How the current economic downturn is affecting the sports industry in China
Following this year’s announcement that Beijing will host the 2022 Winter Olympics, news such as the recently created Wanda Sports Group, China Media Capital’s investment in City Football Group as well a plethora of other high level sports-related investment and sponsorship stories coming out of China this year, it is clear that the world’s most populous nation is once again becoming the darling of potential in the international sports industry. This sentiment is reflected in the growth ambitions of both local and multi-national sporting organisations in China, with our GlobalSportsJobs.cn English-Mandarin platform seeing upwards of 100 new vacancies in the country advertised each week.
In China anything from the whim of a government official to the dynamic force of the market can affect business strategy and there is a continual challenge to keep up, so GlobalSportsJobs.cn has started working closely with the S2M Group and their Managing Director, Mark Thomas, who has more than 25 years’ experience in Asian Pacific sports industry and will be sharing his unique insight with the GlobalSportsJobs audience. In this, the first of his ‘China in focus’ series, he offers his thoughts on how the latest surge in the Chinese sports industry can be attributed to the current downturn in its economy:
Much of the Chinese corporate and individual wealth over the previous decade was made on the back of property investment. So when after oversupply and governmental policy started stagnating, investors in this market started looking elsewhere for growth. This resulted in a growing trend in acquiring overseas assets. There is no greater example of this than China's richest man Wang Jianlin's Dalian Wanda Group, who have not only moved some of their property portfolio overseas but are in the midst of diversifying their assets into other industries, most notably sports and entertainment. They are already making their mark with high profile acquisitions such as US cinema group AMC as well as completing deals to snap up one of the world’s highest profile sports marketing agencies and GlobalSportsJobs.cn client Infront.
For the last few decades, most Chinese brands were more than meeting their growth expectations from a surging domestic market, but the economic cool-down with increased competition and saturation in certain sectors has led a few trailblazers to look internationally to fuel new growth. In order to build business in overseas markets there is a need to invest in their brand image in order to build awareness, with sports sponsorship being the predominant means to achieve this. The best working example to date has been China's Telecom and mobile giant Huawei, who are rolling out a global sponsorship portfolio primarily based around football, such as their partnership with Premier League team Arsenal, to drive brand in order to stimulate sales in key markets. They have been clever enough to be flexible in certain markets where football is not king and their sponsorship of rugby and rugby league properties in South Africa and Australia respectively demonstrates their strategic approach.
Other brands such as Hisense with their partnerships with NASCAR and F1s Red Bull have followed suit and there are plenty more on the way. As such there is currently a massive push to identify and stimulate more Chinese brands to appreciate the benefits of sports sponsorship. However, it is important to note there will be perhaps an even bigger opportunity to take the current 'two-dimensional' media-value-driven sponsorships coming out of China and build more holistic communications platforms that can create greater experience and interaction in order to build brand loyalty to both the domestic and international consumers these programs are trying to attract.
In tandem with this globalisation, there has been a revitalisation of certain sectors within the domestic sports market, illustrated by the recent upturn in Chinese Soccer. Like many things in China, the top-down hierarchy has been a catalyst of this. President Xi Jinping's desire to get the sport to the top of the global game has set into motion an aggressive series of reforms in order to achieve this goal. Supported by improvement in the club game in China highlighted by Guangzhou Evergrande's success in the Asian Champion’s League and a recent upturn of the fortunes of the national men’s and women's teams, there has already been an impressive upturn in interest and investment. However, this enthusiasm must be tempered with the caveat that such government-led initiatives have a tendency to be strangled by overzealous administration and in the worst case rampant corruption.
So it seems the economic downturn could be stimulating a great period of growth for sports in China. For sure there will be downturns and cycles along the way but barring major catastrophe there is no doubt it will become one of the biggest, if not the biggest, sports market in the world at some future date. The challenges associated with engaging in sports business in China should be well worth accepting as the rewards could be significant.
S2M Group is a full-service sports marketing agency and Mark Thomas has acted as Managing Director since its inception, working on a cross section of sports industry projects. S2M have been involved in ownership and promoting propriety sports events as well as delivering strategy, events and activation activities on behalf of its clients. Mark speaks fluent Chinese and has excellent relationships with sports rights holders, governmental partners, brands and media within China. Email firstname.lastname@example.org for more information.