A Sino-Scottish Football Proposal

Readers of this blog will know of my interests (and soft spot) for all things Scotland. I previously wrote a brief ten-point approach to revitalising Scottish Football.

In the time that has elapsed since that article was written, we’ve seen a robust approach to football development in China. Now, football has always been popular in China but the attempts towards establishing China as a footballing powerhouse have been sporadic at best. However when President Xi Jinping became the President of the People’s Republic of China, it all changed.

president-xiIt has to be noted that President Xi is a huge football fan and he has publicly outlined his vision for China to one day host the World Cup and to then win it! In 2015, a 50-point plan was announced by the Central Planning Committee (of the Chinese Communist Party) to overhaul Chinese football and it was overseen by President Xi.

This desire for China to be a football giant isn’t a new one. The other Chinese leader in the past who had huge dreams for Chinese football was Deng Xiaoping, the architect for China’s economic liberalisation but his priorities had to be primarily on economic and social development.

Chinese football fans are a hugely passionate lot – I recall watching the Singapore Armed Forces FC (SAFFC) playing the Chinese Army Ba Yi team in 1998 at the old Kallang Stadium in Singapore and it was sellout turnout that was half Singaporean and half Chinese (despite the fact it was held in Singapore!) and the passion and energy was fantastic.

In fact, when Stockport County (from the Second Division) did a tour in China, their matches were attended by over 20,000 fans per game (more than five times their home average home attendance!).

The Chinese Football Association Strategy

The Chinese Football Association have clearly spelt out their desire and strategy to be a ‘world football superpower by the middle of the century.’

In an effort to match the strategy, they have embarked on a five-pronged approach towards delivering their vision.

1. Grassroots training, academies’ development and training

The Chinese investment into building the game at grassroots level is absolutely staggering. According to a memo sent out by the Ministry of Education in China on July 2015, they have identified 4,755 schools as specialist footballing academies.

Last year, the world’s largest (and arguably the most expensive) football academy – the Evergrande Football School – opened in Guangzhou, a Southern Chinese province. The school built in 10 months cost over $185 million. The school also has partnered with Real Madrid to provide the trainers and coaches to help develop about 3,000 young Chinese footballers.

Other football clubs, including Manchester City, and ex-players such as Luis Figo and Michael Owen have also established their football academies across China.

The Chinese government have also expressed a clear commitment to include football as part of the overall school curriculum.

This is part of the overall goal to ensure over 50 million children and adults play football regularly by 2020 and to develop the critical mass of high-quality players required to develop a world-class team.

2. Providing Chinese players with international experience and exposure

There have not been as many high-profile Chinese players in European leagues. The two most recognisable players were Sun Jihai and Li Tie who played for Manchester City and Everton respectively. Unlike South Korean and Japanese superstars (such as Park Ji Sung for Manchester United, Hideotoshi Nakata, Shunsuke Nakamura for Celtic, et et), Chinese players have not been able to shine at the top European leagues.

There is now concerted effort to get Chinese players playing in the top European leagues to get the international exposure. There is a reasonable expectation that this will not only allow for top players to develop their craft further but also help China in their international competitions.

It is to be noted though that Chinese players turning out for British teams saw over 350 million Chinese viewers becoming more interested in British football!

3. Ownership and partnerships with globally-renowned football clubs

The top Chinese companies are now investing, partnering or buying outright top teams across Europe. From Atletico Madrid to Inter Milan to Wolverhampton Wanderers, we see Chinese ownership. Chinese consortiums are also partners in other clubs such as Manchester City. This is part of a wider effort not only to drive economic benefits that come from effective management of football teams but to also learn and adopt best club management practices. These best practices will ultimately support better footballing management and establishment of world-class processes and procedures required to develop a football network back in China.

4. Bringing world-class managers and trainers to China

The top teams in the Chinese leagues are now bringing in expert football managers and coaches with very impressive pedigrees. The likes of Luis Felipe Scolari, Sven-Goran Erikkson and Dan Petrescu have come to Chinese leagues and have helped raise the level of the game in China.

5. Signing high-quality talent and superstars from overseas to play in Chinese leagues 

In the recent year we’ve seen the financial muscle of Chinese football clubs (supported by the richest Chinese companies and their billionaire owners, including Jack Ma of Alibaba fame and Wang Jianlin, owner of Dalian Wanda and China’s richest man) outbid top European clubs for the services of world-class footballers. From Ramires (£23 million), to Alex Teixera, to Hulk (for £47 million), to Carlos Tevez (being paid an estimated £20m per annum), we’re seeing a very deliberate policy of bringing the best players to China in an effort to drive up the overall quality of Chinese players in the Chinese League through better exposure to top talent.

What all of the above demonstrates is a clear laser-like focus on the Chinese government ambitions of winning the World Cup in the coming decades. We see the ambition being matched with money, political support and commitment from across all sectors (education, business and policy) – and this is just the start. 

One Area For Further Development

There is, however, one area which is still missing. Chinese players need to be playing against quality opposition week-in, week-out. Whilst the youth and grassroots development is a step in the right direction, it is going to take a decade or more before there is a crop of players who will provide the quality opposition. Having a few superstar players (limited to three foreign players per team in any event) again is not enough. Similarly, having a couple of world-class coaches is not going to be enough.

The Chinese league needs to have complete teams with quality players who can provide the Chinese players with the type of competition and exposure that will allow them to make step changes in their development and progress.

This is where Scottish football comes in!

What Could This Mean For Scottish Football?

The Scottish FA have provided for development loans to help build the youth football framework across Scottish football clubs. The Scottish FA have also provided financial incentives to Scottish football team for performance-based outcomes which include number of under-21 players in the first team.

Alistair Gray, in a BBC interview, also highlighted the quality of youth players from Scotland and the need for the players to have more competitive game time to further develop their capabilities.

The Proposal

My proposal is that the Chinese Football Association allow for the Celtic U23 and Rangers U23 participate in the Chinese Super League and increase the size of the league from 16 to 18 teams.

What would this mean for Chinese football and the players in the league?

  • It means that you will have the top Chinese teams playing against the cream of the crop from Scottish Football , against young players who are technically very competent.
  • It will also allow for Chinese teams to get used to the pace of football Scottish teams can provide and help build the overall footballing game intelligence for Chinese league players.
  • This will allow for a much more holistic development of Chinese players and get them acclimatised to playing against different styles and against much higher overall quality players.
  • It could also lead to a more formal exchange programme between Chinese league players and Scottish football clubs and also promote greater youth development through these exchange programmes.

There are significant benefits for Scottish football as a result of this proposal:

  • It will mean the top youth players from Scotland will have the opportunity to play against an up-and-coming group of Chinese players and further hone their skills.
  • It will also create greater interest in Scottish football by Chinese fans and will spur a greater following. It will help expose Chinese football fans to the intrigues and entertainment of Scottish football. The history of Scottish football, its lore and fables – from the Lions of Lisbon, to the history of the Old Firm derbies,   Archie Gemmill’s wonder goal against the Dutch in the 1978 World Cup. This will allow for the Scottish Professional Football League to negotiate better rates for the TV deal in China in the future. Imagine a world with a billion more interested Scottish football fans!
  • An Old Firm derby in Shanghai – the opportunity to recreate one of the world’s most historic football rivalries, creating an interest in the history and ethos of both Celtic and Rangers for an entirely new audience remains a very tantalising prospect.
  • It also provides a fabulous opportunity for Scottish youth to experience a year out in China, learning more about the culture and experiencing life from a different lens and perspective. This can only further build the bridges between cultures.

Ultimately this initiative will lead to greater awareness and relationships between both China and Scotland. It also becomes a fantastic opportunity for Scotland to showcase her natural beauty, the culture and traditions of Scotland and help increase the overall tourism and investment by Chinese.

It will also help the Chinese sports authorities get one step closer to meeting the Chinese leadership’s ambitions of one day winning the World Cup. Now, that’s an offer that will be hard to refuse.

 

China / Japan? History repeating itself?

japanchina2

Too far fetched?

Let’s consider briefly the facts and also some important caveats.

Population demographics

The results of a census taken in 2015 has placed Japan’s population at just over 127 million – a decline of about 1 million in about 5 years. Japan’s birth rate has been long below the total fertility ratio of 2.1 (currently 1.4) and nearly a third of all Japanese citizens are now over 65. This is already a source of policy and economic challenges for Japan and one that is likely to keep growing.

China’s one-child policy starting in the 70s has had a major impact. Whilst the policy has now been relaxed, the population control genie, once out of the bottle can rarely be controlled. Changing economic trends, mindset shifts, and a movement towards an urban citizenry means less people are keen on having children. The United Nations estimates that that the number of Chinese over 65 will increase by 85% to 243 million in 2030 (from the current 131 million). The Chinese working population saw its biggest decline in 2015 – a fall by a record 4.87 million.

Both Japan and China have very restrictive and insular immigration policies which will only serve to further exacerbate the population and demographic challenges. These demographic issues will also impact economic growth and development as in time both economies will have inverted population pyramids, where one active working individual will be supporting two parents and four grandparents – and better medical facilities and healthcare will lead to a greater demand on the working population.

Perhaps the spur in investment in robotics will help alleviate these challenges?

Economic growth history

Japan’s economic growth started with the development of its manufacturing base following World War Two with support from the USA and other Allied nations. Japan’s growth was an average of 9% between 1955 and 1973 (when the first ‘oil shock’ impeded growth).

In the case of China, following a debilitating post-war economic situation and the challenges of the Cultural Revolution, the opening up and reformation of the economic system from 1978 was instrumental in China’s economic story. China’s growth has averaged between 7% and 10% since.

The main engine of growth both in the case of Japan and subsequently China was manufacturing. It will surprise users of top-notch Japanese products today to learn that from the 1950s to around the 80s, ‘Made in Japan’ meant low-quality and cheap and people preferred to use American or European produced goods. However, the Japanese investment into their manufacturing processes, research and development over time meant that they started developing high-value and high-quality goods and products. It’s a process that took decades and systemic investment into innovation.

In the case of China-made products, there are still some challenges around quality and value, but this is something that is being addressed as we now increasingly see greater investment into research and innovation.

Funding world’s developing needs

Japan became development donor from as early as the mid-50s and by the early 90s, Japan became one of the largest officual development assistance (ODA) providers in the world. Grants, aids and soft loans were provided through agencies such as the Japan International Cooperation Agency (JICA) to countries across Asia, Latin America and Africa.

Japan then became instrumental in the establishment of the Asian Development Bank (an institution for which it has maintained presidency since inception in the 60s).

This allowed Japan to project its soft-power and help foster policies favourable to Japan across recipient nations.

If we examine China’s development assistance, aid and grants – it has grown from less than US$1 billion in 2002 to over $25 billion in 2007 to currently over US$100 billion. Due to differences in the way ODAs are valued, it is possible that China’s current aid and grants may be undervalued.

China also was instrumental in the set-up of the Asian Infrastructure Investment Bank (AIIB) with an express aim of building infrastructure across Asia-Pacific. Whilst both ADB and AIIB officials have been at pains to stress that they do not see each other as competitors (indeed they have already co-financed a number of projects), a primary reason why the AIIB was set up so as to have greater autonomy by China and other partners in multilateral banking institutions.

Slowing growth and liquidity trap

In the late 80s, Japan was running a very large trade surplus and the stock market and property prices were booming (there were properties which were valued at US$1.5 million per square meter – or ten square feet in Ginza!) which collapsed in the 90s. There was an asset bubble across both the stock and property markets and when the bubbles burst, it led to the loss of trillions of dollars of value.

Deflation set in and whilst the Japanese government tried its best to promote spending (including setting interest rates at near zero levels), there was little effect. Growth has been anaemic and in 2009 the GDP fell by 5.2%.

Japan found itself stuck in a classic liquidity trap where where its monetary policy had little or no impact on economic output and production levels. This led to the ‘tragedy of Japan’s lost decades.’

Let us now consider China. Relatively easy loans made by banks? Check. Booming property prices? Check. Booming stock market? Check. Corrections across all three areas? Check.

China’s economy has been slowly significantly and it’s GDP growth rate has fallen to a level not seen since 1990. A report from the Wall Street Journal indicated that investors are hoarding cash rather than investing – a classic sign of a liquidity trap. The stock market debacle in Shanghai in 2015/2016 has also dampened investor enthusiasm.

The Chinese Communist Party Politburo has also cautioned against debt-fuelled growth and rising asset bubbles. There is also evidence to suggest that the stimulus packages initiated by the government are having little impact.

Some key differences.

Whilst there are some similarities, it is important to note a number of major differences and caveats before any quick conclusions are made. Firstly, China starts off with a much bigger population base and the reverberations from the impacts will take a much longer time before they are felt.

Secondly, China’s political system lends itself to a greater continuity in policies which may be effective in warding off economic downturns and avoid ‘lost decades’ the likes which Japan went through. Japan on the other hand went through nine prime ministers in the 11 years between 1989 and 2000 which hardly allows for lasting measures and policies.

In order to avoid the liquidity trap challenges, the Chinese government will need to focus on its war against graft and corruption and instil trust in the public institutions. Long-term and difficult policy decisions in the areas of state-owned enterprises reform need to be made in order to boost productivity. There needs to be continued efforts to keep narrowing the inequality gap and create greater employment opportunities which will in turn boost spending and help deter deflation.

The road ahead is a difficult one but there is no reason for history to repeat itself as long as the mistakes of the past are not repeated.

 

The Chinese Skynet!

You struggle to get around any board room meetings or conferences without the phrase “big data” being used like it is the panacea to all the woes businesses and the economy faces.

However, big data is equally relevant to governments, particularly, in light of Edward Snowden’s revelations.

I read a very interesting article a fortnight back on this very topic: http://www.bloomberg.com/news/articles/2016-03-03/china-tries-its-hand-at-pre-crime.

Essentially the Chinese government is looking to building a profiling tool that includes jobs, hobbies, consumption habits, along with details of any other unorthodox behaviour to detect potential/future subversive, criminal or terrorist behaviour.

What’s equally interesting from the article is that there has been, from Mao’s time, a secret file called the dangán, which has records about everyone, from details of their schools, personality assessments to health records, and can determine whether one gets that job promotion or government permit!

There is also a Chinese national network of surveillance cameras called Skynet!

The combination of this surveillance will allow for the Chinese government to analyse, interrogate and assess the data from her 1.2 billion citizens in order to detect future criminal, terrorist or subversive behaviour. However, the challenge that remains is how one can be prosecuted for ‘thoughtcrime’? At what point does the prosecution take place?

All in a very interesting legal and social conundrum!

 

 

 

 

 

What the Asian Infrastructure Development Bank means for Asia and the world

Almost exactly a year ago, just prior to the Asia Pacific Economic Co-operation (APEC) hosted in Bali in October 2013, President Xi Jinping announced the proposal for the establishment of the Asian Infrastructure Investment Bank (AIIB). This was a major announcement which was unforeseen and unexpected particularly as no clear plans were outlined at the time.

Since the announcement however, Chinese officials have been very busy in encouraging other fellow Asian partners to be the initial founding partners of the AIIB.

To date, the Chinese Ministry of Finance has convinced over 22 Asian partners including the likes of Singapore and Bangladesh to confirm their participation as founding partners and contribute to the initial funding capital.

Other major partners such India, Qatar and Saudi Arabia have been very bullish about the prospects and the promise of the AIIB and have made very positive overtures publicly about their participation as founding members. Other South East Asia partners such as Thailand and Malaysia remain positive and other major partners such as South Korea and Australia are still studying the Chinese proposals.

 

The Asian Investment Infrastructure Bank

The role and rationale for the AIIB

The mandate of the AIIB, as a multilateral development institution, is to support the financing of infrastructure developments across Asia that supports economic growth and activity nationally and regionally.

Traditionally Asian nations have turned to the Asian Development Bank (ADB), the International Monetary Fund (IMF)  and the World Bank for financial support. However, the level of financial assistance, particularly from the World Bank and the IMF have dropped since the 2008 financial crisis.

The ADB is also being increasingly viewed as a bureaucratic entity which takes almost seven years to launch a project or initiative (from proposal to the approval of funding) which leads to significant delays due to red-tape.

These conditions do not support the urgent need for infrastructure investment by a number of Asian economies. The ADB estimates that Asia needs about US$8 trillion of physical infrastructure investment between 2012 and 2020. The OECD estimates that globally over US$50 trillion of infrastructure investment is required over the next two decades to support sustained economic activity.

The AIIB is expected to have an initial capital of between US$50 billion to US$100 billion with China contributing to half that amount. This will immediately create an entity that is stronger than the Asian Development Bank (which has a current capitalisation of about US$78 billion) and will be around half of the World Bank’s current capitalisation of between US$180 billion to US$200 billion.

 

Implications and impact for major Asian partners

The creation of the AIIB has a number of major implications for Asian economies. Growth prospects With depressed growth prospects – strong investment in infrastructure projects will support the creation of demand and improve production and consumption. The enhanced infrastructure will also support greater trade and economic expansion.

This is certainly the case for India which forecasted a need for approximately US$1 trillion to meet infrastructure requirements under its 12th five-year plan (from 2012 to 2017) but is struggling to meet the investment target. Participation in the AIIB will allow for India to raise greater capital and visibility for some of her public-private infrastructure initiatives. The rest of the South Asian subcontinent, including Sri Lanka, Bangladesh, Nepal and Pakistan have all either signed up with the AIIB or shown strong interest in the initiative. If India chooses to remain on the side lines, her influence across South Asia will further diminish. The AIIB will be a strong platform for India to take on a regional leadership role and be seen to be a partner for the region’s growth and success.

The AIIB will also certainly support a number of smaller Asian economies which have been unable to meet the stringent requirements or payment terms set out by the likes of the Asian Development Bank or the World Bank. This includes the likes of Nepal, Cambodia and Laos.

From a political perspective, the impact for Japan as a result of these developments is significant. The Asian Development Bank has traditionally been led by Japan (who along with the US share the majority voting rights in the ADB) which previously allowed Japan to exert her political and economic influence across Asia. The AIIB will certainly curtail Japan’s political influence across Asia and also strengthen China’s hand in the on-going disputes ranging from the South China Sea territorial issues to legacy World War II disputes.

South Korea on the other hand is trying to navigate its participation in the AIIB tenderly. On one side, Seoul has to please her largest trading partner, China, whom she is working closely with towards greater economic success. On the other side, Seoul’s traditional security partner, the US, remains a critical partner in South Korea’s regional defence strategy.

ASEAN (Association of Southeast Asian Nations) has certainly shown significant support for the AIIB. Indeed Singapore was one of the early founding members of the AIIB as they have a clear stated policy of working with China from the inside rather than remaining out on the side lines looking in. Other major ASEAN economies such as Thailand, Malaysia and Indonesia are likely to sign up to the AIIB to exert greater influence in the way the bank is run and managed which will in turn support their own investment and growth plans. However, there will be concerns, particularly from Philippines and Vietnam, which in recent times have had strong and sharp exchanges with China over the South China Sea islands. Their concern will be that should China take a greater role in economic influencing and funding, it will strengthen China’s hand and erode Vietnam and Philippines’ support in their respective claims in the South China Sea.

Asia has always traditionally had strong savings, currently estimated to be worth over US$3.99 trillion. This supply of savings can meet some of the immediate infrastructure requirements across Asia but there is a mismatch in channelling these savings towards the financing of the infrastructure projects. The AIIB can help resolve this funding gap moving forward.

 

Problems with Uncle Sam?

The US government has not hidden their opposition to the establishment of the AIIB.

Their biggest concerns are around how China will use the AIIB to further project her economic and political dominance across the region. It also gives greater clout to other major Asian partners such as South Korea and India whilst diminishing the influence of the United States’ traditional Asian partner, Japan (who leads the ADB as highlighted above). This does alter the geopolitical realities in the region and softens the US hegemony in the region.

Some of the other concerns highlighted by the US government is that the new bank will not have adequate and robust safeguards in areas such as environmental protection, human rights and a transparent procurement process which will undermine the need for good governance across the region. Indeed, if the AIIB fails to have strong safeguards, it will exacerbate the challenges of corruption, lack of accountability and proper due diligence which have remained endemic problems across Asia (and also around the world). However, it is likely that the AIIB will operate to very high and rigorous global standards when assessing and evaluating projects.

However, it must be noted that China has made it clear from the outset, and also recently at the Boao Forum for Asia, that they welcome the participation of the US and other European Union partners in the AIIB. This will provide an opportunity for non-Asian partners to support the bank and ensure that AIIB’s governance and strategy is in line with global standards.

The US should use this as an opportunity to partake in the region’s continued growth and stability. US participation in the AIIB (which will be subject to lengthy Congressional debates) will certainly do more to support US foreign policy of a safer and prosperous world rather than the current position of dissuading potential partners from participating in the AIIB.

 

The future

The AIIB will need to create strong and close collaborative partnerships with the likes of the World Bank and the ADB so that they are not working to cross purposes. Encouragingly, the World Bank have announced their wish to work closely with the AIIB when they launched the Global Infrastructure Fund (GIF) earlier in October 2014. Similarly, the ADB have also announced their intentions to work closely with the AIIB.

The AIIB will also need to create a viable and sustainable business model which channels funding appropriately towards infrastructure investment.

Recently, the BRICS Bank or the New Development Bank was set up by Brazil, Russia, India, China and South Africa. The BRICS Bank is headquartered in Shanghai and the Presidency is maintained by India for the initial five years. However, the funding from this BRICS bank is only available to the BRICS nations and not to the rest of Asia. The AIIB helps to alleviate this issue.

The AIIB can potentially create a platform that generates economic ties and greater unity across Asia. It provides a strong and credible opportunity for major Asian rivals to become partners towards growth and development. Initiatives such as these will help to provide resolution to tricky issues that always emerge between partners and friends.