Hooping mad

Basketball owner prevented from selling team

Shanxi team w

Brave Dragon leaping

Long before the Los Angeles Lakers became one of sport’s most popular franchises, the basketball team played in Minneapolis rather than California. In fact, they are called the “Lakers” in reference to Minnesota’s reputation as ‘The Land of 10,000 Lakes’. Founded in 1947 the team went on to win five championships in the next seven years.

However, the Lakers performance started to slide around the mid-fifties and they were the worst team in the league in the 1957-58 season. Attendances were so low the club was in financial jeopardy. So in 1960, the franchise decided to move to Los Angeles, as the NBA’s first West Coast team.

And the rest, as the saying goes, is history. The Los Angeles Lakers have gone on to become one of the most successful teams in basketball history, attracting talents like Magic Johnson, Kareem Abdul-Jabbar and Kobe Bryant.

Back in China, another basketball team is hoping that changing location could reverse its fortunes too. Shanxi Zhongyu Brave Dragons announced late last month that – owing to financial troubles – the team is to be sold to Beijing Enterprises Group. That means Shanxi Zhongyu – which plays in the Chinese equivalent of the NBA known as the CBA – will relocate to the capital for the new season.

Shanxi Zhongyu called the move a “last resort”, saying that it hoped fans will show understanding about its decision.

The move also marks Beijing Enterprises first foray into professional basketball (the conglomerate counts toll roads, department stores and a brewery among its assets and is controlled by the Beijing municipal government).

If only the story was that straightforward. After Shanxi Zhongyu’s announcement, the Shanxi Sports Bureau quickly issued a statement. “The Shanxi Sports Bureau hopes that Zhongyu remains in the province,” said Shen Guangjin, director of the organisation.

The club was put on the market after its owner Wang Xingjiang ran into financial trouble. Wang was the owner of Shanxi Zhongyu Iron and Steel, but like many steelmakers it has struggled with falling prices and a glut of supply. As a result, his company was heavily in debt: 21CN Business Herald reckons there were at least 1,600 debtors waiting to be repaid more than Rmb6 billion.

After losing his steelmaking business to its creditors, Wang now has trouble paying for his basketball club. “The players were being paid by swiping Wang’s personal credit card,” says Zhang Beihai, general manager of the Shanxi team.

Some blame Wang for mismanagement. He spent heavily to lure former NBA players Marcus Williams and Charles Gaines to play for his team, although Williams hardly repaid the favour by testing positive for marijuana.

Wang concedes as much but says the problem relates to the rising costs of running a team. “The main reason is because of financial difficulties,” he admitted to Taiyang Evening News. “We can’t make ends meet. These last few years, every CBA team has invested more and more money – on average each team puts in Rmb40 or 50 million per year. Sometimes it can even go as high as Rmb100 million.”

“I haven’t been at the Shanxi steelworks since 2008 and there hasn’t been any new business ventures for me since then. Every season, the team operates at a deficit of Rmb20 to Rmb30 million, and that’s eating directly into my own capital. I’m only able to do so much. I truly can’t prop up the club anymore.”

Enter Beijing Enterprises Group, which expressed an early interest in buying the club. Wang wanted to give local companies a chance to match their offer, telling the China Daily that he had even offered to sell the club locally at a discount. But no local firm was interested.

“This is going to be disappointing for local fans. Fans in Shanxi are known as arguably the loudest and most passionate in the league. Brave Dragons home games have given the team a huge edge in recent years,” says Jon Pastuszek, author of NiuBBall, a blog that tracks the development of the CBA.

Will the deal go through? It’s an open question. Shanxi Zhongyu still needs sign-off from the province’s sports bureau and there are indications that Fenjiu Group, a local liquor maker, has been ‘encouraged’ to bid for the club. Meanwhile the Dragons will want to avoid the fate of Chinese football club Dalian Shide. When its tycoon boss was arrested, Dalian faced financial ruin and struggled to find another buyer in the city. Prohibited from relocating elsewhere by local officials, the team had to close down and exited the league in February (see WiC181). It was an ignominious end for the former league champions.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.