China’s Guangzhou appeals for state aid to cover loss of owner Evergrande’s cash support

September 16 – Chinese top club Guangzhou have asked for government aid to survive, a move that could herald further and more structural ownership changes in the Chinese Super League (CSL).

High-flying, eternal big spenders and the dominant force in the domestic scene for the past decade, Guangzhou is cash-strapped and the club’s parent company Evergrande is preparing to relinquish at least a part of its ownership. In a widely circulated letter, the club’s general manager Gao Han said that Evergrande is no longer able to financially support the team and demanded a “feasible takeover plan” from local authorities.

It’s a fall from grace for the Chinese powerhouse. Guangzhou won the domestic crown eight times in the last decade and in 2013 the club became the first Chinese team to win the Champions League, Asia’s premier club competition. The following year, billionaire Jack Ma’s Alibaba Group acquired a 50% stake.

But the club always struggled to generate enough revenue to cover operating expenses. Bloomberg estimates that Evergrande lost between $155 million to $310 million on the club annually. Those ills were further complicated by Evergrande’s own mammoth liabilities.

Much of the rationale behind the investing so heavily in the club was always supported by the team being able to carry the Evergrande name in its title, but with the Chinese FA telling clubs they will can no longer have owner names included in their team name, the marketing justification for such high levels of financial support disappeared overnight.

How Chinese authorities will respond to Evergrande and Guangzhou’s plea for help is not clear yet, but they are reportedly prepared to bail out the club via taking an ownership position.

Since 2015, China has been encouraging mixed ownership structures at clubs, suggesting the government wants tighter control, but also preventing local companies from overspending on the game and particularly in the transfer markets.

Guangzhou’s struggles draw comparisons with the demise of Jiangsu Suning FC which was shut down by parent company Suning, citing financial difficulties, just 100 days after the club had won the Chinese Super League.

Contact the writer of this story at moc.l1634329470labto1634329470ofdlr1634329470owedi1634329470sni@n1634329470osloh1634329470cin.l1634329470uap1634329470

 


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