Evergrande Crisis Doom China’s Grandiose, Big-Spending Football

One well-known Evergrande Chinese saying asks. Can the eggs be unbroken if they are destroy? This expression implies that no one is safe from a great catastrophe. This question is very relevant for Evergrande Group, the second-largest Chinese property developer. It also shows the ripple effects of financial problems on China’s ambitions for football.

Evergrande is the owner of Guangzhou Evergrande FC football (soccer), the most successful club from China. The company and Chinese football are now intertwine financially and politically. They will rise and fall together. This has had a ripple effect on the government, and its reliance upon football to boost national pride and deflect criticism while achieving its larger goals. Trouble is coming, as the Evergrande crisis shows.

Evergrande Effect

China has used sport for centuries to foster social cohesion, patriotic citizenship and a common national identity. China has been a dominant power at the Olympics in recent decades. Hosting the Summer Games in Beijing 2008 was regard as one of China’s crowning achievements.

China has long been an embarrassment in football, the most popular sport in the world. China has not qualified for the FIFA World Cup and has never scored any goals. China’s chances of being in the expanded field at the 2022 World Cup in Qatar seem slim.

China’s cabinet, the State Council launched a major football development program in 2015 to address this problem. It aimed at elevating the country’s programs, from the grassroots level, to the elite. Evergrande Group was the strongest supporter of this campaign.

In 2009, Evergrande enter the football industry by purchasing a Guangzhou club that was previously own by a pharmaceutical firm. Evergrande spent enormous financial resources on the development of youth academies, recruiting top international and domestic players and coaches, and upgrading its club facilities.

The club’s peak was achieve in 2013, when it won titles in the Chinese Super League as well as the Asian Champions League, under legendary Italian coach Marcello lippi.

The Evergrande Effect boosted public interest in football and laid the groundwork for the central government’s inclusion of football development in President Xi Jinping’s comprehensive economic, political and social reforms towards national revitalization. The government has made significant investments in the sport’s reputation and financial capital.

Football Arms Race

Guangzhou Evergrande’s success prompted other tycoons and businessmen to invest in teams to increase their visibility with the Chinese public as well as the government. The arms race for Guangzhou Evergrande was intensified, with other tycoons investing in teams to attract foreign talent to China.

Jiangsu Suning FC is own by major electronics retailer. It hired Fabio Capello, an ex-England coach, and signed Brazilian players Alex Teixeira (and Ramires) for close to US$100 million (A$138 millions).

The Chinese Super League spent 529million euros (A$772 millions) on players in 2016-17’s transfer market. This was the highest amount of any league worldwide, while only 147 million euros ($215 million) in income.

Guangzhou Evergrande has maintained its top spot in the league despite increased competition over the past decade. Except for two seasons, it has won the Chinese championship every single year since 2011.

There was a certain amount of hubris. Liu Yongzhuo (ex-CEO of the club) stated that no other team could win the championship unless Evergrande grants it to them.

The club has also been building a $US1.8 million ($A2 billion), lotus-shaped stadium to seat 100,000 fans. It is believed that it will be the largest stadium in the world. The construction of the stadium, which was only half built, appears to have stopped.

The Bubble Bursts Evergrande

It is clear that the Chinese have increased the commercial value of their league by recruiting elite European players. But, these expenditures quickly rose to unhealthy levels.

The Chinese Football Association intervened with a 100 percent tax on foreign signings and a salary cap for this year, as clubs were running large deficits. However, it was not enough to stop the bubble from burst.

These unsustainable expenditures made Chinese football clubs more susceptible to the economic slowdown caused by COVID-19 than any other international league.

Jiangsu FC is the current Super League champion and was the most severe victim. It shut down its operations in March just months after it won the title. It hadn’t paid its employees for several months.

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