CFG stake is part of China’s dream of becoming powerhouse

Photo credit: AFP.

A state-backed Chinese company’s $400 million stake in Premier League giants Manchester City underlines the nation’s soaring ambitions in soccer — and how its investors are seeking profits as well as prestige, analysts said.

The swoop by China Media Capital (CMC) marks China’s first investment foray into the hugely popular English Premier League, and a step forward for a grand project spearheaded by President Xi Jinping. Soccer is an important part of Xi’s agenda as he seeks to “rejuvenate” the nation, building it into a world power that can compete across all domains from military and economics to sport. He has called for the country to host and win a World Cup, and in a visit by Britain’s Prince William to Beijing this year said he wanted to see more Chinese players in the English Premier League.

The Manchester City group, which also brackets New York City and Melbourne City, isn’t China’s first investment in European soccer. A Chinese model car-maker last month said it was taking an 80 percent stake in Spain’s Espanyol, and real estate powerhouse Dalian Wanda snapped up 20 percent of Atletico Madrid in January.

But the latest deal — just weeks after Xi visited Manchester City — has by far the highest profile and is expected to have wide-ranging benefits for both China and the Abu Dhabi-owned group.

– ‘Sports powerhouse’ –

Academic Zhang Ziru, of the Central University of Finance and Economics in Beijing, said the government’s priorities are behind China’s push into foreign sports.

“During the last two years, the Chinese government has put forward policies to strongly promote the development of the sports industry,” he said.

That has made some Chinese companies, including newcomers to the industry, take “notice of the domestic and international sports market,” he added.

SEE MORE: Manchester City get Everton in League Cup; Liverpool to face Stoke.

So far, China’s achievements in soccer have not kept pace with other indicators of its national rise. Despite becoming the world’s second largest economy, it has made only one World Cup appearance, in 2002, and is struggling in the current round of qualifiers for Russia 2018.

Turning that trend around “is a must to build China into a sports powerhouse as part of the Chinese dream,” state media cited a top Communist Party body as saying in March.

CMC has backing from China’s top state planning agency, while its chairman is a former Shanghai government official. The firm’s leaders have said the deal is a chance to learn how to build a winning soccer brand, and also boost China’s domestic game.

“A big aim is also to gather experience that the domestic sport industry can learn from,” its chairman Li Ruigang told local media outlet The Paper this week.

– Slowing economy –

Industry analyst Zhang said that Chinese firms’ “management and profit-making capabilities are inferior” to foreign competitors in sports. But their advantage is “large amounts of capital,” he added. Buying shares in European clubs, he said, has the “strategic meaning” of bringing their know-how back to the home market.

For Manchester City, the tie-up represents an opportunity to increase their appeal in one of the world’s largest and still growing sports markets. China’s economy is slowing, spurring companies in many sectors to step up investment abroad in search of higher returns. Businesses are also expanding into China’s consumer sector — including sports — as the country tries to rebalance its economy away from manufacturing.

Cash has flowed into China’s domestic soccer in recent years, with Guangzhou Evergrande, backed by a major property firm and web giant Alibaba, winning their second Asian title in three years last month.

Wanda, headed by Asia’s wealthiest man, has invested in the world-famous “Ironman” triathlon this year and paid 1.05 billion euros for Infront Sports and Media — a Swiss sports marketing outfit.

For Rastar Group, the model car-maker which acquired a majority stake in Barcelona-based Espanyol, buying into European football is a matter of simple economics.

It “might do something for Chinese football unintentionally. But our primary motive is based on business,” the secretary of the company’s board Yang Nong told AFP.

Sports clubs’ business models are “quite simple,” he said, expressing confidence that the company would be able to turn a profit despite being new to the industry.

“As a private and listed company, it’s impossible that we do not take returns into account,” he said.