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| The softer side |
| Suveen K Sinha / New Delhi Aug 07, 2010, 00:07 IST |
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Chinese interest in Liverpool FC shows a need to connect with people.
Geely Holding Group’s acquisition of Volvo a few days ago for $1.5 billion is an unusually large deal for a private Chinese company. Lenovo’s acquisition of IBM’s personal computer division was as significant as it was unusual. The rest of the world, especially the United States, the self-proclaimed leader of the free world, is wary of corporate China.
Chinese companies are widely viewed as pursuing their government’s agenda, which not many imagine to be totally benign. The US Committee on Foreign Investment scrutinises all attempts by Chinese companies to acquire American assets. At times, the White House intervenes directly.
Huawei, one of the world’s top telecommunication equipment manufacturers, is owned by its 20,000 employees. But the West still saw red when it tried last month to acquire two US companies. Its bids for internet software group 2wire and a unit of Motorola were rejected, though it had offered the highest price for both. Two years ago, Huawei dropped its bid for computer equipment company 3Com because the US expressed concerns that it could gain access to military-related anti-hacking technology.
Five years ago, CNOOC, owned by the Chinese government, offered $18.5 billion for US oil and gas group Unocal, but was thwarted. The same fate befell the attempt last year by Chinalco, state-owned again, to invest $19.5 billion in Rio Tinto as it triggered a political backlash in Australia. Jon Huntsman, US ambassador to Beijing, said last week in a speech that Americans tended to be suspicious of state-owned companies.
That is why the upcoming battle for control of Liverpool, the English Premier League club, should be watched with interest. Not because of reports that Mukesh Ambani and Subroto Roy are in the fray, but because Kenny Huang, who represents China Investment Corporation, has expressed interest in bidding for the club. Ominously, the Chinese government fund spent the past fortnight raising 351 million pounds by selling shares. That is exactly equal to Liverpool’s debt burden.
Sovereign wealth funds boast enormous assets under management, but at any given point in time most of them are tied up in equity and bonds. Rapid liquidation nearly always heralds new investments. However, such funds, which typically make long-term bets, are not known to fritter away good money on faraway football clubs.
What can anyone hope to get by buying an English football club? They are not terribly lucrative propositions. The old adage is that if you want to make a small fortune out of football, start with a big one.
The answer to this question may be profile and brand. Global interest in football is surging. The income from domestic television rights in England has been largely flat, but international rights have more than doubled in three years.
And then there is something more: Connect with people. Perhaps the Chinese have realised that they have to win over the people before they can conquer the world. Football is all about people. It can provide the much-talked-about soft power and a softer face to Chinese ambition.
(suveen.sinha@bsmail.in)
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