Shanghai GP at crossroads over high costs

PUBLISHED : Saturday, 27 March, 2010, 12:00am
UPDATED : Saturday, 27 March, 2010, 12:00am

The Chinese Formula One Grand Prix, an annual fixture on Shanghai's sports calendar since 2004, may be just one more race in the high-octane world of motor sport. But in seven short years it has also earned an extraordinary reputation for political and legal peril, with all three of its founding patrons ending up in jail.

Chen Liangyu , the former Shanghai party boss who, almost singlehandedly, introduced the extravaganza to the city in 2004, was later jailed for 18 years for doling out business favours in exchange for bribes. However, on the mainland, where using corruption charges to purge adversaries is the recipe for political dominance, it is believed that Chen's fall from grace had more to do with political infighting at the top of the Communist Party than any wrongdoing on his part.

Less than three months after Chen's downfall in 2006, Yu Zhifei, the general manager of Shanghai International Circuit, the promoter of the Shanghai GP, was detained. Yu, the public face of the GP from the very start and a Chen protege, has been in custody ever since, with a court jailing him for four years in 2008 for using company money to buy a 1 million yuan (HK$1.37 million) flat at a discount.

Perhaps the most convincing legal case against a GP patron involved Chen Tonghai , a former general manager of state-owned oil firm Sinopec Corp. He received a suspended death sentence after being convicted in a 190 million yuan corruption case. Sinopec's five-year, 800 million yuan, title sponsorship deal for the GP played a key part in securing the race for Shanghai.

The authorities have never indicated that the three men's troubles were interconnected, despite persistent rumours to that effect.

This year's GP, taking place in three weeks' time, could possibly be the last, thanks to the impending expiry of the city's seven-year hosting contract. Shanghai leaders are considering whether to get rid of the ominous - and expensive - event, arguably the biggest tangible legacy of an era the city is eager to leave behind.

But the country's business capital has found itself between a rock and a hard place over its F1 prospects. On the one hand, officials frown on the lack, if not downright absence, of economic sense in extending their commitment to the race and are keen to pull the city government out of the money pit. On the other hand, the financial consequences of scrapping the race are equally daunting.

According to official figures, the city government spent 2.5 billion yuan on the purpose-built Shanghai International Circuit, and then US$20 million a year for the right to host the event. These sums, along with all of the sponsorships, ended up in the pockets of Formula One Administration (FOA), a private company that owns the series. The only way for Shanghai to recoup the cost was ticket sales. The inaugural Chinese GP registered 300 million yuan in ticket sales, with a record crowd of about 15,000, but those figures have never been replicated as the novelty factor has faded away.

Qiu Weichang, a former deputy chief of the Shanghai Municipal Sports Administration, threatened in late 2008 not to renew the GP contract after this year unless the FOA trimmed the annual fee and shared more of the profits with local organisers. However, his brinksmanship only highlighted the flimsiness of Shanghai's bargaining power. To stop the losses, many officials and commentators have suggested discarding the race.

But others argue doing so could be equally devastating. In an F1-free scenario, the Shanghai International Circuit would become a white elephant. On top of the initial cost of building the state-of-the-art racetrack, the circuit has to spend 80 million yuan a year on maintenance.

With a fledgling car racing culture on the mainland, it is hard to imagine any other forms of motor sport could fill the vacuum once the F1 event is gone. How will Shanghai deal with a deserted, top-level racetrack, they ask. Demolish it, erasing all the taxpayer money poured in, or build a theme park to make up for a scaled-down Disneyland planned for Pudong?

Despite the economic issues, the thing that may decide the fate of the Chinese GP is the race's link with Shanghai's disgraced former Communist Party chief. Chen Liangyu, a sports enthusiast, brought many international sporting events to the city during his reign, from the ATP Tennis Masters Cup to athletics' IAAF Shanghai Grand Prix. The GP was his biggest pet project.

Now that Chen Liangyu's penchant for sporting grandeur and largesse no longer strikes a chord with Shanghai's administration, the chances of an F1 sequel next year seem unlikely. But that will not stop a lot of head-scratching as Shanghai tries to find a painless exit.