China’s retail king’s woes dampen Xi’s football fantasy

When Zhang Jindong tied his arms with fellow billionaire Hui Ka Yan and swallowed a glass of baijiu in 2017, the Chinese retail king had a lot to celebrate.

His group Suning had bought Inter Milan, the prestigious Italian football club, for 270 million euros the previous year. Its streaming service, PPTV, had a $ 700 million deal to broadcast the English Premier League to homes in the world’s most populous country. And back in China, he joined the local team of Jiangsu FC, deepening his investment in the country’s young professional league.

The acquisitions have placed Zhang at the heart of Xi Jinping’s ambitions to use football – a sport the president loves – as a way not only to animate Chinese youth, but also to extend the country’s influence to the foreign.

But four years later, the debt problems that hampered Zhang’s conglomerate expansion have spread far beyond its Suning stores and websites. The collapse of its football empire signals a sharper pivot in Beijing’s approach to soft power at home and abroad: away from reliance on hitherto high-profile tycoons and corporations like Suning and back to the directing hand of state control.

Jonathan Sullivan, an expert on Chinese politics at the British University of Nottingham, pointed out that many central pillars underpinning Xi “football dream” remains unchanged.

These cover dozens of Chinese-built stadiums in developing countries, marketing deals boosting the global exposure of Chinese brands, strengthening the country’s presence in sports governing bodies and training a generation of footballers qualified enough to perform. compete on the world stage.

“All of these things are long-term projects that continue. What has changed is the place of private investment in football, ”said Sullivan.

In an early signal that Zhang’s strained coffers would have ramifications for his sporting interests, PPTV lost its broadcast rights to English football in September. This year, as a dispute over the broadcast deal spreads through UK courts, Suning asked for $ 200 million in emergency cash and new partners to help. consolidate finances of Inter Milan.

With imposing debt obligations, Zhang’s potential departure from European football would mark the last of a chain of similar outputs ever since Beijing tightened capital controls in recent years following a torrent of overseas investment. The list includes Atlético Madrid in Spain, Aston Villa in the UK and Slavia Prague in the Czech Republic.

Suning’s debt problems have also hit much closer to home. On February 28, Jiangsu FC went out of business, a blow to fans and players just months after winning China’s top soccer competition, further undermining the championship defended by the president.

The Chinese Football Association did little to shed light on the development in a public notice, but club supporters were less opaque: “Simply put, Suning is out of money,” a fan wrote on social media.

Zhang Jindong during a Serie A match between Inter Milan and AS Roma in 2017 © FC Internazionale via Getty

Zhang, 57, founded Suning in Nanjing, east China, in 1990 as a home appliance retailer. It grew rapidly, filling the homes of the growing Chinese consumer class with air conditioners, washing machines and televisions.

But, like many once-dominant businesses on the streets, Suning struggled to switch to e-commerce, losing to Alibaba, JD and Pinduoduo. On the same day as Jiangsu FC’s abrupt shutdown, Suning confirmed a state-backed investment in its online retail unit, The bailout led Zhang and other major shareholders to sell nearly a quarter of their stake in the company for $ 2.3 billion.

Suning declined to comment. Zhang has vowed to refocus on the core retail business, including growing his e-commerce unit, Yunwang Wandian.

Zhang’s cash crunch, however, appears to have escalated due to his interweaving with Hui’s Evergrande, the world the most indebted real estate developer.

In 2017 – the same year, Zhang was photographed drinking with Hui, then The richest man in China – Suning has invested 20 billion rmb (3.1 billion dollars) in the continental branch of Evergrande. Last year, the unit’s stock market listing did not go as planned, meaning Suning was denied both the benefits of the IPO proceeds and its initial investment in cash.

Suning’s retirement also coincided with the Chinese Communist Party take greater control on private enterprise.

Simon Chadwick, a global football trade expert at Emlyon Business School, said the outflow of Chinese club ownership reflected a shift in Beijing, which no longer wanted companies or entrepreneurs to run his football diplomacy.

“What is very clear about China is that there is still a very strong connection between the interests of the state, the direction of government and what these companies are doing,” Chadwick said. Suning “is not a company that has embarked on Italian football, nor[did it do so]for purely commercial reasons ”.

Instead, analysts expect Beijing to prioritize exerting influence over governments, especially in countries where it has builds critical infrastructure, and at Fifa, sport governing body in difficulty. This pressure is seen as part of China’s strategy to host the World Cup in 2030, the tournament’s centenary year.

As the blow to private capital in football threatens to temper Xi’s ambitions in the sport, Sullivan was skeptical that the Chinese leader would suffer any fallout.

“Xi’s power is ingrained enough that it would take a lot more to hurt him,” Sullivan said. “It’s detrimental to the football reform program he has encouraged, but it’s not hard to blame it. . . to private companies and / or to Covid. “

Given booming investments in China, foreign cash may soon reach Chinese football clubs, Chadwick added.

“What China is doing now is cultivating the conditions in football to attract foreign investment,” he said. “We could see Jiangsu resurrected with Volkswagen as the jersey sponsor or an American private equity firm as the owner.”

Additional reporting by Sherry Fei Ju in Beijing

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