22 October 2016
China's sports industry will benefit from government plans to boost the sector to drive domestic demand. Photo: Xinhua
China's sports industry will benefit from government plans to boost the sector to drive domestic demand. Photo: Xinhua

Chinese damas to boost domestic sports industry

On the day Britain voted to leave the European Union, I made the prediction that the Shenzhen-Hong Kong Stock Connect was unlikely to be announced on July 1, the anniversary of Hong Kong’s handover to China.

The medium- and long-term impact of Brexit remains uncertain, but it is expected to have a profound impact on the renminbi as well as Chinese investors’ interest in holding foreign assets.

China’s A shares failed to make it into MSCI emerging markets index last month, and MSCI said the Shenzhen-Hong Kong Stock Connect was not a key consideration.

The authorities are not in a hurry to launch the stock link, which is one of the few policy ammunitions that Beijing holds to boost A shares.

I believe the policy will be unveiled when authorities feel it is the best time to do so in order to achieve the best effect. Otherwise, it won’t pay off.

Meanwhile, China’s damas – middle-aged and elderly women in the country – continue to support the stock market.

As we know, square dancing is becoming increasingly popular on the mainland, and the Chinese damas are having great fun doing this excellent pastime and form of exercise.

In fact, Beijing has been urging investors to tap into the dancing fever. On June 23, the State Council issued a five-year plan to drive national exercise, and it’s estimated that the sports consumption market would reach 1.5 trillion yuan (US$225 billion) by 2020.

The national exercise plan has become a new growth engine for driving the sports sector and boosting domestic demand.

China intends to have 700 million people who would exercise for more than once a week, and 435 million people who would exercise regularly.

Also, the nation will speed up the development of football pitches and ice hockey rinks as part of the country’s urbanization plans.

The government will step up the construction of public sports facilities. It intends to build 15-minute exercise circles in urban communities, and the area of a sports center per capita will be increased to 1.8 square meters.

The authorities will adopt a free or low-charge policy for large sports centers, and expand that policy to smaller sports centers as well.

The government will set up a multi-source capital-raising mechanism and implement various preferential tax policies to attract investment.

Local governments above the county level should include relevant spending in their fiscal budgets and gradually ramp up spending.

In addition, a certain proportion of the lottery fund and other fiscal funds would be channeled into specific investment funds, and social investment will be encouraged into building sports centers.

It’s widely believed that all these efforts will lead to a golden decade in China’s sports industry.

The sector still has a huge potential to grow in terms of scale, percentage to GDP, per capita consumption and other parameters.

A stream of supportive policies will be unveiled.

A number of domestic and international sports competitions are scheduled for this year on the mainland. These include the China Super League, AFC Champions League and the China Basketball Association tournament.

These games would help boost mainland audience ratings and advertising incomes.

China’s sport industry is all set to take off, and companies that are good at consolidating resources or focusing on certain sports will be well sought after in the market.

This article appeared in the Hong Kong Economic Journal on July 4.

Translation by Julie Zhu

[Chinese version 中文版]

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Senior investment banker

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