If you’re not a fan of schadenfreude, then this might be a time to look away. Generally, I don’t like to write about the mob from across the expressway but there are some important things happening and it’s good to draw a comparison.
I’ve spoken before about Blues gambling last season and losing – it’s evident from the accounts that the club will need to be more careful in 2018-19.
However, the gamble taken by our friends from B6 was a much larger one, a much riskier one, and like ours, a failed gamble.
Many people have spoken about potential problems they might have with Financial Fair Play (FFP) – the Telegraph touched upon it in this article – but I think there is a much deeper financial issue both teams have to look at.
Last August, news broke of the Chinese government cracking down on overseas investment in certain areas, including football. The government had decided to only permit investment in football if it was linked to the “One Belt One Road” initiative.
This crackdown is to be enforced in two ways. Firstly, the outflow of capital from the People’s Republic of China was to be limited to approved projects. Secondly, companies would only be able to get loans from banks for approved projects.
For Chinese-owned clubs, this spells trouble. If a club is dependent on money coming into the club from a Chinese benefactor, then there is a question if that flow of money will stop.
Right now, Birmingham City are in the clear.
The club is owned by a listed company on the Stock Exchange of Hong Kong – an area which is not currently affected by the crackdown. The holding company’s major investors seem to have provable significant sums of money offshore in places like the British Virgin Islands (BVI).
In short, the people who put money into Blues aren’t affected by the crackdown
However, our friends on the other side of the expressway are in a different situation.
Their owner, Tony Xia, has his money tied in companies listed on stock exchanges within the People’s Republic of China. He’s already had to cancel investment in a film company in Hollywood, losing a $20million deposit in the process.
Now the question will be this summer if Xia can continue to finance the extraordinarily high outgoings in B6 or if he will be blocked in any attempt to move money out of mainland China.
There are further suggestions as to why Xia moving money may be problematic.
News within China in the last week suggests that there are financial problems at Lotus Health, one of Tony Xia’s listed companies.
If that proves to be true and Xia is financially mired, then regardless of FFP there are huge problems in B6 and the Telegraph’s suggestion of a sale of the Bodymoor Heath training complex might be the tip of the iceberg.
I’ve long held that the benefactor model within football ownership is fundamentally flawed. If Blues are to take advantage of this “Birmingham Power Shift” then it’s vital that they do so in a sustainable manner.
If we can do that, then it’s possible we’ll be on the right side of the power shift for some time.
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