China footprint large on Indian sport

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Suspended 75 feet above the ground with the help of cables, China’s former gymnast Li Ning ‘flew’ along the circumference of the Bird’s Nest and lit the Olympic cauldron; in spectacular fashion, the six-time medallist from the 1984 Games kicked off the 2008 edition in Beijing.

That night, Li’s eponymous sportswear brand also aimed for the stars. At the Beijing Games, the Li-Ning brand clothed only the Chinese gymnastics team. After Ning’s opening acrobatics, the brand’s market value rose by 6% overnight, and there was a 20% rise in it’s brand recall, the highest in a field that also included Nike and Adidas, according to a research paper published by media agency MEC Global.

More than ten years later, Li-Ning made a similar leap in the Indian market. Last February, they signed PV Sindhu as their brand ambassador for Rs48 crore for four years, a record deal for an Indian badminton player.

Six months later, Sindhu won the World Championship. Li-Ning soared, signing a two-year multi-crore deal with the Indian Olympic Association (IOA), which included sponsoring the Indian athletes’ apparel at the 2018 Asian Games and the Tokyo Olympics. They also signed on a handful of Indian badminton players, including Kidambi Srikanth (for Rs 35 crore for four years) and Parupalli Kashyap.

But as Li-Ning’s share in the Indian market grew rapidly, 20 Indian army personnel were killed on the India-China border in Galwan, Ladakh, and the happenings of June 15 eventually led to a growing clamour to ban Chinese goods in the country.

In the aftermath of Galwan, the IOA claimed that it was open to review its deal with Li-Ning, just as the BCCI had called a high-level meeting to discuss their ties with the title sponsor of the IPL, Vivo – a Chinese phone manufacturer.

The meetings are all well and good. But in an era of complex stake-holding patterns, is it possible to define a company’s nationality? And what really is the extent of Chinese import of sports equipment in India?

No. 1, by a mile

“For Li Ning, India is the second biggest market after China,” Mahender Kapoor, director of Sunlight Sports Pte, Li Ning’s distribution partner in 21 markets across Asia, Australia and New Zealand, told afaqs.com after Sindhu had signed in February last year.

Li-Ning of course isn’t the only Chinese brand to have entrenched itself in the Indian sports market.

As per numbers from the Ministry of Commerce & Industry’s Export Import Data Bank, commodities worth ~91,872.59 lakh were imported from China from April 2019 to February 2020 under the head of “Artcls and eqpmt fr gymnstcs, athltcs, other sports (incl table tennis)/outdoor games.”

The total import for the same head and period was ₹ 139,912.07 lakh. China accounted for over 65% of that market. A distant second was Japan (₹11,588.51 lakh).

The growth of Chinese imports in Indian sports market has been rapid. From ₹ 59,434.58 lakh in 2014-15 to ₹ 107,514.25 lakh in 2018-19, according to the ministry’s data. That’s an over 80 per cent rise in just five years.

“Even if there is a plan to ban Chinese imports, it will not happen from tomorrow. We first need to develop that same infrastructure to match the mass production capability and quality of Chinese products,” says Virender Nagpal, proprietor of Sportsline that exports cricket helmets, pads and guards.

“The facilities are being developed in India but it will take time. We must first work towards removing the complexities in getting various compliances in setting up an industry in India. Today China has the cost as well as quality advantage.

According to Nagpal, China has a stronghold in badminton, tennis, and fitness equipment. “Even basketballs and footballs have started coming from China,” he adds. “It’s not only raw material, but finished products too that are being imported.”

Take Taishan for example, a Chinese sports manufacturing unit that produces the cheapest International Gymnastics Federation (FIG)-approved equipment. Varun Grover runs a Pune-based company that distributes Taishan equipment in the country. He says: “If the overall cost of one set of gymnastics equipment is ~ 1 crore from Taishan, it will be double the amount from a German manufacturer or a French company.”

Why would the distributors or the athletes turn to anyone else?

Gaining eyeballs

It’s not only the sports market that has seen growing Chinese influence. The India-China bilateral trade, between January and November 2019, stood at $84.3 billion. And the greater the influx of Chinese products in India, the greater the use of sports as a vehicle to advertise their wares. Chinese companies have understood this well. For example, Vivo retained IPL’s title sponsorship with a ~2199 crore bid for five years. “Which is a 554 per cent increase over the previous contract,” the BCCI had then said in a statement.

While Vivo also paid ~ 300 crore to command the title sponsorship rights of the Pro Kabaddi League for five years, their rivals Oppo outbid them (~ 1079 crore to Vivo’s ~ 768 crore) to become the Indian cricket team’s primary shirt sponsor in 2017.

“The Oppos and Vivos of the world produce mobile phones for the masses. And what better than cricket – the game of the masses in India – to gather eye balls? It then becomes a no-brainer to invest that kind of money to get the reach they are looking for,” says Amarjeet Singh, senior partner with KPMG India, who specialises in start-ups in the fintech space.

Oppo, incidentally, did not see their five-year deal through with the Indian team and were replaced in 2019 by Byju’s – an online learning company that is seen to be wholly Indian.

But it isn’t. Byju’s, founded by Byju Raveendran in 2011, has several international investors. Including Tencent, a Chinese multinational conglomerate holding company.

In July 2017, Tencent pumped in $40 million in Byju’s and again invested in March 2019. Is it justified to label a home-grown company like Byju’s ‘Chinese’ just on the basis of its investors?

If so, then the list of such investment in Indian cricket is very long.

Paytm, title sponsor for international and domestic cricket matches in India, has seen more than $600 million from China’s Alibaba Group. Dream11, an online gaming platform and official partner of both the BCCI and IPL, in 2018 saw $100 million investment from Tencent. Dream11 is an official partner of the Indian Super League as well.

The list also includes Swiggy and MakeMyTrip – both of which have heavy Chinese investment – who were IPL’s associate sponsors in 2019.

“In a globalised world populated with MNCs, while companies certainly have places of incorporation, it is nearly impossible to attribute companies a ‘nationality’”, says Nandan Kamath, sports lawyer and trustee of GoSports Foundation – a NGO which supports grassroots athletes.

“Equity ownership is only one limited aspect of commercial interest and there are many direct and indirect ways of investing in equity. Any attempt to attribute companies a nationality different from their place of incorporation is likely to be a limited and futile exercise.”

No directives yet

The government of India is yet to come out with a clear-cut directive for the road ahead. Until then, most boards and agencies are happy to wait and watch.

“Sponsors are hard to come by. We chose Li-Ning as Indian Olympic contingent’s apparel sponsors because they were the highest bidders. We had a contract till Tokyo Olympics that was supposed to happen this year. It was postponed till 2021 and the contract got extended,” says Rajeev Mehta, IOA secretary general.

“There is no question of cancelling the contract before the government guidelines comes in.”

Even in the case of a sudden termination to the contract, Kamath reckons that it will be Indian sports that will suffer most.

“If a party terminates an agreement prematurely and unilaterally in a manner not contemplated under the agreement, this could amount to a breach of the agreement and remedies of damages will be available,” he says.