Real estate football, the final whistle
"Caijing" reporter Wang Bo, Yu Le, Xin Xiaotong, Chen Xianzhong
Editor|Yu Le
On the evening of February 14, Chen Jiayuan, president of the Chinese Football Association, was announced to have "fallen from the horse"; At almost the same time, Meng Xuan, co-president of Huaxia Happiness, was also placed in Hubei for suspected violations and crimes. A person close to the company's core revealed to Caijing that Meng's problems are related to the recent anti-corruption in football.
"Love and kill" for 30 years, the big guys of real estate enterprises and Chinese football have been in the same frame countless times, but this time is the most embarrassing.
In the anti-black storm in football since the end of 2022, former national football coach Li Tie, former secretary general of the Football Association Liu Yi, executive deputy secretary and director of the national team management department Chen Yongliang, and football association president Chen Jiayuan have fallen one after another.
Along with this, real estate companies represented by Evergrande and Huaxia Happiness have stayed away from the green field in the past two years, some have directly dissolved clubs, and some have significantly reduced expenses. Chinese football, which has just experienced the "golden decade" of real estate football, has fallen to a freezing point.
Since the reform of football professionalization in the 90s, real estate companies have been one of the most important investors in professional leagues. After Evergrande Real Estate joined in 2010, it set off a frenzy of "Golden Yuan Football", which once made the Chinese Super League prosperous.
However, after 30 years, the level of Chinese football has not only not improved, but its status in Asian football has continued to decline. Real estate companies burn countless amounts of money, but they have been repeatedly involved in "fake gambling" scandals in football, and whether their investment is proportional to their returns also needs to be questioned.
Wang Jianlin, Xu Jiayin, Zhang Li, Song Weiping... These real estate bigwigs who once spent a lot of money for football have now left this land of right and wrong, some of them are frustrated, some are helpless to leave, and some are still caught in various debates and criticisms.
More importantly, the once prosperous real estate industry itself has now fallen into a trough and is overwhelmed.
Is China's real estate football coming to an end this time?
Huge investment in exchange for dazzling results
One day during the AFC Champions League in June 2019, Xu Jiayin had just finished a day's meeting when he pulled his friend to the restaurant quickly. "Today there is our game and there is a TV in the restaurant."
Not long before that, Wang Jianlin organized a group to bring Zhang Li, chairman of R&F, and Hu Baosen, chairman of Jianye, to Madrid, Spain. The three bigwigs came to Atletico Madrid, a La Liga powerhouse in which Wanda participates, and watched a game at the newly completed "Wanda Metropolitan Stadium".
Wang Jianlin (second from right) with Zhang Li (first from right) and Hu Baosen (second from left) watch at Wanda Metropolitano in Spain. Image source: Jianye Group official website
Some people in the industry believe that such gatherings will increase in the future. In addition to watching the game, they also want to learn from the world's top clubs. Unexpectedly, a few years later, such a scene not only could not be reproduced, but even the word "Wanda" was removed from the name of the stadium by Atletico.
China's private camp bosses and football ties back to 1992. In this year, the National Sports Commission decided to take football as a breakthrough in sports reform, establishing the development direction of China's football to take the road of professionalism, and opening the door to private capital for football investment.
Wang Jianlin and Hu Baosen entered the game at this time. There were rumors in the industry that Wang Jianlin wanted to build a house near a gymnasium in Dalian and also invest in football, but the local government did not approve it. However, Wang Jianlin still sponsored the Dalian Wanda Club.
In the 90s, Dalian Wanda won the A-League championship four times, becoming the best club at that time. However, in 1998, after a FA Cup match between Dalian Wanda and Liaoning, Wang Jianlin immediately said that Wanda Group would withdraw from Chinese football forever because of dissatisfaction with the referee. "I am worried about the development of Chinese football, in other words, I have no confidence in Chinese football now."
At that time, the main sponsors of the Chinese football league were not only real estate companies, but also many tobacco and alcohol brands, such as Yunnan Hongta, Sichuan Quanxing, Chengdu Wuniu, etc. But after 2000, the popularity of China's professional leagues began to decline, and the operating costs of clubs continued to rise. Many companies in other industries are gradually unable to play football, or do not want to play football, and only real estate developers can still invest a lot.
In 2009, China's housing prices kicked off a new round of rising cycle, and in the following decade, house prices rose exponentially, hundreds of billions of housing enterprises gradually increased, and real estate developers also set off the most fanatical wave of burning money in Chinese football.
In 2011, when the "Golden Yuan Football" kicked off, 14 of the 16 clubs in the Chinese Super League had real estate backgrounds, accounting for 87.5%. The only two teams without a real estate background, Shanghai Shenhua and Shenzhen Red Diamond, were later taken over by real estate companies Greenland Group and Kaisa Group respectively.
Chinese Super League clubs' 2011 "room included" statistics
The standard-bearer of "Golden Yuan Football" is undoubtedly Xu Jiayin, the head of Evergrande Real Estate. In 2010, Xu Jiayin bought Guangzhou Medical Club, which had been relegated for suspected match-fixing, and invested a lot of money to buy international players and strong foreign aid. In 2014, Xu Jiayin and Ali Ma Yun changed the club's name to Guangzhou Evergrande Taobao Football Club. On November 6, 2015, Evergrande Taobao landed on the New Third Board and became the first stock in Asian football.
The huge investment has brought dazzling results. In 2012, Guangzhou Evergrande Club reached the quarter-finals of the AFC Champions League for the first time, and won the championship in 2013, which was also the first time that a Chinese football club won the championship of the competition. In the Chinese Super League, Evergrande Club won the title eight times in the nine years from 2011 to 2019.
Loss inside the dike and compensation outside the embankment
Wang Jianlin and Xu Jiayin, these two real estate bigwigs, have created the most successful teams in the A era and the Chinese Super League era respectively. However, from a business point of view, if the income other than football is not considered, the investment of real estate companies in football has not been successful.
Compared to teams in overseas mature leagues, Chinese Super League clubs have insufficient hematopoietic capacity in business. In a paper written by Li Zhiming and Song Jianqi, the author compares various financial data of Evergrande and Manchester United from 2014 to 2018. The study found that Evergrande Taobao's revenue source is single, mainly relying on commercial (advertising) income. The main contributors to this revenue are likely to be parent company Evergrande Group and its affiliates.
Manchester United, on the other hand, has a more stable and balanced income. Due to the huge broadcast revenue of the Premier League around the world, Manchester United can get a relatively stable dividend every year. This part of the income has brought stability to Manchester United.
From the comparison of the income cost of Manchester United and Evergrande Taobao, in 2018, Manchester United's operating income was 8.59 times that of Evergrande, but the main operating costs and employee compensation were only 2.35 times and 1.76 times higher than the latter, respectively.
According to incomplete statistics, in the past two decades, real estate enterprises led by Evergrande, Wanda, Jianye, Huaxia Happiness, Kaisa, R&F, etc. have invested nearly 10 billion yuan in the field of football in China, but none of them have made money, and the degree of loss is increasing.
Taking Evergrande Taobao as an example, the Securities Times reported that the club lost a total of more than 8.635 billion yuan in the seven and a half years from 2013 to the first half of 2020.
Even so, there are still a large number of leading private housing enterprises that want to have their own football club. There is a saying in the industry that the money lost by real estate companies on the football field can be earned back by selling houses. In other words, the traffic, credit endorsement, and brand promotion that football brings to enterprises help developers sell more houses.
A report in "Global People" wrote that around 2011, Xu Jiayin once calculated an account: "We give Guangdong Sports Station 40,000 yuan in broadcast fees for each game, in exchange for 90 minutes of brand exposure... You know, CCTV advertising 150,000 yuan per second, and I only used very little money to exchange for so much return, do you say this investment is worth it? ”
The rise of Guangzhou Evergrande Club and the rapid development of China's real estate market have put Evergrande Real Estate at the top of the industry. In 2014, Evergrande Real Estate's national sales area surpassed Vanke to become the first place.
Feng Lun, one of the founders of Vantone Group, once concluded that investing in football is a very expensive task, but real estate companies are happy to do it. There are roughly three reasons: first, it can improve the social image of the enterprise and play a role in the development of the corporate brand; Second, football and the development of the city have a close relationship, real estate has a strong regional attribute, if the team results well, the brand image of the city will also have a role in improving; Third, individual real estate business owners like football, and investing in football is to meet personal interests.
The second point Feng Lun did not expand. That is, football not only embellishes a city's business card, but also becomes a stepping stone for developers to maintain good communication with local governments. The construction of stadiums naturally requires the allocation of business districts and residential areas, and these are the benefits that real estate companies can obtain by investing in football.
Data released by the National Bureau of Statistics shows that in the 20 years from 2000 to 2021, the average house price of commercial housing increased by more than 5 times. In popular cities such as the first and second tiers, house prices have risen even more. The profits of real estate companies are enough to make their investment in football profitable.
For example, in 2009, Shanghai Greenland Group signed a contract with Xi'an Chanba Ecological Zone, acquiring about 4,000 mu of land with a total investment of about 28 billion yuan. In the same month, Greenland Group replaced Zhongxin Real Estate as the main sponsor of Chanba, and the name of the football team was changed from "Zhongxin Chanba" to "Greenland Chanba". Investing in football clearly played a key role in Greenland's land acquisition.
The merits and deeds of "Golden Dollar Football"
The success of the real estate tycoons in their main business has made them believe that as long as they are willing to throw money and rob people like they grab good land plots, they can also do football well. However, it has proved that such "golden yuan football" can help the team improve its performance in a short period of time, but it does not help the overall level of Chinese football.
In 2010, after Xu Jiayin bought Guangzhou Pharmaceutical, he invested in Zheng Zhi, who would work overseas, to return to China and buy the sought-after international player Gao Lin. At that time, many people were not optimistic about this temporary team. But as mentioned above, Evergrande quickly proved its strength with multiple championships. This also seems to tell the industry in a sense that the road of "golden dollar football" with high salaries and high transfer fees has run through.
In 2014, the State Council issued Several Opinions on Accelerating the Development of the Sports Industry and Promoting Sports Consumption (commonly known as "Document No. 46"), and the sports industry entered a stage of great stride development. In 2015, Sports Olympic Power bought the broadcast rights of the Chinese Super League for 8 billion yuan in five years, and in 2016, the dividends of each Chinese Super League club were about 60 million yuan, giving many investors confidence.
In 2016 and 2017, football clubs entered the peak of burning money. The club spends heavily on strong foreign aid in overseas markets. In those two years, Shanghai SIPG successively introduced Brazilian stars Oscar and Hulk with 60 million euros and 55.8 million euros; Jiangsu Suning "cut off" Brazilian rising star Teixeira from Liverpool for 50 million euros; Guangzhou Evergrande paid 42 million euros for "parallel cargo" foreign aid Jackson Martinez...
The price and strength of the foreign aid introduced have increased, while the level of domestic players has not improved, but the value has also increased by leaps and bounds. In 2012, Yu Dabao, who played for Tianjin TEDA, joined Dalian Albin for 20 million yuan, becoming the local champion of the season; When Zhang Chengdong transferred from Beijing Guoan to Hebei Huaxia Happiness in early 2017, his worth had soared to 150 million yuan.
An industry insider told Caijing that Zhang Chengdong's broker received more than 20 million yuan in this transaction alone, achieving financial freedom.
There is an example of how inflated the value of domestic players was at that time. At the end of 2016, Zhang Chenglin, a left-back from Beijing Renhe and nearly 30 years old in the Chinese League One, joined Guangzhou Evergrande for more than 100 million yuan. According to the information of the transfer market, an authoritative football data network media in Germany, Zhang Chenglin's market valuation at that time was only 106,000 pounds, about 900,000 yuan, a premium of more than 100 times.
During the winter transfer period of that year, Evergrande's recruitment expenditure ranked only 11th in the Chinese Super League. Hebei Huaxia Happiness topped the list with 77.69 million euros (about 560 million yuan) in terms of recruitment expenditure, and Tianjin Quanjian ranked second (74.59 million euros, about 540 million yuan). These two clubs also rank in the top two globally for spending
The heads of the two clubs at the time, Meng Jian and Shu Yuhui, are now behind bars.
In the later period of "Golden Yuan Football", Evergrande Club even paid the salary of the national team manager. Previously, Bai Guohua, a reporter who has been following Evergrande for a long time, said that on October 22, 2016, Lippi took over as Gao Hongbo as the manager of the Chinese national team. The World Cup-winning coach earns €20 million, €15.5 million of which is borne by Evergrande. In 2019, Lippi coached the national team for the second time, this time his salary of up to 23 million euros is still borne by Evergrande.
Even with this burning money, the level of Chinese football has not improved after the "golden decade". Who should carry this pot?
On the surface, a huge amount of money poured into the world of football is supposed to drive the industry forward. However, as mentioned earlier, the funds of real estate football are mainly spent on competing for players and coaches at prices much higher than the market price, which is essentially just a meaningless "involvement".
"Golden Yuan Football" not only failed to solve the "blood-making" problem of the football industry, and could not allow clubs to support themselves by broadcasting, tickets and other income, but raised the threshold for investing in football, resulting in fewer and fewer enterprises capable and willing to invest in clubs. In the later period of "Golden Dollar Football", a large number of investors withdrew from football, and several clubs disappeared from the league every year.
With too little supply of good players and very strong demand, a small number of elite players have earned several times more money than their abilities. However, there are still a large number of ordinary players who are still living on wages and low salaries. This phenomenon also contributes to the phenomenon of ball gambling, match-fixing, etc.
As the foundation of professional leagues, the youth training system and campus football have also benefited little from "Golden Yuan Football". It is difficult for youth training institutions to make money by developing and selling players, and can only charge high tuition fees to maintain their operations. It is difficult for ordinary people to bear the cost of training children to practice, and the selection of materials is getting smaller and smaller, let alone the luxury of selecting truly talented seedlings.
In addition to failing to drive the overall development of the football industry, "Golden Dollar Football" itself is also unsustainable. In the golden period of the real estate industry, housing companies have a lot of money to "burn", but in the downturn of the industry, the bosses of housing enterprises can no longer use the money of the main business to supplement football.
In 2020, affected by the "three red lines" policy of deleveraging the real estate industry and the epidemic, most real estate companies experienced a decline in sales and a reduction in profits. Among the real estate companies that invest in football, Evergrande, Huaxia Happiness, Kaisa, R&F, etc. have all experienced liquidity crises. High salaries and high transfer fees are gone. Evergrande and Huaxia Happiness, which were the most generous to players in previous years, also began to significantly reduce salaries and even arrears.
On October 7, 2021, media person Li Xuan broke the news on social platforms that the economic crisis of the Chinese Super League Hebei team (the former Huaxia Happiness Team) was very serious, and even the tens of thousands of yuan for the participation could not be paid, and the parents of the players needed to pool money. On February 16, 2022, Guangzhou Football Club (formerly Evergrande Club) issued an announcement that it terminated its contract with naturalized players Axon, Gaulart, Alan, Luo Guofu and Fernando; Players collectively cut their salaries, with the main players reducing their salaries by nearly 90%.
With the real estate bosses stopping burning money and even leaving the field, and a number of senior officials of the Football Association led by Chen Jiayuan being investigated, the era of "golden yuan football" driven by real estate developers has finally come to a complete end in 2023.
The real estate bosses are successful businessmen, most of them have a broad vision, good at identifying business opportunities and assessing the situation. They have not been able to do football well, obviously not because they are incapable, not because they have no money, but because they do not have a healthy environment.
A benign market should be when all parties involved can get reasonable returns, and at the same time work together to make the market bigger. The "golden decade" of real estate football failed to do just that, with more input not leading to more output. Therefore, the money is like a large flood that accidentally rushes into the desert, and although it is menacing, it quickly evaporates without a trace. The desert is still a desert and has not become fertile land.
(Caijing reporter Liu Xin also contributed to this article)