Case Study: Market entry China for a German football club

In my practical work as a legal advisor in Chinese law, I worked for a major law firm in Shanghai in 2019. During my time there, I was partly involved in an exciting project: the market entry of a German Bundesliga football club. First of all, it is interesting to note that the market entry of a football club is in principle not very different from the market entry of a mechanical engineering company. However, there are differences with regard to the specific activity. I will highlight this in more detail later.

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Already in 2018, the first stage was the establishment of a subsidiary. For this purpose, the legal entity was established and an office was rented and equipped for the company in the Puxi district of Shanghai. Additionally, the first employees have already been hired, where the firm provided labor law support. The decision in favor of Shanghai as a location was made for reasons of a good infrastructure, well-established contact with Chinese authorities and, last but not least, already existing basic local interest in Western football clubs. Through at the time 2019 every year more than 30,000 Chinese exchange students in Germany, there was and is actually already an existing basic interest in German football. The foundation itself took about 5 months at that time.

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After the completed establishment of the entity, the actual activity of the Chinese operation was now to be legally secured and actually built up, namely youth training and promotion of young talents, thereby in cooperation with the local administration and with a local Chinese football club.

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Checking legal compliance of the football club’s China activites was where the first difficulties arose. Actually, the business purpose of training young talents could possibly violate Chinese investment law. In detail, the Chinese investment law has a so-called negative list, which lists sectors in which foreign investment is not permitted or at least restricted. Specifically the area of “education” is listed there. Upon deeper research, it was found that there are fundamental investment restrictions here, namely in the specific area of “compulsory education or religious education institutions“. However, it was also found that this basically only concerns basic school education (so-called compulsory education K1 to K9) as pre-schools, ordinary high schools and institutions of higher education. In legal comments and literature, no indicators could be seen that activities in the sport sector could be in the scope of the specific negative list restriction. Thus the football clubs young talent training was in principle seen to be compliant with Chinese investment law.

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Besides the actual legal work, the law firm also supported in other aspets: Regarding cooperation with a local club, the task was to explore local collaborations with Chinese football clubs. Here it was important to separate realistic cooperation projects from purely speculative ones. It was helpful that the German football club actually had vice presidents and managing directors on site in China in 2019 to sound out possible collaborations.

Regarding HR, what had to be made clear to the German football club, that a planned project of sending a German coach to China was – from a legal point of view – not a simple process. Here, it was the law firm’s job to set realistic expecations.

On the other hand, it was relieving that the football club decided to choose a local China manager who would permanently remain on site and who also speaks fluent Chinese. The latter was seen as a great advantage to create and maintain a strong local presence, to establish cooperations and to build up connections with fans.

Last but not least, the law firm supported the club in building up a cooperation with the municipal sports bureau.

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