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Sporting and Recreational Services the Next Driver of China’s Economic Growth

July 20th, 2017

Euromonitor International projects that China’s sporting and recreational services industry will more than double over 2016-2025, contributing to the country’s gradual transition towards a services and consumption-driven economy. According to the latest data available, by 2025, China is set to become the third largest sporting and recreational services industry globally, overtaking Germany and Japan. Strong growth and the increasing importance of sporting services in China will be driven by changing Chinese lifestyles, growing government support and increasing private investment in China’s sports industry.

Chart 1. Increase in Turnover of Sporting and Recreational Services within the Largest Economies, CAGR and Absolute Value Growth 2016-2025

Source: Euromonitor International from national statistics

Growing Chinese middle class and changing lifestyles fuel interest in sporting activities

The expanding middle class and rising income levels are some of the major contributors to the growing sporting and recreational services industry in China. The number of Chinese middle class households is projected to reach 128 million by 2030, accounting for 23% of total households. As a result, the growing middle class is anticipated to support Chinese expenditure on healthy lifestyles and experiences, thus benefiting businesses operating sports facilities, organising sports events or managing sports clubs.

Not only is participation in fitness activities growing, but interest in spectator sports is also rising in China. According to the Chinese search engine Baidu, Chinese searches for information on sports increased by over 25% to 1.6 billion times in 2016, with basketball and football (soccer) the most popular searches. What is more, the national basketball league (the CBA) has been recording growing popularity after being able to include high-calibre US athletes and elect national basketball star Yao Ming as its president in 2017, while China’s domestic football (soccer) league (the Chinese Super League) has been experiencing a peak in interest amongst both TV audiences and spectators, as a result of a national soccer reform signed in 2015.

Furthermore, domestic interest in American football in China is expected to increase, with the National Football League (the NFL) planning to host its first regular-season game in China in 2018, whereas winter sports have been attracting more Chinese interest recently as a result of the upcoming 2022 Winter Olympics in Beijing.

Chart 2. Increases in Consumer Expenditure by Category in China, CAGR 2016-2030

Source: Euromonitor International from national statistics

Government support is key to sports development in China

Sport industry development has been included as one of the priorities in China’s 13th 5-Year Plan, giving the sports industry an additional push from public funds. According to the Government’s plan, by 2020, the sports industry (including sport-related industries such as sports goods manufacturing) is set to more than double in total value terms, contributing to 1% of the country’s GDP (up from 0.6% in 2016).

Besides the further development of basketball, volleyball and winter sports in the country, the Government is set to focus on football (soccer) development, with the aim of having 70,000 football (soccer) pitches and 20,000 football (soccer) academies by 2020 and China becoming a top class football (soccer) nation by 2050. In addition, to boost Chinese health and fitness, the Government has issued the Healthy China Outline 2030 and The National Fitness Plan 2016-2020, with the aim ofbuilding 15,000 fitness facilities and 10,000 playing grounds across the country.

Investors seek business opportunities in China’s sports industry

Whether China succeeds in implementing its ambitious plan for sports industry expansion or not, ongoing modernisation and the removal of corrupt officials from the Chinese Super League have already resulted in an increase in football’s (soccer’s) popularity in the country. This shows that China’s determination to develop the sports industry will positively affect investors’ confidence in business opportunities related to sports facilities operations, sports marketing, merchandising, media and sponsorship. Changing football’s (soccer’s) landscape in the country has already attracted private investors such as Alibaba, which has acquired a 50% stake in Guangzhou Evergrande Football Club for RMB1.2 billion. The company has also pledged to invest an additional RMB680 in rugby in China in the upcoming decade.

While investment in the domestic sports industry is set to benefit local investors as active supporters of Government policies, acquisitions of European football clubs and media rights agencies are seen as a way to diversify investment portfolios and, at the same time, allow China to step onto the international sports stage. Over the last couple of years, Chinese investors have been on a buying spree in Europe, with some major investments including Suning Holdings Group acquiring a 70% stake in Inter Milan and conglomerate Wanda Group acquiring a 20% stake in Atletico Madrid and Swiss sports marketing agency Infront Sports & Media AG, owning TV rights to major sporting events.

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