Is the Chinese Super League sustainable?

Is the Chinese Super League sustainable?

Unless you’ve been living under a rock for the past decade, you’ll have noticed the explosion of the Chinese Super League (CSL) onto the international football scene.

Founded in 2004 after the failure of the Chinese Jia-A League, at first the CSL was merely another minnow in the sea of young Asian football leagues, producing a level of quality similar to that of the J-League (Japan) and the K-League (South Korea).

However, as China grew to become a world superpower, the CSL grew up too. Now a big fish, the league is hunting top talent from Europe’s elite leagues with reasonable success – a first for Asian football.

Oscar, Yannick Carrasco, Hulk and Alex Teixeira all moved to the Far East in their prime, turning down the chance to compete for the UEFA Champions League in favour of a £400,000+ weekly wage.

But how exactly are these transfers funded?

Carlos Tevez dubbed his £650,000-a-week stint in China a ‘holiday for seven months’. He earned £34m at Shanghai Shenhua.

Xi Jinping’s Plan

Most CSL clubs are owned by massive private corporations with cash to splash. Guangzhou Evergrande’s majority shareholders are Evergrande Real Estate Group and Alibaba Group, which have a combined market capitalisation of nearly $800 billion USD.

But Evergrande has owned part of the club since 2011, so what’s changed?

For one, the company experienced massive growth in 2017, seeing its stock price quadruple. Broader economic growth in China means that the shareholders of nearly all CSL clubs (not just Evergrande) have more money to spend.

However, the more important factor was the government’s renewed focus on the sport, which began in 2015. President Xi Jinping is a massive football fan – he visited Manchester City’s training facilities in that year and even had a go at kicking a soccer ball back in 2012.

President Xi, Sergio Aguero and David Cameron, October 2015. Two months later, City Football Group, which owns Manchester City, announced a $400m (£265m) investment from a Chinese consortium, CMC, that bought a 13% stake and valued CFG at $3bn.

New government splurges have emboldened CSL clubs to make massive investments in their squads. They know that having a quality domestic league would be important for a World Cup bid, so throwing money at top talent is seen as a way to stay on the good side of the ruling Communist Party.

If you’re a westerner, it can be easy to forget how important it is for corporate entities in China to appease the nation’s leaders – after all, the country seems pretty capitalistic from the outside. However, the businessmen at the top know that they need to be careful. Xu Ming – former billionaire and owner of CSL club Dalian Shide – fell foul of the authorities, had his club dissolved, and died in prison in 2015.

Is The CSL Sustainable?

As things are currently going, you might expect to see the CSL grow to become bigger than some of Europe’s top leagues. Antonio Conte even described it as “a danger for… all the teams in the world.” His fears aren’t unfounded: who would turn down half a million quid per week to play football?

But the Chinese government won’t allow this.

For the national team to grow, Chinese players need to be able to flourish domestically. This is a part of the reason why England is doing so poorly internationally: for Premier League clubs it’s easier to import international players rather than focus on their youth academies.

As a result, the CSL has restrictions in place. You can’t have more than three foreign players on the pitch at any one time. In addition, clubs must play at least two Chinese players under the age of 23 in every single match.

Amid a wider crackdown on capital outflows, China’s state-controlled football association brought in a 100% tax on transfers of more than $7m last summer. Javier Mascherano joined Hebei China Fortune from Barcelona for a fee just below the $7m tax threshold.

In February 2018 the Chinese Football Association placed a new 100% tax on the importation of foreign players. This made purchases of players in the £50+ million range quite painful for CSL clubs, and as a result the steady stream of players entering China has slowed to a mere trickle.

It’s a difficult balance to achieve for the Chinese FA.

On the one hand the league has to have good players – this is essential for future World Cup bids and for increasing TV rights revenue. It’s also critical in attracting more talent to the league in the future, as potential transferees will think about who might sign them when they leave China.

On the other hand, the government wants the national team to improve, and it needs the CSL to be the training ground for the Chinese Messi.

Source: Transfermarkt

We should see the 100% tax rate cut down a bit in the near future, as the Chinese FA realises that it’s gone too far. With China’s economic growth slowing, corporate investors will be hesitant to put more money into the sport, especially if they think that the tax won’t be around for more than a few years.

Ultimately though, the Chinese government will have its way. To predict the future of the Chinese football, you’ve got to understand what the government wants.

Therefore, the CSL won’t be taking over from the Premier League as the world’s biggest league any time soon. We’ll likely see steady, sustainable growth in the near future – the league picking up a few good players as they become available.

However, there won’t be any more massive buying frenzies for quite some time. The restrictions on foreign players will remain in place, at least until China has secured the right to host its very first FIFA World Cup.