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Warning could mean (Chinese) soccer bubble is about to burst
by Paul Kennedy, January 5th, 2017 7:31PM
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TAGS:  alex morgan, atletico madrid, china, france, italy, manchester city, soccer business

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Wild spending by Chinese Super League clubs -- including massive deals for Oscar and Carlos Tevez by rival Shanghai clubs -- has to stop.

That warning isn't coming from European officials, fearful of the inflationary pressure on transfer fees and salaries, but from the Chinese Sports General Administration, which issued a statement on Thursday that it will “regulate and restrain high-priced signings, and make reasonable restrictions on players’ high incomes."

The statement accusing clubs of "burning money" comes a month after an editorial by the ruling Communist Party’s official newspaper, the People’s Daily, critical of the spending by Super League clubs on foreign players and coaches had reached almost $500 million.

The irony, of course, is that the boom was triggered when Chinese president Xi Jinping, a big soccer fan, supported efforts to transform the country into great soccer power. At the grassroots level, that has meant the investment of huge sums in soccer schools. But national and internationally, Chinese investors have been encouraged to center their sports and entertainment portfolios on soccer properties.

Reuters quoted an unnamed official as saying concerns were centered on "large scale overseas acquisitions, the grave phenomenon of clubs burning money, salaries that are too high for foreign players, not attaching importance to youth training, and only emphasizing short-term achievements and neglecting long-term development."

To attack the problem, the Sports General Administration is looking at imposing caps on transfer fees and limit fees paid to agents and brokers for facilitating agreements -- wasted money it wants directed to youth development.

Bloomberg also reported that the Sports General Administration's warning isn't just limited to domestic spending, suggesting it will take aim at overseas soccer spending.

What European clubs gain from an easing of the inflationary pressure on salaries and transfer fees might be offset by reduced Chinese investment in struggling European clubs that has been termed "a blessing."

Chinese investors have bought or attempted to buy majority or minority positions in a host of European clubs, including Manchester City, Inter Milan, AC Milan and Atletico Madrid.

Lyon's acquisition of Alex Morgan coincided with a deal club president Jean-Michel Aulas reached with China's IDG Capital to invest 100 million euros ($120 million) into Lyon in return for a 20 percent interest in the club.

Investment in smaller European clubs has come as a lifesaver, allowing them to pay off or restructure debt. Without it, the soccer bubble economy could burst.


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