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Communists Go After Liverpool

August 7th, 2010 · 8 Comments · Business, Football, Government, Sports, Sports Media

An op-ed article looking at the recent news reports that the Chinese government’s “investment arm” is interested in purchasing a Premier League football club.

It might be too early to call it “normal,” but since Chinese investors went after the NBA Cleveland Cavaliers basketball squad in 2009, the latest news that a Chinese investment group is now looking to purchase Liverpool F.C. doesn’t seem all that surprising. Except for the little issue over the fact that it is the China Investment Corporation, a state-owned company established in 2007 under the Ministry of Finance using 1.55 trillion RMB. The corporation is charged with managing part of the country’s foreign reserves, and is one of the world’s largest sovereign wealth funds.

Kenneth Huang, point man for the potential purchase of Liverpool F.C. by the China Investment Corporation. Image from Shanghaiist.

The British press seems flustered at the prospect of having the financing arm of the Chinese government owning a football club. The BBC’s Beijing corespondent Chris Hogg cautioned the move by the CIC in an August 5 podcast. The Guardian questioned the decision by the CIC, calling a potential Liverpool purchase “the odd one out in the CIC investment portfolio,” given the group has invested in firms such as Coca-Cola, Apple and Motorala, but has no experience in sports teams.

According to the Telegraph, the investment group would be led by Kenneth Huang and his QSL Sports Limited company, both of which have been linked to purchasing a 15 percent stake in the Cleveland Cavaliers, bringing Tsingtao beer to the Cavs’ sports arena, as well as helping bring Yao Ming to the Houston Rockets and deals with the New York Yankees baseball organization. Huang and associate Guang Yang, executive vice president of Franklin Templeton Investments and chief investment officer of the China Life/Franklin Templeton Fund, would be in charge of day-to-day operations should Liverpool be bought, and the other Chinese investors involved in the CIC deal would have a more “passive” role in the team.

In 2009, when China Sports Review looked at the Cleveland Cavs deal with a group of Chinese investors, CSR championed Huang and the apparent front runner of the group, Albert Hung, one of the wealthiest businessmen in Hong Kong, for potentially ushering in a new era of sports investments into American athletic teams. Since then, the only attention the Cavs have received is the circus that surrounded LeBron James’ departure from the team to join the Miami Heat, and recently Shaquille O’Neal’s move to the Boston Celtics.

Even the NBA’s own reports downplayed the purchasing stake in the Cavs, and instead focused on Huang’s goals of investing more into the China Basketball Association. The Cleveland Cavaliers didn’t even bother to make it news for the organization, as it is not listed anywhere on the team’s official Web site that a Chinese company has a stake in the franchise. Tsingtao Beer is probably kicking themselves in the pants for investing in a team that’s seen its star players jump ship, and is now a Chinese beer company with exclusive distribution rights to … just another sports team in the “middle of nowhere” Ohio.

This isn’t to knock Huang, who seems to pop up in the news every few months with a potential sports deal that elicits even more raised eyebrows than the previous, particularly because China has a very limited history of investing in foreign sports teams, but I think Huang is the wrong person to focus on when talking about the potential Liverpool purchase.

It’s also naive and unnerving to see the British media challenge the CIC based on the fact that it has no previous experience in the sports world. Pardon me, Guardian’s Tania Branigan, but what is wrong with a fund that made a nearly 12 percent return on its 2009 investments now branching out into sports?

Lou Jiwei, current head of the CIC, China's former Vice Minister of Finance, and one of the country's most seasoned financial operators. Image from Time Magazine.

Maybe it’s as simple as saying CIC has a lot of money to throw around, Liverpool is in debt, and for all intents and purposes the CIC will bail them out. Maybe it has something to do with getting a foothold on a market that is currently undergoing a number of infrastructure projects — code words for serious money moving around — in preparation for the 2012 London Olympic Games. Or, given we’re looking at Liverpool, maybe it has something to do with the massive planning project recently approved for Liverpool, the largest in the United Kingdom, that will see 1.7 million square meters of the region developed. The not-for-profit Web site Merseyrail Extensions is currently documenting the expansion taking place in Liverpool, and it has managed to pull together several interesting developments — another code word for serious money moving around — taking place in Liverpool.

Given all that, I don’t have anything to back these assertions, but Lou Jiwei, China’s former vice minister of finance who now runs the CIC, just doesn’t look like a man that interested in soccer balls. In this case, the purchase of a sports franchise seems like the first step in creating a pipeline for Chinese investors into the United Kingdom, and more importantly “western Europe.”

— Zachary Franklin

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8 Comments so far ↓

  • John

    You say Huang is the wrong person we should be focusing on, should Hung be the one we focus on, wasn’t he part of a group of Chinese investors who made a enquiry into buying Manchester United a while back ?

    Reply

    Zach Reply:

    John, you are right, a group of Chinese investors did an inquiry into possibly purchasing Manchester United, which was obviously turned down. CIC has deeper pockets, and as a major investment group they are looking more toward long-term investments. A sports team is a long-term investment. But by opening that door, what does Liverpool have to offer Chinese investors? How about the UK?

    Reply

    John Reply:

    So in your opinion you think CIC are still involved in this bid, if that’s so why have both Huang and CIC denied it ? My head is spinning with all this.

    Reply

    Zach Reply:

    It’s all gone “topsy turvy” since it was originally reported. There are reports that both sides are denying a bid. There are reports that both side have submitted a proposal, but not a formal bid. There are other reports that say the deal is still on.

    We’ll just have to see what happens now.

  • b. che

    I love your blog and this was a topic I almost blogged about as well, but there is too much bs about the deal. I don’t believe for a second the CIC has any kind of significant role in Huang’s bid, it doesn’t fit into their portfolio or strategy. I’m guessing this is yet another publicity stunt on Huang’s part.

    Reply

    John Reply:

    Well it wouldn’t be a very good one if he fails to buy Liverpool and if CIC aren’t involved people around the world will know who he is and know he is a con man, not to sure he would play it like that.

    Reply

    b. cheng Reply:

    But people actually believe he owns a part of the Cavs still, even after he himself has released a press statement (granted nearly a year later) that he doesn’t. Kirdi is as big a joke as Huang, maybe more so, the British media hasn’t really checked into either of them and once the team is bought (most likely by neither of them) their names will disappear only to return the next time a story like this pops up as the guy who “almost” bought Liverpool.

    Reply

    Zach Reply:

    That’s a good point. If Huang “almost buys Liverpool,” does he loose all credibility in the western sports world going forward? And if that’s the case, doesn’t it seem like he’d be hurting China’s chances of expanding any sort of sporting business outside of the People’s Republic?

    Reply

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