The Belt and Road Initiative is a major development strategy launched by the Chinese government in September 2013 to sponsor and promote economic co-operation across Eurasia and Africa. As President Xi Jinping highlighted in a keynote speech in 2014, the Chinese government aims to be more closely connected with other countries through policy coordination, removal of trade barriers, financial integration and building “people-to-people bonds”. The full name of the Belt and Road Initiative, “The Silk Road Economic Belt and the 21st-century Maritime Silk Road”, evokes grand infrastructure projects; after all, you need roads to build a new Silk Road. However, it’s easy to overlook the fact that the Belt and Road Initiative is also a broader projection of China’s growing soft power – to strengthen connectivity between China and the rest of the world, to grow its position as a global power  and to fulfil President Xi’s “China dream” of national rejuvenation. And there is little doubt that Chinese policy makers are embracing the reach of “the world game” as a vehicle to display Chinese soft power. Who could forget one of the lasting images from President Xi’s official visit to the UK in 2015 where, together with then Prime Minister David Cameron, the two world leaders posed for a “selfie” with Manchester City striker Sergio Agüero, which was widely circulated on mainstream and social media. Whether spontaneous or contrived, the message of a more open, modern and internationally connected China is clear.

As a pre-cursor to the now-infamous “selfie of the year”, Chinese soft power is concerned with, among other things, its image among the world’s leaders.  For example, during President Xi’s official visit to the UK in October 2015, he enjoyed a pint of ale and some fish and chips with David Cameron at a British pub, which was seen to create a more open and internationally-connected image of China. One more influential medium through which we are already seeing that soft power expressed is sport.

In 2015, the Chinese government announced its plan to become a ‘sporting superpower’, developing Chinese sport into a US$ 850bn industry by 2025. The idea of using sport as a geopolitical tool isn’t new; it was ‘ping-pong diplomacy’ that brokered a thaw in relations between China and the US in the 1970s, and it was hosting the 2008 Olympic Games that gave China the platform to announce its arrival as a superpower.

Increasingly, we are seeing Chinese companies – both state-owned and private – making investments in sport around the globe. One of the most visible examples of this trend is in football; in recent years, Chinese investors have bought stakes in football clubs in the UK, the Netherlands, France, Spain, Italy and the Czech Republic. It’s tempting to dismiss these purchases as nothing more than the whims of rich men. In the case of Spanish Third-Division sides FC Jumilla and Lorca FC, that’s arguably accurate; this season’s fixture between the two clubs was moved to a larger stadium, broadcast live to a Chinese audience and dubbed the “Shanghai Derby” after both clubs were purchased by wealthy Shanghainese.

However, in some cases such purchases appear to be a means of achieving wider strategic objectives, including creating brand awareness and loyalty and building bridges on behalf of China, Inc. Below, we look at several recent examples and consider what trends might emerge in the future.

In February 2015 Dalian Wanda Group, a Chinese multinational conglomerate, acquired Infront Sport & Media, a Swiss sports marketing group. Whilst Wanda has been highly acquisitive worldwide (buying stakes in Sunseeker yachts, Sony Pictures Entertainment and Atletico Madrid CF), this purchase was seen as particularly significant as Infront represents all seven Olympic winter sports federations. At the time, Beijing was one of two cities bidding for the 2022 Winter Olympics, which it subsequently won in July 2015. Whilst it’s impossible to know what impact Wanda’s acquisition may have had on the success of Beijing’s bid, Wanda Chairman Wang Jianlin himself recognised that “by acquiring Infront, Wanda will also be in a position to increase its influence in the global sports industry and help raise the level of competition in Chinese sports.”

To take another example, in December 2015 China Media Capital Holdings (CMC) paid US$400m for a 13% stake in City Football Group, which owns Manchester City Football Club, among others. The majority owner of City Football Group is Sheikh Mansour bin Zayed al Nahyan, an important member of the royal family of Abu Dhabi. CMC’s purchase came at a time of warming relations between China and the UAE, which saw the signing of an oil production agreement between Abu Dhabi and China in April 2014. Undoubtedly CMC’s investment will have made commercial sense in its own right, but it also offered an opportunity to make a substantial capital investment in a trophy asset of one of China’s newest allies.

Sometimes, such investments are more closely linked to individual companies’ commercial objectives to identify synergy opportunities in the region. Take the purchase of SK Slavia Prague by CEFC China Energy in September 2015 as an example. At the time, Slavia Prague was in financial difficulties, although its position has improved since CEFC’s investment. CEFC’s other business interests in the Czech Republic include real estate, airlines, tourism, manufacturing and brewing. Most significantly, CEFC owns a 50% share in the J&T Finance Group, a major Czech financial institution. Czech club football may not rank among Europe’s elite, but the Czech Republic is strategically located on the overland “belt” of the Belt and Road Initiative. CEFC has spoken of its intention to use J&T for bond issuance and overseas settlement services in Europe on behalf of China Development Bank, a major player in the Belt and Road Initiative, as well as setting up a Central and Eastern European investment fund alongside Industrial and Commercial Bank of China. CEFC will no doubt have seen the purchase of Slavia Prague as a way to win substantial goodwill for its other projects.

Looking at the future, what trends might emerge?

One area likely to see substantial growth is sponsorship. Used properly, sponsorship of sports teams or events allows companies an opportunity to significantly raise their profile. Another  advantage of sponsorship is that, from a regulatory perspective, there is less of a hurdle to overcome. Unlike taking ownership of a sports club, sponsors do not need to be subject to the relevant “fit and proper” tests, and there is nothing to stop a company from investing in more than one team or event at the same time. To take a recent example, in Pakistan, which has been one of the largest recipients of Belt and Road investments to date, Chinese firm Haier won the right to sponsor the 2016 Pakistan Cup, one of Pakistan’s largest domestic cricket tournaments. As more and more Belt and Road projects come online, we are likely to see a corresponding increase in sponsorship of sports teams or events by Chinese companies.

Another likely area of growth is direct investment in sporting institutions. It would not be surprising to see other companies following CEFC’s lead, by buying stakes in football clubs in countries where they are making other substantial investments. For example, in July 2016 COSCO, one of China’s largest shipping companies, bought a 67% stake in the port of Piraeus, Greece’s largest port. COSCO has since announced its intention to invest heavily in developing the port, which is viewed as a significant part of the maritime ‘road’ in the Belt and Road Initiative. One aspect of COSCO’s investment strategy may be to make a related investment in football, about which Greeks are passionate; an obvious target would be Olympiacos FC, the Piraeus football club. In other countries with substantial domestic football leagues, such as Turkey and Iran, we may also see Chinese firms making similar investments.

A third area where there may be significant growth is in the construction and financing of sporting infrastructure by Chinese companies. One such example can be found in Minsk, Belarus. In October 2016, it was announced that Minsk will host the 2019 European Games (an international sporting event). The inaugural games, hosted in Baku, Azerbaijan, saw US$1.2bn of investment in sporting infrastructure in preparation. Whether there will be an equivalent level of investment in Minsk remains to be seen, but, given the strategically significant location of Belarus on the overland ‘belt’, it is possible that Chinese companies will see this as an opportunity for further Belt and Road projects.

While it is expected that this surge in Chinese foreign investment will continue, recent policy changes imposed by the Chinese government may impact outbound investments. In particular, recent statements by the People’s Bank of China and the National Development and Reform Commission suggest that Chinese companies may soon be facing tighter regulatory restrictions on overseas investments. Nonetheless, we expect these investment trends in sports to accelerate in future. Where sports and politics intersect, there is a unique opportunity; although these investments don’t offer the same boost to trade as a new power plant or deepwater port, they allow Chinese companies to project a “softer” side, which may be crucial to the viability of more traditional Belt and Road projects.