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China’s plan to massively expand its sports industry

China’s plan to massively expand its sports industry
November 28, 2016

China's sports market is projected to go through a period on ongoing growth, as the country ramps up its resources to facilitate the development of physical activities.

Fuelling the trend is the government's initiatives to accelerate the development of the local sports industry and promote sport consumption among Chinese people.

China's General Administration of Sport mapped out the 13th Five-Year Plan for the industry in July 2016, aiming to spend the next five years in boosting it so that it would be worth 3 trillion yuan (US$460 billion) by the end of 2020 and would account for 1% of domestic GDP.

Prior to the latest plan, the State Council released a guideline for the sports industry in 2014, which suggests that the total value of China's sports industry should exceed 5 trillion yuan by 2025.

In 2014, the value of the sector was 1.36 trillion yuan.

Under the latest sports plan, the country will provide 70,000 football pitches, averaging at least half a pitch for each 10,000 people and by 2020 China will have 20,000 football academies.

The plan also issued a blueprint for nationwide fitness programs, setting goals of building more than 15,000 fitness facilities in villages and towns, with 10,000 more multifunctional playing grounds to be constructed in cities.

Analysts say the industry is flourishing with opportunities in many areas including sports media, sports facilities, merchandising, sports marketing and sponsorship.

Li Ning, Chairman of the Beijing-based sportswear maker Li Ning Co Ltd. told the China Daily “sports activities among ordinary people, compared with sports professionals, are seen creating huge demand.”

Li Ning said the affluence stemming from increasing urbanisation of China's population, and increases in family income would spur the sector.

According to independent research conducted by 36kr, a Chinese media site specialising in reporting technology-related news stories, the sports market is set to increase 25% in the next 10 years.

Analysts say companies and investors have been seeking business opportunities in the industry in the past three years.

Examples include the Wanda Group’s purchase of Switzerland-based sports marketing company Infront Sports & Media at US$1.2 billion, just weeks after its purchase of a stake in Spanish La Liga champions Atletico Madrid. It also bought Florida-based World Triathlon Corporation - the world's biggest operator of Ironman events, accounting for 91% of the global market share of long-distance triathlon events - for US$650 million.

China's e-commerce giant Alibaba Group Holding Ltd established Ali Sports Group, while Tencent, the top internet service portal, bought online broadcasting rights for a large number of sports events.

However, although there is a huge sport market, analysts suggest that it may be difficult to turn that potential into profits because of a lack of a proven business model.

Li Xudong, Managing Director of the investment banking department at Beijing-based China Securities, explains "there's a lot of money available to finance the industry, but we need time to figure out how to ... make profit.”

Li added that none of the Chinese sports companies were listed on the stock market's main board. As for the New Third Board - popular among micro, small and medium-sized firms - 41 companies are currently listed in the sports or sports-related category.

According to industry data, the 41 companies recorded an average annual loss of 11 million yuan.

The rise of the Wanda Group and its interests in sport, entertainment and tourism was a feature in the September/October 2016 issue of Australasian Leisure Management

Images: Zhuhai Hengqin International Tennis Centre (top - courtesy of Huafa Sports Operation and Management Co Ltd) and online retailer Alibaba dominates sales of sportswear (below)

11th November 2016 - CHINESE GOVERNMENT RELAXES SPORT EVENT RESTRICTIONS

2nd November 2016 - CHINA APPOINTS NEW DIRECTOR FOR GENERAL ADMINISTRATION OF SPORTS

23rd September 2016 - IOC PRESIDENT PROCLAIMS ‘TIME OF ASIA’ AS SPORTS MINISTERS SIGN DECLARATION IN PYEONGCHANG

29th July 2016 - POPULOUS BACKS ALIBABA PLAN TO INCREASE SPORT PARTICIPATION IN CHINA

25th July 2016 - CHINA TO BUILD 60,000 FOOTBALL FIELDS BY 2020

21st June 2016 - CHINESE PROFESSIONAL SPORTS MARKET TO REACH US$242 BILLION BY 2025

12th April 2016 - ALIBABA BACKS WORLD RUGBY WITH ‘GROUNDBREAKING’ DEAL


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