Not a Spectator Sport

By+Yin+Pumin

On October 20， the State Council， Chinas cabinet， issued a document entitled Guidelines on Accelerating the Development of Sports Industry and Promoting Sports Consumption， intended to boost productivity in the countrys sports sector. The guidelines outlined plans to turn the nations sporting world into an important driving force for economic growth.

The document has accorded Chinas sports industry an unprecedented level of national importance， marking the first time the Chinese Government has attempted to tap into the economic potential of the sports industry， analysts say.

According to the guidelines， the government expects the sports industry to be worth a whopping 5 trillion yuan （$813 billion） by the end of 2025.

Chinas sports industry is worth about 900 billion yuan （$146.34 billion） right now， which means the plans are to make it almost five times larger within a decade. This is massive，” said Hao Fuqing， a senior official of the National Development and Reform Commission （NDRC）.

The guidelines focus on encouraging more people to participate in athletics and on channeling more investment into sports facilities and stadiums for public use. Public agencies， businesses， social organizations， and schools should all implement one hour of fitness every day to enable employees and staff to take part， the guidelines state. The government will also build “15-minute fitness areas” in communities across the country.

Analysts say the move will provide more opportunities for the countrys sports industry and make it be a new contributor to Chinas sustainable social and economic development.

Liu Peng， Minister of the General Administration of Sport （GAS）， said that with incomes rising across the country， Chinese people are pursuing a higher quality of life.

“The notion of investment in health is taking firmer root among the people and physical fitness is gaining more attention，” Liu said， adding that China needs to further unleash the potential of the sports market.

According to the GAS， the sports industry is expected to account for about 1 percent of the countrys GDP by 2025， the same level as in most developed countries， compared with 0.6 percent in 2012.

Huge potential

In the guidelines， the government admitted that the sports industry in China is still in its infant stages and its vitality is yet to be explored.endprint

According to an annual report on sports industry development jointly released by the Beijing-based Social Sciences Academic Press and Beijing Sport University in July， sporting goods sales in China reached 79.7 billion yuan（$12.96 billion） in the first three quarters of 2013， a 10.6-percent year-on-year increase， and realized profits of 3.2 billion yuan （$520.33 million）， a 3.4-percent rise from 2012.

However， growth of Chinas sports industry has been slowing since 2010 due to a lack of professionalism in sports administration and marketing， the report said.

Over the past decades， sport in China has largely been built around the planned economy system， in which the government owns and runs all sports.

While the strengths of this system are evident in yielding gold medals at global sporting events， it makes it harder for a free market to grow around sport， and thus， for the nations sports industry to take root.

Although in many industries， China has embraced opening and reform over the past three decades， the domestic sports industry has not developed in the same way and many of the nations elite athletes and sporting events remain largely sheltered from commercialization.

“One of the big problems is that the system dampens the enthusiasm of private investors and the introduction of a professional approach，” said Eric Ho， Executive Director of Peking Universitys Research Institute for Sports Science.

According to the report in July， China currently has 894 sporting goods manufacturers in operation， employing 267，446 people， but most of the major brands suffered a slump in business in 2013.

Anta， a renowned Chinese sporting goods brand， recorded net profits of 662 million yuan（$107.64 million） in the first half of 2013， a significant drop of 18.7 percent year-on-year. Another major brand Li-Ning also suffered a huge loss of 184 million yuan （$29.92 million） during the same period， and closed 410 retail outlets across China.

Ho said the slump should be attributed to the underdevelopment of Chinas sports entertainment business.

The GAS should streamline its work and delegate powers to lower levels， allowing sports events and the sports industry to act according to market forces， Ho added.

Fortunately， on the other side of the coin， the current state of Chinas sports industry might denote huge potential for growth and immeasurable business opportunities.

Chinas rapid economic growth has driven up the living standards and disposable incomes of its citizens， particularly in such metropolises as Beijing， Shanghai and Guangzhou， where a more affluent generation of Chinese sports fans have been born.endprint

“Chinas sports market has huge potential，”said Chen Shaofeng， Director of the Beijingbased Sport Industry Research Center of China， adding that in the spectator sports and recreational sports sector， which constitute the core of sports industry， theres 90 percent of the market that is yet to be explored.”

“For the industry to reach its full potential， Chinas sports must free from central planning and be built around independent， professionally managed sports leagues and its own market，”Chen suggested.

Although China adopted the notion of professional sports from the West and started to create competitive leagues more than 20 years ago， professional sport， in essence， has yet to come to existence， since Chinas sports federations， each of which runs their respective sports leagues such as the Chinese Football Association Super League and the Chinese Basketball Association， have been all run by the state.

Unprecedented opportunities

The October 20 guidelines provide an opportunity for the sports industry to transform itself.

The guidelines raise the nationwide fitness campaign to the level of a national strategy and takes improving peoples physique and health level as its fundamental goal， and supports sports as a green industry.

The document sets a goal for per-capita availability of sports grounds to reach 2 square meters by 2025 and to increase the number of people who regularly exercise to 500 million. The countrys public sports services will cover all its population.

According to data from the GAS， Chinas average area of sport facilities had stood at only 1.2 square meters per person by the end of 2010， much lower than neighboring countries like Japan and South Korea.

Meanwhile， distribution of sports facilities is not even. Community sports facilities took a relatively small proportion compared to large stadiums， and utilization of what facilities are available was also low， according to the GAS data.

“In the guidelines， a newly developed residential community thats home to some 3，000 people will be required to have at least six ping-pong tables for its indoor sports facilities. While its outdoor workout space should be over 900 square meters， the size of one and a half basketball courts，” said Hao with the NDRC.

Meanwhile， the guidelines said China will support the sports sector by eliminating industrial and policy barriers to form a policy system that is conducive to the sectors rapid growth.endprint

The country will encourage social capital to invest in the industry， including construction of sports facilities and providing related products and services， according to the guidelines.

It will also expand the opening up of the sector by encouraging foreign capital to invest in the industry.

Liu Fumin， Director of the GAS Department of Finance， said the moves will unleash the vigor of social capital， boost the sports sectors growth and stimulate Chinese peoples demand for sports， leisure and fitness.

“An increasingly mature sports market will offer great opportunities for foreign companies，” Liu said.

Foreign enterprises account for just 1.55 percent of all service companies in the industry， and the number of foreign sporting goods companies accounts for 23 percent of the total， said Liu.

“There are great opportunities for foreign investors， particularly in areas such as sporting events， overseas sports tourism and venue management， where their strengths are clear，”he added.

The guidelines include measures for lessening the paperwork for sports event approvals， which will help the industry attract more funds.

He Wenyi， a sports industry researcher with Peking Universitys Research Institute for Sports Science， said that ownership and intellectual property rights of many sports events were“ambiguous” in China.

Currently， all sports events are subject to the approval of the GAS and its local bureaus. These sports watchdogs charge fees based on an events importance and ability to attract advertisers.

Zhang Qing， founder of Key-Sports， a consulting and research agency， said the changes have the potential to alter the status quo in the sports industry， but could be difficult to carry out because those with vested interests will oppose them.

“If you purchase real estate but you dont have the property rights， that will greatly dampen the enthusiasm of investors，” Zhang said.

Zhang said the sole investor of the CBA， which pays $1.5 million annually as an approval fee， started to see a profit only last year.

But he predicted that change will take place gradually since it intends to take back the biggest income source of sports watchdogs.

Unlike Zhangs cautiousness， He firmly believes that the new policy on event approvals will help ease some concerns among investors and bring more funds into the sports sector.

“Increasing investment in the sector， including sports facilities， will create a ‘new generation of consumers， which will benefit foreign and domestic investors，” said He.endprint

Meanwhile， the guidelines also encourage the involvement of private capital in the industry and the listing of qualified companies.

Zhang Yuxian， a researcher at the NDRCs Information Center， said more domestic sports companies are on track to be listed. The number of listed companies remains relatively low and many focus on property or other business related to sports， rather than sports themselves.

More sports service companies such as event managers or stadium management companies will go public， he said.

The guidelines encourage sports companies to expand their sources of funding with debt issues.

The authorities plan to designate new hitech sports companies as being eligible for a 15-percent reduction in income tax.

Sports companies can qualify for a sales tax rate as low as 3 percent， said Liu. He added these financial and tax preferences could be in place in one or two years.

The guidelines also encourage qualified gymnasiums to establish chain stores across regions.

“This is good news. Under the new guidelines we can have a market-oriented sports industry，” said Shi Fengling， Chairperson of Beijing Fanhuaxinxing Sports Co. “More capital and private enterprises will join us， and we will have a more robust growth potential.”

Yang Renwen， a senior analyst at Founder Securities Co. Ltd. headquartered in Beijing， said that investors see great opportunities in three sectors： sports events， gym clubs and intelligent sporting goods.

A sample sport

Concerning one of the major targets of the guidelines， the State Council announced it will take measures to promote popularization of three particular ball sports—soccer， basketball and volleyball.

Specifically， the government will set up long-term development plan for soccer， which is relatively undeveloped compared to other ball sports in China， encompassing construction of sports facilities and promotion of soccer on campuses.

In fact early in July， the Central Government， in the wake of its national football team failing to qualify for the last three FIFA World Cups， decided to improve football standards at schools and universities.

Education Minister Yuan Guiren said at a national sports education symposium that football training at schools and universities would be prioritized， the China Education Daily reported on July 30.

A four-tier league system covering primary schools， high schools and universities will be introduced， opening a growth channel for young football talent and building a substantial reserve of skilled soccer players， said Yuan at the symposium.endprint

He also urged the formulation and implementation of a middle- and long-term development plan for young soccer talent.

According to the plan， about 20，000 schools nationwide， including primary and high schools as well as universities， will develop football training programs in the next three years， an increase from the 5，000 involved today.

“Its not about the number of soccer schools that are planned to be built， but their quality，” said Chu Chaohui， a research fellow with the National Institute of Educational Sciences.

“Countries which are strong in soccer performance are not guided by policy， but a culture in which students enjoy playing football after school，” said Wang Dazhao， a sports critic and senior member of the Chinese Football Association.

Chu suggested a new assessment system be introduced to ensure the overall quality and effectiveness of the enhanced physical education curriculum.

“Such a system would need to have the physical well-being of students assessed by professional sports institutions， as the ultimate goal of the reform should be the improvement of students physical health，” he said.

The GAS has designated 5，084 football schools in the past five years， but the investment in them has risen to only 56 million yuan（$9.11 million） since last year， which stands in stark contrast to investment in soccer in Germany， worth approximately 700 million euro（$938.09 million） each year， the Beijing Youth Daily reported.

“Only a few teams sent by primary and high schools in Beijing have played in matches. Non-competitive matches take place between elementary and junior high schools while league matches among senior high schools are almost non-existent，” said Yang Anli， a youth coach who used to play for Bayi Football Club.

The Outline of the National Plan for Football Development on Campuses （2015-20） is expected to be issued after half a year of research conducted by education and sports authorities.

The outline will coordinate links between education and sports authorities， considered a key aspect of reforming the training system in schools.

Alongside campuses， many football clubs in China have also been enthusiastic about establishing football schools as a way to foster a new generation of talented football players.

In 2012， Guangzhou Evergrande Football Club， supported by Evergrande Real Estate Group， invested about $160 million to launch its own football school with more than 10，000 students. Luneng Group Co. from Shandong Province also built a football school 10 years ago and is now one of the largest football schools in China.endprint

According to Liu Jiangnan， Executive President of Evergrande Football School， these schools feature a strong integration of academic studies and training. The organizers of these schools also hope to persuade parents to adopt a more realistic attitude concerning their childrens futures.

“Chinese parents have long held the wrong view about soccer. They want their children to become soccer stars the minute they leave school， but actually， only a small number of children will go on to play professionally，” Liu said.

Like children at regular primary and middle schools， the students at Evergrande study a wide range of academic topics. “The students train after they have finished their academic day， a method commonly used in European countries for youth training，” Liu said， adding that although there were about 4，000 traditional soccer schools in China during the 1990s， most were forced to close as a result of the sports poor public image in the country.

“We are making efforts to introduce top teachers and professional coaches at the school. Everything is aimed at boosting Chinese soccer in the long term，” he said.

Now， Guangzhou R&F， which employs Sven-Goran Eriksson， a Swede who managed Englands national soccer team for several years， is making similar efforts to boost youth training.

In cooperation with the English Premier League giant Chelsea， the club has launched a soccer school in Meizhou， in eastern Guangdong.

“Because we prioritize academic studies， we have hired qualified teachers， but we have also employed some coaches from Chelsea，” said Hong Youqiang， the schools executive head.

Fernando Sanchez Cipitria， Technical Director of Evergrande School， said the combination of training and study would help to boost Chinese soccer. “Academic study is of great importance to young， developing players. A professional player will find it hard to find a career after retirement if he hasnt been well educated in his youth，” the retired Spanish player said.

After two years of studying and training， many students at Evergrande School have demonstrated their potential， and some of them have been sent to Europe for short-term training and playing experience， according to Liu.

“Parents are now more confident， because they believe their children will perform better in school， both academically and on the soccer field，” he said.

However， insiders believe the game should be better promoted， not only in dedicated soccer schools， but also throughout society as a whole.

“We dont see children playing soccer in public places because we dont have a soccer culture，” said Xie Liang， a veteran commentator for Radio Guangdong.

According to Xie， only when the country develops a healthy soccer culture—not for the thrill of winning， but for the fun of participating—will Chinese soccer improve.

“We should boost the number of young people playing soccer. To do this， the game should be better promoted on all campuses and not just in soccer schools，” he said.endprint