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UPDATED: December 12, 2014 NO. 50 DECEMBER 11, 2014
Not a Spectator Sport
China looks to actively cultivate economic power from its sports sector
By Yin Pumin

REGULAR EXERCISE: Students of a middle school in Jiaozuo, central China's Henan Province, practice Tai Chi during a break from class (XINHUA)

On October 20, the State Council, China's cabinet, issued a document entitled Guidelines on Accelerating the Development of Sports Industry and Promoting Sports Consumption, intended to boost productivity in the country's sports sector. The guidelines outlined plans to turn the nation's sporting world into an important driving force for economic growth.

The document has accorded China's sports industry an unprecedented level of national importance, marking the first time the Chinese Government has attempted to tap into the economic potential of the sports industry, analysts say.

According to the guidelines, the government expects the sports industry to be worth a whopping 5 trillion yuan ($813 billion) by the end of 2025.

China's sports industry is worth about 900 billion yuan ($146.34 billion) right now, which means the plans are to make it almost five times larger within a decade. This is massive," said Hao Fuqing, a senior official of the National Development and Reform Commission (NDRC).

The guidelines focus on encouraging more people to participate in athletics and on channeling more investment into sports facilities and stadiums for public use. Public agencies, businesses, social organizations, and schools should all implement one hour of fitness every day to enable employees and staff to take part, the guidelines state. The government will also build "15-minute fitness areas" in communities across the country.

Analysts say the move will provide more opportunities for the country's sports industry and make it be a new contributor to China's sustainable social and economic development.

Liu Peng, Minister of the General Administration of Sport (GAS), said that with incomes rising across the country, Chinese people are pursuing a higher quality of life.

"The notion of investment in health is taking firmer root among the people and physical fitness is gaining more attention," Liu said, adding that China needs to further unleash the potential of the sports market.

According to the GAS, the sports industry is expected to account for about 1 percent of the country's GDP by 2025, the same level as in most developed countries, compared with 0.6 percent in 2012.

Huge potential

In the guidelines, the government admitted that the sports industry in China is still in its infant stages and its vitality is yet to be explored.

According to an annual report on sports industry development jointly released by the Beijing-based Social Sciences Academic Press and Beijing Sport University in July, sporting goods sales in China reached 79.7 billion yuan ($12.96 billion) in the first three quarters of 2013, a 10.6-percent year-on-year increase, and realized profits of 3.2 billion yuan ($520.33 million), a 3.4-percent rise from 2012.

However, growth of China's sports industry has been slowing since 2010 due to a lack of professionalism in sports administration and marketing, the report said.

Over the past decades, sport in China has largely been built around the planned economy system, in which the government owns and runs all sports.

While the strengths of this system are evident in yielding gold medals at global sporting events, it makes it harder for a free market to grow around sport, and thus, for the nation's sports industry to take root.

Although in many industries, China has embraced opening and reform over the past three decades, the domestic sports industry has not developed in the same way and many of the nation's elite athletes and sporting events remain largely sheltered from commercialization.

"One of the big problems is that the system dampens the enthusiasm of private investors and the introduction of a professional approach," said Eric Ho, Executive Director of Peking University's Research Institute for Sports Science.

According to the report in July, China currently has 894 sporting goods manufacturers in operation, employing 267,446 people, but most of the major brands suffered a slump in business in 2013.

Anta, a renowned Chinese sporting goods brand, recorded net profits of 662 million yuan ($107.64 million) in the first half of 2013, a significant drop of 18.7 percent year-on-year. Another major brand Li-Ning also suffered a huge loss of 184 million yuan ($29.92 million) during the same period, and closed 410 retail outlets across China.

Ho said the slump should be attributed to the underdevelopment of China's sports entertainment business.

The GAS should streamline its work and delegate powers to lower levels, allowing sports events and the sports industry to act according to market forces, Ho added.

Fortunately, on the other side of the coin, the current state of China's sports industry might denote huge potential for growth and immeasurable business opportunities.

China's rapid economic growth has driven up the living standards and disposable incomes of its citizens, particularly in such metropolises as Beijing, Shanghai and Guangzhou, where a more affluent generation of Chinese sports fans have been born.

"China's sports market has huge potential," said Chen Shaofeng, Director of the Beijing-based Sport Industry Research Center of China, adding that in the spectator sports and recreational sports sector, which constitute the core of sports industry, there's 90 percent of the market that is yet to be explored."

"For the industry to reach its full potential, China's sports must free from central planning and be built around independent, professionally managed sports leagues and its own market," Chen suggested.

Although China adopted the notion of professional sports from the West and started to create competitive leagues more than 20 years ago, professional sport, in essence, has yet to come to existence, since China's sports federations, each of which runs their respective sports leagues such as the Chinese Football Association Super League and the Chinese Basketball Association, have been all run by the state.

Unprecedented opportunities

The October 20 guidelines provide an opportunity for the sports industry to transform itself.

The guidelines raise the nationwide fitness campaign to the level of a national strategy and takes improving people's physique and health level as its fundamental goal, and supports sports as a green industry.

The document sets a goal for per-capita availability of sports grounds to reach 2 square meters by 2025 and to increase the number of people who regularly exercise to 500 million. The country's public sports services will cover all its population.

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