,700 last year, but opportunities for youth players to go on to sign professional contracts remain scarce due to structural and societal reasons. Meanwhile, debts were once again ballooning as clubs engaged in massive infrastructure projects and players’ salaries hit new heights.

    To counter these developments, the Chinese Football Association implemented regulations aimed at curbing “irrational” spending on player transfers, part of a broader strategy to develop domestic talent and introduce more sustainable club business models. The central government’s restrictions on overseas sports investments, introduced in 2017, also cooled investor enthusiasm, although attendance numbers and domestic league investment remained relatively stable.

    That was until 2020, when the COVID-19 pandemic hit, exposing the unsustainable business model of most clubs. The struggles of the country’s real estate sector were especially detrimental, as the sector was by far the biggest backer of the professional game at the time.

    The rise and fall of real estate giant China Evergrande Group symbolize the vicissitudes of the decade. The firm’s takeover of Guangzhou Pharmaceutical F.C. in 2010 had ushered in a period of unprecedented success for the club, including seven consecutive league titles from 2011 to 2017. By 2021, however, the club had fallen into deep financial trouble due to the serious debt problems of its parent company. Forced to sell its best players, the club was relegated to the second division in 2022.

    Since 2020, Chinese professional soccer has seen its third major period of development in which the state has reasserted its role. The folding of several privately-owned clubs, including Dalian Pro and Shenzhen F.C. in January this year, has coincided with reforms promoting mixed ownership clubs such as Guangdong GZ-Power F.C., launched by a group of state-owned enterprises in 2023 that currently competes in China’s third division. Nine of the 16 clubs that competed in the Chinese Super League last year were fully or partly state-owned, including the top five teams.

    The return of the state as the central driving force in Chinese professional soccer can also be seen on the commercial side. The current 2024 Chinese Super League season is title sponsored by C’estbon, a bottled water brand — the first time the league has been title sponsored by a product from a state-owned enterprise in its 30-year history — and the official broadcaster Migu Sports is a subsidiary of state-owned telecom giant China Mobile, which paid almost double what private company Tencent had paid three years prior for the broadcast rights in February.

    With private investment yet to pick up, the state’s renewed efforts in recent years to rescue the remnants of Chinese professional soccer are providing a lifeline for many struggling clubs. The significant fall in club operating costs is also helping the industry stabilize. However, the future of Chinese soccer still hinges on whether clubs, investors, and officials can establish a high-quality and financially sustainable ecosystem for the professional game.

    Editor: Vincent Chow.

    (Header image: Shanghai Shenhua F.C. (in the dark kit) compete in China’s first professional Jia-A League, 1994. VCG)