Why China’s fears over capital flight and corruption may have dictated new football rules

The Chinese Football Association announced sweeping new laws to the governance of the game that appear to have been dictated by a government extremely suspicious of the massive sums clubs have been spending

PUBLISHED : Friday, 20 January, 2017, 5:15pm
UPDATED : Sunday, 22 January, 2017, 3:04pm

Chinese football’s shock restriction on foreign players and other new rules may be linked to the central government’s deep fears over capital flight and corruption – and suggest the state still dictates Chinese Football Association policy.

England has been quite put out in the last two winter transfer windows, as the Chinese Super League overtook it as the world’s most revoltingly spendthrift football country.

The CFA’s announcement that the number of foreigners allowed would be reduced to three was a great surprise, especially with the new season just weeks away and after some clubs had already spent fortunes.

But China’s median annual income is about 1.1 per cent of the US$800,000 Carlos Tevez will reportedly earn every week: each time he scores for Shanghai Shenhua it will remind the masses that the country’s income inequality is among the world’s worst.

Not the kind of propaganda the government had in mind when it demanded China become a “football superpower”.

Chinese media assumed orders to limit foreigners came “from above”, and further initiatives announced at the CFA’s annual meeting seemed to reinforce that.

On Thursday, they published an 18-point plan titled in snappy Party style, “Strengthen Management and Guidance to Promote the Healthy and Stable Development of the Professional League”.

The guidelines include the three-foreigner limit and the order requiring clubs to field two under-23 Chinese players in every match (which will likely lead to a new bubble in that “asset class”).

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There will be a tax on “ultra-high transfers” to fund youth development, though the rate and what constitutes “ultra-high” were not stated (30 million has been mentioned).

Six of the 18 points involve youth development and seem decent ideas at first glance, though there seems potential for waste or fraud.

More interestingly, many of the points seem to reflect the government’s efforts to clamp down on capital flight, money laundering, overseas investment, etc. as it fights to prop up the yuan.

Point nine might send shivers down the spines of some club owners: a “unified accounting system” for every club. The CFA threatens to “employ a third-party auditing company” to go through everyone’s books, possibly prompting several panicked boardroom meetings.

It seems inconceivable that at least some of China’s mega deals have not involved corruption. Chinese businessmen and football agents are not renowned for their aversion to envelopes – brown or red per cultural preference – bulging with cash.

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A salary cap will be introduced. Clubs will not be allowed to make losses for three consecutive years. And point 13 demands a “fight against clubs paying [under-the-table] signing fees, yin-yang contracts and other illegal acts”.

“Yin-yang contracts” are associated with another China bubble, the housing market. The “yin” contract is exchanged between buyer and seller with the apartment’s real price, while the “yang” goes to authorities with a lower price to evade tax.

Is it hard to imagine collusion over the stated value of players or salaries, with the difference funnelled to the Cayman Islands?

Point 16 makes the government’s worries even plainer: “Multi-department efforts to crack down on club tax evasion, illegal opening of multiple corporate accounts and overseas accounts, embezzlement and bribery, money laundering, match-fixing and other criminal acts.”

Much of the wording seems to have been copy-and-pasted from comments made by an unnamed spokesman of the government’s General Administration of Sport at the start of January.

The CFA is supposed to have “decoupled” from the government body, but its president Cai Zhenhua admitted there were still three key areas in which it had not: “The leadership of the Party, business guidance and supervision, and financial support.”

Government interference in member associations is prohibited by Fifa but, as ever, it seems there’s one rule for China and another for everyone else (Fifa and the AFC did not respond to requests for comment).

Regardless, the gravy train for foreign players, agents and businessmen looking to get their yuan out of the country has surely been slowed, if not derailed altogether.