Summary of Economics of Sports in China-A Maturing Sector

The article herein intimates that sports in China is a relatively new sector contributing to the countrys economy. The sports sector was mainly run by the Chinese state until the mid 1900s under the authority of the General Sports Administration and sponsored by various sports federations. The Chinese government was solely in charge of the selection of athletes to participate in international events based on both moral and sporting capabilities, their education and training as well as living expenses. Similarly, the government was responsible for the organization of local and national competitions involving the country. This dynamics officially changed in 1994 when the Chinese government allowed outside investments in the professional football championship (Bardon 41).

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As an economic investment, the sports sector in China is still relatively indefinite due to the fact that it remains largely under the administration of the state which is very particular about its entitlement. Moreover, the sports system is based on the soviet model which has a lot of disadvantages. The most notable downfall is poverty in finances caused by the totalitarian approach to management of the sports sector. This is illustrated by the much lower Chinese sporting events budget in comparison to that of the other countries. As a result, these constraints lead to modest living conditions and salaries for athletes and trainers as well as low victory bonuses. For instance, Rong Guotang did not receive any bonuses; he was the athlete thanks to whom China won the world championship in table tennis in 1959 for the first time (Bardon 43).

Being the pioneer in the new system, football in China faced many problems. The state employees had little to no training on the rules of this transition; as a result, the level of the game was affected. The transition was followed by a period of confusion, corruption, and a very low profile for the football championship in the country. It was subsequently deemed an unstable investment.

The opening of the football clubs to the outside investments led to a rush of the Chinese enterprises joining the investors. This was headed by the international group, IMG. However, this had an adverse effect, because the salaries and bonuses paid to the athletes and trainers rapidly increased. This led to incorrigible losses by club owners; thus, investors pulled out one after another. The lack of adequate training on the market and rules of privatization of clubs coupled with the government officials sense of entitlement further led to creating the image of Chinese sports as an unstable investment. There were problems in relations between IMG and the Chinese Football Association (CFA) which further contributed to the decision to transfer the commercialization of the Chinese football back to the government. This was issued by the CFA in 2002 under the League of the Chinese Football Development Corporation. This resulted in unrest among the sponsors leading to several scandals regarding the championships. The most well known so-called the Black Whistles scandal involved match fixing and bribery among both the athletes and referees.

The most negative experience of instability in this market took place in 2002 when Pepsi Company pulled out of its contract with CFA, which had signed a contract to broadcast thirty football matches per season while prominently displaying the Pepsi logo. The sports channel defaulted on this agreement during the 2001 season when it broadcast fewer matches than agreed and none in the 2002 season.

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The reforms continued despite this rather shaky start, and the investments into the other sports like Formula One in Shanghai, table tennis, boxing, and basketball grew. The most successful reform is that of the Chinese Basketball Association (CBA) which accepted outside experts to advice on following marketing logics and market orientation. The success of the association attracted the National Basketball Association (NBA) with an increase in viewers from 200 million in 2006 to 420 million spectators in 2007 and a growth in sponsorship (Bardon 45).

The growth and development of the Chinese sports market can be attributed to the star system as well as the efforts of the states administration. The athletes are viewed as heroes; for example, among them are Yao Ming who is very successful in NBA, Liu Xiang who is a world record holder and gold medalist in the 110 meter hurdle race in Athens, and the Olympic champion diver Tian Liang. This star system introduced the concept of endorsements into the Chinese market. For instance, Yao Ming signed advertising contracts with Apple, Visa International, Nike, China United Telecom, and Sorrent Incorporated. These financial returns benefit the athlete, the club, the federation, the general administration, and the players original club who are all entitled to earn a percentage. The Chinese government puts that at thirty percent of the earnings to the CBA, twenty percent to both the government and the general administration. With this growth, administrative control still remains the biggest obstacle to the growth of the sports market.

Another constraint on the way to the growing of the Chinese market is the monopoly of the broadcast media. In the United States and Europe, one of the biggest earners are the companies who buy rights for the clubs and championships broadcasting. In China, there is only one national sports channel, CCTV5, which pays very low broadcasting rights as it is a monopoly. This has led to creating many marketing strategies to bypass the channel and use Internet sports websites (Bardon 45).

The sports market in China remains relatively immature and slightly risky. This is because the state is very specific about its prerogatives in the field of sports. The Chinese enterprises such as the Hyundai Company are known to sometimes invest in the clubs and federations as a platform for political agendas and lobbying. Some enterprises such as Sinopec owned by the state are required to endorse the clubs by the government and are, therefore, unconcerned. The decisions made on the investment options in the countrys sports sector are not always based on economic rationales. For instance, the extravagant arenas created for sports events are left abandoned like in Nanjing after the 2005 national games. It is seen that China sets up its own rules even when it comes to the Olympics to be held in Beijing. The decision to invest should be made wisely taking all the issues into consideration.

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