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Jiangsu financial collapse spells trouble for CSL, history, wages, transfers
Five years ago, China came forward with a promise that threatened to divide the football world.
Like the West had in abundance for well over a century, the East was finally going to have its answer to elite league football.
The method was simple — one that has been used for eons, and will be used for eons more.
Jiangsu put it into use in 2016 when the club, backed by multibillion-dollar retail giants Suning, spent big and trumped an offer by Liverpool to sign Brazil’s Alex Teixeira for about $A80 million.
His transfer from Shakhtar Donetsk capped off a chaotic fortnight in Chinese football that had the West taking notice.
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Jiangsu had just bought Ramires from Chelsea for about $A35 million, before Guangzhou Evergrande snapped up the highly-rated Jackson Martinez from Atletico Madrid for about $A50 million with Arsenal watching on helplessly.
The strength of the Chinese economy had long made such deals possible with the right investment, but only now was that financial power being wielded in the football arena.
Then the signings kept on coming, each one more surprising than the last.
Shanghai Port (previously Shanghai SIPG) was responsible for some of the most eyebrow-raising; Brazil international Hulk ($A87m), his international teammate Oscar ($A93m) and, later, Austrian forward Marko Arnautovic ($A39m).
The league most readily synonymous with the West’s grasp on the global football market, the Premier League, was a prime target.
Along with the signings of Ramires, Oscar and Arnautovic came Paulinho from Tottenham and, more recently, Marouane Fellaini from Manchester United and Aaron Mooy from Brighton.
Meanwhile, Argentina great Carlos Tevez and former Chelsea striker Demba Ba enjoyed stints at Shanghai Shenhua, while Belgian international Axel Witsel spent time at Tianjin Tianhai and Yannick Carrasco at Dallan Professional before joining giants Borussia Dortmund and Atletico Madrid respectively.
The signings painted a picture of a league in good health. One that was going places.
But the image was a hollow one.
The Chinese Super League’s might was held together with a flimsy knot that is swiftly unravelling.
Most symbolic of the league’s demise is defending champion Jiangsu, who during the week ceased operations with immediate effect, barring any last minute bailout.
Tianjin Tigers, reportedly owing its players 10 months’ pay, are expected to also dissolve in the coming days.
Their local rivals Tianjin Tianhai last year declared bankruptcy having once had Fabio Cannavaro coaching and Alexandre Pato and Witsel as players.
Their woes join those of Shandon Luneng, which has been banned from the Asian Champions League due to its debts to employees.
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While these financial disasters have laid waste to the promise of an elite league in the East, they will create some concern in Western football where Chinese investment has long been on the rise.
For starters, the future of Serie A heavyweight Internazionale has been thrown into doubt as it is also run by Jiangsu’s owner, Suning.
The retail giant pulled out of Jiangsu after announcing it intended to shift away from non-retail businesses in the wake of the coronavirus pandemic.
“We will focus on retail business resolutely and without hesitation will close and cut down our business irrelevant to retail,” chairman Zhang Jindong warned last month.
Suning’s ownership of Chinese broadcaster, PPTV has also affected the Premier League which took a financial hit last year.
Suning had its three-year broadcast deal with the Premier League — among the league’s most lucrative at a reported $A900 million — ripped up after the company withheld payment of an instalment.
Tech conglomerate Tencent last year picked up the remainder of the deal, which runs until mid-2022, but at a discount rate, according to the Financial Times.
PPTV has since reportedly lost the rights to broadcast Serie A as well after a delay in payments from Suning to IMG, which marks the global rights for the Italian top division.
But China’s interest in Western football extends far beyond Internazionale and TV deals to its biggest leagues.
In England’s top flight alone, West Bromwich Albion is owned by Chinese billionaire Lai Guochuan, Wolverhampton Wanderers by Chinese conglomerate Fosun International, and Southampton by majority shareholder (80 per cent) Gao Jisheng, while Chinese investors also hold minority stakes in Manchester City.
In one flight below, Birmingham City and Reading are both controlled by Chinese investment.
Many club acquisitions coincided with a boom at home in transfers for overseas players that would otherwise command contracts at some of Europe’s biggest clubs.
As such, China appeared to be imposing itself on the international football market, but cracks began to appear around 2019.
Since Ramires joined Jiangsu in January 2016, Chinese Super League clubs landed seven more transfers for overseas players worth more than $A35 million.
Some of these deals included major financial windfalls to the players themselves, such as Oscar, who earnt $A34 million a year playing in Shanghai.
None, however, have arrived in China for that transfer value or more since Guangzhou Evergrande exercised a $A65 million buy option for Paulinho in January 2019.
Months later, Jiangsu reportedly had a transfer “90 per cent” complete for Welsh striker Gareth Bale until Real Madrid’s demands for a fee torpedoed the deal.
No big signings followed that summer in China — and none have since with coronavirus and a new salary cap the final nails in the coffin.
With expenditure 10 times higher than the K-League and three times higher than the J-League, the Chinese Football Association has capped foreign player salaries at $A4.8 million a year, while domestic players can earn a maximum $A1 million.
Hulk has since left Shanghai, while Oscar must take about an 86 per cent pay cut to keep playing in China.
Meanwhile, some Chinese investments overseas have also gone pear-shaped.
Tony Xia in 2016 became one of the first men from mainland China to buy a major European football team when he gained control of Aston Villa. But his takeover coincided with the club being relegated and his debts began to spiral out of control.
He was then forced to hand over majority ownership in 2019 because of a £30 million bonus he reportedly owed the club’s former owner, Randy Lerner, for Villa returning to the Premier League within three seasons.
Today, the South China Morning Post reports that Xia was arrested by Chinese authorities in January for allegedly harming the interests of a manufacturing company in Shenzhen.
At a similar time in Italy, Silvio Berlusconi sold AC Milan to Chinese businessman Li Yonghong in 2018 for a staggering $A1.15 billion.
But the tenure was short-lived.
Li’s monster investment largely came from a high-interest, $A460 million loan from American hedge fund Elliott Management. He swiftly defaulted on a payment of about $A50 million — a fee Elliott paid to resolve a financial fair play issue with UEFA — and the hedge fund gained control of the club.
Today, club ownership in China is evidently becoming tricky, too, with two clubs in financial ruin and two others on the brink.
Companies, such as Suning, have been forced to focus efforts on less glamorous, yet more prosperous, elements of their businesses than football.
Furthermore, a new league rule that bans the use of corporate sponsors on team names — Jiangsu used to be Jiangsu Suning — has made club ownership in China even less fashionable.
It’s now simply a battle to protect the bottom line, and understandably so.
Signing Brazilian internationals and poaching targets from Europe’s elite would have been nice while it lasted, but it’s clear China’s dreams of a five-star league in Asia have gone up in smoke for the time being.
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