Manchester City-Chengdu deal - A matter of business or politics?

February 25, 2019 14:34
Third-tier Chinese  soccer club Sichuan Jiuniu FC (left) is being acquired by Manchester City’s parent company. Photos: Chengdu Jiuniu, Reuters

Another year, and yet another Manchester City franchise has been announced. This time it is the acquisition of Chengdu’s Sichuan Jiuniu, the Chinese club following the likes of New York, Girona and Melbourne into the City Football Group (CFG) portfolio.

Football's biggest club ownership network is not yet quite on a parallel with McDonalds or Starbucks, though it continues to chart a course set for it by Walt Disney. CFG’s chief executive, Ferran Soriano, is an avowed fan of the entertainment giant’s business model, something he has drawn inspiration from in taking City global.

There have been rumors for several years that Manchester City would acquire a club in China, indeed it seemed only a matter of time before it happened. If there are any surprises in this latest deal, it is firstly that it took so long and secondly in the team City has acquired.

The last eighteen months in Chinese football, indeed in China generally, have been somewhat turbulent. State concerns about currency outflows, a desire to put China first and consequent increased government intervention, has seen an end to big name signings in football and a general dampening of expectations that the country is in the midst of a football boom.

CFG has therefore bucked what has been a trend. One suspects that Chinese investor CMC, which acquired a 13 percent stake in the business in 2015, was instrumental in navigating through the complexities of Chinese football’s operating environment (and its politics) to ensure that City and its Abu Dhabi owners were able to win support for the deal from key stakeholders in Beijing.

City is in the business of talent acquisition and market development, hence China was always an inevitable destination for the organiZation. Here is a country with a large population, a government committed to promoting football, and a market that continues to exhibit healthy growth. In spite of concerns about the country’s slowing economy, it continues to average over 6 percent growth.

As such, China is a potential source of sustainable revenue for City, but also a place where future City stars may be identified. In this respect, CFG’s reading of the situation has been very shrewd and probably one reason why City has succeeded where others have failed. The deal for Sichuan Jiuniu effectively represents an injection of cash into Chengdu rather than one of the withdrawals that has previously so irked the Chinese government.

Furthermore, it represents a commitment to the future of football in China. It seems that City has positioned the relationship as being long-term and sustainable, rather than opportunistic. Among state decision makers, this is likely to have played out well in securing their support for the project.

What is perhaps most striking about the deal is the club that City has bought. Not only is it a lower league team, but it is also some considerable distance away from the economic hotspots and football heartlands of Beijing, Shanghai and Guangzhou. One senses that this was an important aspect of the deal, as it demonstrates a willingness by the English club to support the development of Chinese football as it moves westwards across the country.

As big money transfers into the Chinese Super League have been abruptly halted, and with Chinese acquisitions of overseas football clubs apparently having ended (at least for the time being), the timing of CFG’s acquisition of the Sichuan club is also telling. The deal comes at a point when government in Beijing is beginning to take the Gulf region more seriously.

At a time when China is being considered in its overseas spending, there has been an upsurge in its investments in the United Arab Emirates (UAE). Commentators believe that the country’s political stability and attractive yields are amongst the reasons for this, although China’s One Belt One Road policy is also likely to be important (not least in securing oil supplies).

It is likely that faltering relations too between the UAE and the United States, as well as between the latter and the UAE’s close ally Saudi Arabia may also be pushing certain parts of the Gulf towards improved, more certain, relations with government in Beijing. Indeed, it hardly seems coincidental that as City’s Chinese tie-up was being announced, Saudi Crown Prince Mohammed bin Salman was arriving in China for talks with President Xi Jinping.

Presumably no coincidence either that, just days before CFG acquired Sichuan Jiuniu, Abu Dhabi’s Etihad Airways announced that it will be introducing an all new fleet of Boeing 787’s to service its routes into Chengdu. It is worth keeping in mind that state owned Manchester City’s shirts are already sponsored by state owned airline Etihad. It will be worth keeping an eye on the local airport as CFG’s work with the local football team unfolds.

All of which suggests that the purchase of one football club by another football club (albeit one that owns several more football clubs) is more than just sport. This indicates yet again that sport in Asia is often a means to an end rather than an end in itself. We have been here before and we will be here again, over and over.

The alignment of CFG’s, Abu Dhabi’s and China’s football interests is not insignificant, nor is it incidental to recent developments. However, Manchester City’s purchase of Sichuan Jiuniu again illustrates how state policies, geopolitics and international relations are closely linked to and often bound up in sport, business and wider industrial developments.

As such, when fans cheer for whichever club they support from within the CFG portfolio, they should remember that here is an organization which combines the commercial savvy of a Hollywood entertainment empire with the political and economic clout of an Asian state. Clearly, they’ll never walk alone.

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Simon Chadwick is Director of Eurasian Sport, Professor of the Eurasian Sport Industry Director, Centre for the Eurasian Sport Industry.