When Zhang Jindong linked arms with fellow billionaire Hui Ka Yan and swallowed a glass baijiu in 2017, the king of Chinese retail had a lot to celebrate.
His Suning group had bought Inter Milan, the prestigious Italian football club, for € 270 million last year. Its streaming service, PPTV, had struck a $ 700 million deal to send the English Premier League to the homes of the world’s most populous country. And back in China, he’d picked up local team Jiangsu FC, investing more in the country’s fledgling professional league.
The acquisitions placed Zhang at the heart of Xi Jinping’s ambitions to use football – a sport the president loves – not only to animate China’s youth but also to expand the country’s influence abroad.
But four years later, the debt problems of Zhang’s massive conglomerate have moved far beyond its Suning stores and websites. The unraveling of his football empire hints at a greater pivot in Beijing’s approach to soft power at home and abroad: away from dependence on hitherto high-flying tycoons and companies like Suning and back to the leading hand of state control.
Jonathan Sullivan, an expert on Chinese politics at the British University of Nottingham, stressed that many of the central pillars underlying Xi’s ‘football dream’ remained unchanged.
These include dozens of China-built stadiums in the developing world, marketing deals that increase the global exposure of Chinese brands, strengthen the country’s presence in the sport’s governing bodies, and raise a generation of footballers skilled enough to compete on the global stage.
“All of these things are long-term projects that go on. What has changed is the place of private investment in football, ”said Sullivan.
In an early signal that Zhang’s strained treasury would affect his sports interests, PPTV lost its English football broadcasting rights in September. This year, Suning has sought $ 200 million in emergency money and new partners to support Inter Milan’s finances.
With skyrocketing debt obligations, Zhang’s potential exit from European football could be the latest in a string of similar exits since Beijing tightened capital controls in recent years following a torrent of outbound investment. The list includes the Spanish Atlético Madrid, Aston Villa in the UK and Slavia Prague in the Czech Republic.
Suning’s debt problem has also struck much closer to home. Jiangsu FC retired from operations on Feb. 28, a huge blow to fans and players just months after it won China’s top football league, further eroding the league defended by the president.
The Chinese Football Association shed little light on the development in a public notice, but the club’s supporters were less opaque: “Simply put, Suning is out of money,” one fan wrote on social media.
Zhang, 57, founded Suning in 1990 in Nanjing, East China, as a home appliance retailer. It grew rapidly, filling the homes of China’s growing consumer class with air conditioners, washing machines and televisions.
But, like many companies that once dominated the high street, Suning is struggling to transition to e-commerce and lose it to Alibaba, JD and Pinduoduo. On the same day as Jiangsu FC’s abrupt shutdown, Suning confirmed a state-backed investment in its online store, Suning.com. The bailout resulted in Zhang and other major shareholders selling nearly a quarter of their stake in the company for $ 2.3 billion.
Suning declined to comment. Zhang has vowed to refocus on its core retail business, including the growth of its e-commerce unit, Yunwang Wandian.
However, Zhang’s cash crisis appears to have intensified as a result of its intertwining with Hui’s Evergrande, the world’s most indebted real estate developer.
In 2017 – the same year, Zhang was photographed drinking with Hui, when China’s richest man – Suning plowed Rmb20 billion ($ 3.1 billion) into Evergrande’s subsidiary on the mainland. Last year, a listing of the unit did not go according to plan, which meant that Suning was denied both the benefits of the IPO proceeds and the original cash investment.
Suning’s retreat also coincided with the Chinese Communist Party gaining more control over private enterprises.
Simon Chadwick, an expert in the global football business at Emlyon Business School, said the exodus of Chinese club ownership was a reflection of a change in Beijing, which no longer wanted companies or entrepreneurs to lead their football diplomacy.
“What is very clear about China is that there is always a very strong link between the interests of the state, the direction of the government and what these companies are doing,” Chadwick said. Suning “is not a company that has bought into Italian football in a capricious way, nor[did it do so]for purely commercial reasons ”.
Instead, analysts expect Beijing to prioritize exerting influence over governments, especially in the countries where it has built critical infrastructure, and FIFA, the sport’s struggling governing body. This pressure is seen as part of China’s strategy to host the World Cup in 2030, the tournament’s centenary.
While the encroachment of private capital in football threatens to dampen Xi’s ambitions in the sport, Sullivan was skeptical that the Chinese leader would suffer any consequences.
“Xi’s power is entrenched enough that it takes a lot more to harm him,” Sullivan said. “It is detrimental to the football reform program he encouraged, but it is not difficult to pass the blame on to private companies and / or Covid. “
Given the booming investment in China, foreign money could soon reach Chinese football clubs, Chadwick added.
“What China is doing right now is cultivating the conditions in football to attract foreign investment,” he said. “We could see Jiangsu reviving with Volkswagen as the shirt sponsor or an American private equity firm as the owner.”
Additional reporting by Sherry Fei Ju in Beijing