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article imageSports industry in China: Tapping the Goldmine Special

By Zhenyu Li     Apr 8, 2011 in Business
At the height of China's post-Olympic glory, the portal to the "gold mine" of the nation's sports resources is poised to be unlocked.
China's sports industry, an untapped gold mine with immense potential business opportunities has, over the years, caught the eyes of many, mostly inside Chinese sports officials and outside gold rushers. Now, the locked door to the treasury is beginning to open.
Last year around this time (March 24, 2010), China's highest executive organ of State administration historically issued an official document designed to transform the nation's sports industry, with the primary goal of attracting non-governmental investment.
"We welcome both private domestic and foreign investors' participation in China's sports industry, especially in such core domains as the sports performance and recreational sports sector," Liu Fumin, Director General of the Department of Finance of the General Administration of Sport of China (China's biggest boss in sports industry sector) told this journalist at the one-year milestone.
"The budding sunrise industry is bound to bring them sweet rewards."
A Golden Industry
Over the past decades, sport in China has largely been built around the planned economy system, a regime known as juguo, or "whole nation", in which the government owns and runs all sports. While the strengths of this system are evident in yielding gold medals, it makes it harder for a free market to grow around sport, and thus, its sports industry to take root.
Although in many industries, China has embraced marketization and globalization over the past three decades of its extraordinary economic growth, the sports industry in China has far from fully developed and many of the nation's elite athletes and sporting events remain largely sheltered from commercialization. According to statistics of the General Administration of Sport, given the weak situation of China's sports industry, it accounts for only 0.52 percent of China's GDP in 2008, while in some developed countries, the number often exceeds one percent.
On the other side of the coin, the current state of China's sports industry might denote huge growth potential and immeasurable business opportunities.
China's rapid economic growth has driven up living standards and disposable incomes, particularly in such metropolitans as Beijing, Shanghai and Guangzhou, where a more affluent and younger generation of Chinese sports fans are born.
"China's sports market has HUGE potentials," Chen Shaofeng, director of the Sport Industry Research Centre of China told this journalist. "In terms of the sports performance and recreational sports sector, which constitute the core of sports industry, there's 90% of the market that is yet to be explored."
China's sport may not only produce gold medals, as witnessed in the unparalleled 2008 Olympics, but also tons of "pure gold". Sports industry in China is a gold mine that is yet to be tapped.
"For the industry to reach its full potential, China's sport must free itself from the centrally planned regime and be built around independent, professionally-managed sports league and its own industrial chain," said Chen.
Although China adopted the notion of professional sports from the West and brought in the league system as early as more than 20 years ago, the professional sport, in essence, has yet to come to existence, since China's sports federations, which run their respective sports league, such as Chinese Super League (CSL) and Chinese Basketball Association (CBA), have been all State-run.
"China's sports industry calls for a reform of the sporting regime," Chen Shaofeng said.
A Timely Rain
A major transformation of the sports industry in China is approaching.
Last year around this time, China's State Council, the highest executive organ of State administration, for the first time, issued a document designed to promote sports industry in China. The release of the document, namely the Guiding Opinion on Accelerating the Development of Sports Industry in China, Guiding Opinion for short, indicates that sports industry in China was elevated to an unprecedented height of strategic position at the national level, manifesting Chinese central government's resolution to transform the sunrise industry.
"The primary goal of the Guiding Opinion is to attract non-governmental investment," said Liu Fumin.
As the document points out: both domestic and foreign private investment in China's sports industry is actively encouraged, and market exploration of sports performance and recreational sports should be put into action to a greater extent.
"In my opinion, the core of the Guiding Opinion is about intellectual property and organizing sporting event," Chen said. "The main problem that has long been plaguing China's sports industry is that the market resources have not opened to the public."
"Although the opinions are highly constructive, the key is to work out specific, practical practices and implement them all."
In the light of industry experts, by 2020, the market size of China's sports industry is more than likely to exceed 2 trillion RMB should the Guiding Opinion come to fruition.
Over the last five years, China's sports industry has ridden on a high-speed train and is emerging as a new bright spot in national economy. The growth rate of the industry has kept up a pace of above 16% in recent years, surpassing that of the national economy, and China has become the world's largest sports goods manufacturer, according to the statistics of the General Administration of Sport.
"China's sports industry is booming and the Guiding Opinion came like a timely rain," said Liu. "The General Administration of Sport has been working on the Guiding Opinion's follow-up policies to ensure that China's sports industry takes a sound development path in the coming years."
A Win-win Game
Despite the fact that China's sports industry has grown by leaps and bounds, it is, comparing with those of the developed countries, still in its infancy and requires nutrients from the "adults".
"Sports industry in the western world is far more established than that of ours. We should keep an open mind and learn from their experiences and expertise," Liu said.
Over the years, a series of major international sporting events, such as NBA and F1, as well as some global big-time sports management conglomerate have come to China. Not only did they bring the original live games to the local audience, but also expertise in sports business management.
"The overall level of the operational competence in our industry has improved thanks to their participation," said Liu.
In turn, international sports brand such as Nike and Adidas have achieved excellent performance since entering into the vast Chinese market.
"Investors ought to have faith in the industry, for the policy of encouraging investment in sports industry is written in stone," Liu remarked. "During the period of the Twelfth Five-year Plan, there will surely be more favorable policies and business opportunities for the sports industry in China, particularly in the field of sports performance and recreational sports."
As the portal to the "gold mine" is poised to be unlocked, it strikes a win-win for both China and abroad.
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