China's Physical Culture and Sports Industrialized
by Our Staff Reporter Wang Chen
For a long time, sports have been, for the Chinese, only a pursuit of an ideal, a career used to win honor for the country, and a means to build up health. It has been considered a purely consumptive undertaking operating completely with state allocations.
However, in the early 1980s when China began moving onto the world sports arena in an all-round way, and especially with the increased pace of the reform drive, sports-related industries began developing rapidly. At the First National Sports Goods Fair in 1993, there were only 100 exhibiting booths, and the volume of business was 100 million yuan. At the fourth fair in 1997, however, 1,412 domestic and foreign businesses took part, and orders totaled 6 billion yuan.
Li Ning, an Olympic champion now general manager of the Li Ning Sports Goods Group, asks, "What role will China's sports undertakings play in the nation's economic development in the 21st century? Is it possible that the sector will become one of the country's high-developing industries?"
In the eyes of many businesses, China's sport industry is like a submerged gold mountain coming gradually to the surface.
Industrialization: The Only Way
Last October, the 8th National Games, the largest in Chinese sports history, were held in Shanghai. A total of 5.6 billion yuan was spent in renovating and building stadiums and gymnasiums, and on the organization and running of the games. However, four years ago when Shanghai applied for the right to hold the event, the state promised to appropriate only 80 million yuan toward funding it. It would simply have been impossible to hold such a grand event by relying on the meager state allocation, should it occur in the past.
So, Shanghai had to rely on sports to support sports. During the preparatory stage, the organizing committee used different fund-raising methods, including the operation of joint ventures, comprehensive development of venues, sale of advertising rights, lotteries, the naming right and the sale of television broadcasting rights. Near the main stadium, the "Road of Sports Lovers" was opened on which the names of donors were displayed. A sports goods fair was also held on the site. Thus, the value of sports was fully exploited in many different ways in order to guarantee sufficient fund availability.
This was in sharp contrast to the Asian Games held in Beijing eight years ago, when 60 percent of the needed investment came from state appropriations and the Beijing municipal government.
The great disparity, in fact, demonstrates the tremendous power of sports industrialization.
According to the State Physical Culture and Sports Commission, over the past few years, the sports industry has registered an annual growth of around 30 percent in output value. If it is guided and developed in a more effective way, the industry not only can meet its self-development needs, but also become a new economic growth spot.
In the Outline of the Ninth Five-Year Plan for National Economic and Social Development and Long-Range Objectives Through the Year 2010, adopted by the National People's Congress last year, it was made clear that Chinese sports should "form a pattern, in which the state, social organizations and individuals make joint efforts to run a proper sports undertaking, and follow the road to socialization and industrialization".
Size of the Market
Over the past few years, professional league football matches have become the most popular spectator sports in China. These are operated to mirror long-existing Western practices in soccer administration, and have brought tremendous economic profits for the teams and their players.
A survey of six large cities shows that about 20 percent of the local population are football fans. Among them, almost three-quarters have followed the game for at least six years. Take Beijing for example. The metropolis has a population of 11 million, producing about 2.2 million football fans--a lucrative base for a range of related industries.
One football products businessman said that marketing posed no problem if the goods produced comply with the Chinese people's psychology of appreciation, values, morality and habits.
During the current decade, there has been a rapid growth in the Chinese sports industry, whose prospects look endless. "With the change of the Engel coefficient in Chinese society, it is natural for the people to think about leisure and sports after they have met their basic needs for food, clothing and housing. At a time when Chinese consumption has reached Western levels, it is hard for sports businessmen to imagine how large the market will be in a country like China with a population of 1.2 billion," said Zhang Zhuo, a sociologist with the Chinese Academy of Social Sciences.
Last December, the State Physical Culture and Sports Commission (SPCSC) disbanded three training and competition departments and founded nine management centers in track and field, swimming, basketball, volleyball, gymnastics, table tennis, badminton and other events. So far, more than 80 sports events have separated themselves from the direct SPCSC management, and have been put under the administration of 20 sports management centers in the nature of economic entities.
According to Xu Chuan, head of the SPCSC Policy Research Division, a sports management center is a unique form of administration created by China. They have independent management rights and are no longer pure government departments.
The large-scale restructuring is the first step taken by SPCSC to meet the needs of the industrialization drive. It also demonstrates that the standardized development of sports industries has just begun in China.
Li Ning, for example, noted that the sector remains small and weak, with low output value. In spite of China's great market potential, the annual sales value of sports goods only reaches 30 billion yuan, a far cry from the global figure of between US$200-300 billion. China's annual income of 200 million yuan from football, when compared with the world annual transaction volume of US$250 billion, is but a drop in the ocean.
"The development of China's sports industries is only a beginning, and it still has a long way to go," said Wu Shaozu, SPCSC minister. "If we put our efforts into improving the quality of sports goods, enhancing the overall level of sports industries, and standardize the management of the sports market, I dare to say that the sports industry will become a new economic growth point."
Opportunities and Competitions
One of the outstanding achievements of the world famous International Management Group (IMG) has been the management of China's league football matches. Its business grew further in 1995 through the investment of US$1.2 million to manage the domestic basketball national league.
League matches in the two events have not only brought in tremendous profits to IMG, but also gained a lion's share of the domestic sports market. A responsible member of the China Department of IMG states that the organization had benefited considerably from choosing the correct opportunity and correct business direction.
The competition has intensified amid a surge of business opportunities. But not everyone has succeeded. Two years ago, for example, a Hong Kong company sought to gain control of mainland sports sponsorship, but it had to give up due to insufficient funding.
Compared with the activities of foreign companies, domestic businesses have been slow to act. An investigation of two major international events held in Beijing in 1996 and 1997 showed 90 percent of the financing came from overseas firms.
Some old-brand sports firms were squeezed out of the market because they could not cope with the new challenges, such as the Touch brand which was popular in the 1950s-60s. Brands such as Li Ning, however, are in great demand.
Just as Li Ning said, developing China's potential sports market calls for clear-minded businessmen to seize opportunities in the face of acute competition.