CSL clubs approached the transfer window cautiously due to the new 100% transfer tax for foreign players – and the lack of detail surrounding it. But clubs are continuing to look for loopholes and that, coupled with Wanda’s return to Chinese football, could spark a return to spending in the summer.
[This has been updated following further clarification from the BBC’s Piers Edwards to reflect that Beijing Guoan received a 15% discount on the Bakambu transfer tax, not 20% as originally stated.]
Even casual followers of Chinese football will be aware that things don’t operate in a normal manner over in this part of the world. Which other league in the world, for example, would tolerate a change in the number of foreign players allowed per team *in the middle* of a transfer window, as has happened in the recent past?
But the events of the past few days rank right up there in the head-scratching history of the Chinese Super League (CSL) and – once again – could have profound implications for the global transfer market.
First, a quick recap…
After a combination of some negative footballing headlines – led by the Carlos Tevez debacle – and a general desire from the government to stop capital flight (i.e. money being transferred out of China) due to currency depreciation concerns, the powers that be attempted to crack down on huge amounts of money leaving football – either in the form of massive transfer fees paid to overseas clubs, or to the foreign players themselves in the form of hefty salaries.
To do this, they brought in what has become known as the 100% transfer tax, whereby the fee for all foreign players costing more than 45 million RMB ($7 million) would be doubled, with the first half going to the selling club, and the same amount going into a CFA grassroots development fund. The idea was that this would dramatically reduce spending, but in the event that clubs still bought expensive players, there would still be a windfall for the CFA in the form of the transfer tax. A classic win-win, as Chinese officials love to say.
So far, it has largely, with spending way down on last year’s outlay. However, after a largely restrained winter transfer window, two main deals were announced right at the end, which trumped everything else by a considerable margin.
Bakambu’s in Beijing – but did Guoan pay the tax?
Villareal‘s Cedric Bakambu had a release clause of €40 million ($49 million)in his contract; pay that, and the player is yours. Except that Beijing Guoan, who didn’t really want to pay €40 million to free him from his contract and then an additional €40 million into the CFA‘s slush fund, had other ideas. So they dreamed up a scenario under which a mysterious “third party” – or the player himself (reports differ) – paid the €40 million to Villareal, thereby releasing Bakambu from his contract and turning him into a free agent. Guoan then tried to sign him on a “free” transfer.
Never, ever doubt the creativity of Chinese clubs when it comes to this sort of thing. While this appeared to be a clear contravention of the spirit of the transfer tax, legally it looked like a valid loophole.
There was then a farcical period of a few days where Bakambu was pictured training with the club in Portugal, while the club denied all knowledge of the transfer. All the while, the club was – presumably – negotiating with the CFA via back channels over whether they could get away without paying the tax.
But to the dismay of Guoan fans, the CFA then released further clarifications to the policy, with one point clearly designed to address Bakambu’s exact situation, stating that any fees paid to activate a buy out or release clause will be counted as part of the transfer fee, irrespective of who pays the fee.
Game set and match, CFA, surely? But there was a twist…
When Bakambu was finally paraded in front of the media this week, the club insisted they had paid the transfer tax “in full”, but curiously wouldn’t reveal the exact amount, saying it was a secret. That raised eyebrows, because it they had paid €40 million, the why not just say so? Additionally, if the club had been given a discount by the CFA, it was clearly in the interests of both parties to keep quiet.
However, Piers Edwards from BBC Africa Sport claims the club got a 15% cut on the full tax amount, equating to €6 million or $7.5 million. Edwards cites “sources close to the player”, and has previously quoted as Bruno Leveel, who “works closely with Bakambu”, so this seems entirely legit and far more believable than Guoan’s ‘secret’ tack.
There’s less incentive for those close to Bakambu to keep this quiet among their circles overseas, but now that the news is out that Beijing Guoan only paid 85% of the tax, the CFA will have a very hard time convincing other clubs to pay the tax in full in the future.
A big fish called Wanda returns to Dalian with a splash
The other main deal concerns the transfer of Yannick Carrasco and Nico Gaitan from Atletico Madrid to Dalian Yifang. If you thought the Bakambu saga was complicated, this one is insane…
When the transfer tax was first announced in May last year, I imagined five ways that clubs might react:
- #1 Sign players on free transfers.
- #2 Sign players on loan.
- #3 Sign players for reduced transfer fees, with selling clubs getting compensated in some other, unspecified way.
- #4 Extend contracts of current foreign players in order to avoid signing new ones.
- #5 Get “creative” with their accounting (because the tax only applies to clubs in debt – which all of them currently are).
#3 is critical to this latest deal for Carrasco and Gaitan, which according to Transfermarkt – one of the better sites for logging deals in the opaque world of Chinese football – was worth a combined €48 million ($59 million). But that breaks down to just €30 million for Carrasco – suspiciously below market price, with The Sun saying Atletico turned down an offer of €60 million for Carrasco from Bayern Munich in the summer and that he had a buyout clause of nearly €100 million.
Something’s not adding up here, but that’s where Wanda comes in…
Here’s a timeline of the key background facts:
- 1994-2000: the Wanda Group, led by Wang Jianlin, sponsors its local top-flight football team in Dalian – from then on known as Dalian Wanda – and wins four Jia-A League (forerunner of the CSL) titles in five years 1994-98, before selling the club in early 2000.
- Jan 2015: Wanda and Wang buy a 20% in Atletico Madrid for €45 million (later diluted to 17% in 2017).
- 2015-16: Wanda invests heavily in sport, buying the Infront sports agency, the Ironman triathlon franchise and becoming a top-level FIFA sponsor through 2030 in deals worth billions of dollars in total.
Then, last month, things moved quickly:
- Feb 14, 2018: Wanda sells its 17% stake in Atletico Madrid for €50 million.
- Late Feb, 2018: rumors circulate that Wanda has taken de facto control of newly-promoted CSL club Dalian Yifang and will shortly rename the club Dalian Wanda (though there is still, to date, no official announcement on any of this).
- Feb 23, 2018: Dalian Yifang signs Jose Fonte from West Ham for a reported fee of €5 million.
- Feb 26, 2018: Atletico Madrid announces Carrasco and Gaitan will join Dalian Yifang on a permanent deal.
But the question now is what – if anything – did Dalian pay Atletico for the two players, and did they pay the transfer tax? Reports online have emerged saying that the duo were sent to China as part of the deal that saw Wanda sell its 17% stake in Atletico. If that is the case, then the club could argue it received the players for free and is not liable for any tax – although given Carrasco’s value (see above) and the fact that Wanda has yet to officially announce it actually has any links with the Dalian franchise, that would be a pretty tenuous legal argument.
Legality, however, is often secondary here.
While Wanda got into some trouble with the government last year and was effectively forced to sell off swathes of its assets to reduce its debt burden, it is still a massively powerful conglomerate and can do what it wants at a local level. It’s worth keeping that in mind when hearing the Dalian Evening News, likely in the club’s pocket, says the tax has in fact been paid, though there’s still no news on what exactly the combined transfer fees were.
However, the CFA announced this evening (March 2) that the Carrasco and Gaitan transfers are “under investigation”, with the obvious explanation related to the ongoing tax discussion. With the season having already started, and Dalian set to open their campaign in Shanghai on Saturday night, there’s still no word on whether the duo will be allowed to play or not.
What’s next?
The ramifications of all of this could probably take another post, but in summary, it never ceases to amaze quite how out of their depth the Chinese Football Association is. It literally just make up the rules on the fly. In fairness, that is, in part, because it is still, ultimately, governed by the state, despite the much-vaunted (and completely untrue) “separation” between the CFA and the government.
And while it’s wonderfully fascinating at every turn – because it’s impossible to imagine even a fraction of this nonsense happening in any half-decent professional league – it’s also endlessly frustrating. For all the progress that has been made in recent years, there remain so many things in Chinese football that need fixing – and having, at best, a governing organization that has one hand tied behind its back or, at worst, one that is desperately inept hardly instills confidence for the way ahead.
