With so-called “epi curves” flattening as the number of people contracting the coronavirus slows, much of the discussion now focuses on the aftermath and how the world reacts to the destruction the disease has wrought.
Some moves seem certain, especially as nations such as the United States, Great Britain and Japan accuse China of downplaying the extent of the initial outbreak and not sharing crucial information about the virus, which to date has caused more than 250,000 deaths worldwide. Expect those countries to re-think their relations with China as well as their reliance on a country that manufactures vast quantities of essential medicines and nearly half of the world’s personal protective equipment.
Golf is among those industries that will take a hard look at China. The assessments within the game likely will involve everything from staging professional tournaments to the manufacture of equipment and apparel.
Tourists also might feel less inclined to travel to China in the immediate future. And businesses certainly will think twice about setting up operations in China if comparatively cost effective (and less risky) options are available in other locales.
Golf is among those industries that will take a hard look at China. The assessments within the game likely will involve everything from staging professional tournaments to the manufacture of equipment and apparel.
The game’s most high-profile presence in China is the collection of professional tournaments staged there. The most prominent of those is the WGC-HSBC Champions, which is still slated to be played at the Sheshan International Golf Club in Shanghai, Oct. 29-Nov. 1. There is also the Volvo China Open. Co-sanctioned by the European Tour and the Asian Tour, it was supposed to be played at the Genzon Golf Club in Shenzhen last month but has been postponed. Other tourneys are put on by the PGA Tour Series China, which was formed in 2014, and the China Tour. The list also includes LPGA events in Shanghai, slated for October, and Hainan Island, which has been postponed until 2021.
So, what will happen to these competitions?
The general thinking is that the WGC-HSBC will be fine, in large part because the sponsor has deep pockets (a 2019 operating income of $13.3 billion) and deep roots in China (the initials stand for Hong Kong and Shanghai Banking Corporation). The tournament has served as an effective way for that institution to entertain its most important clients while burnishing its profile. First staged in 2005, the WGC-HSBC has come to be regarded as one of the biggest sports events in Asia and regularly attracts the top golfers in the world, thanks in no small part to a purse that last year exceeded $10 million.
The Volvo China has an even longer history that dates to 1995, when it became the first professional golf competition organized in China. But what speaks most loudly to its staying power is Volvo, once a mainstay of Swedish industrialism, being owned by a Chinese company. Its cars are made in several plants throughout that country and Volvo sells more vehicles in China than any other place on earth.
“Sports sponsorship is a commercial transaction designed to sell products and services,” says Giles Morgan, who headed up the golf sponsorship program at HSBC for 13 years, beginning in 2005. “And it has worked quite well in China for HSBC, and also Volvo. But what happens now? Given the economic contractions due to all the lockdowns, there will likely be less corporate money available for sponsorship.
“That is not to say, however, that those sponsorships will go away. As long as there are fans, there is a market for sports marketing. And as long as golf continues to help corporations achieve their business needs, those businesses will continue to invest in the game. But they will have to adjust.”
So might the tournament organizations, Morgan adds, as he wonders about the money that once came from spectators who went to tournaments, from the tickets they bought and the merchandise they purchased. “Will people still be willing to travel to events, and to be in crowded, public places?” he asks.
HSBC and Volvo no doubt have the money to adjust, as well the desire to keep associating their businesses with golf. But it might be tougher for those companies sponsoring events on the smaller, lower-profile circuits such as the PGA Tour Series China and the China Tour, both of which have suspended play.
The good news for those events backed by companies based in China is that they likely will be swayed far less by geopolitical winds. And while golf does not have much of a history in China, having been banned for decades by the Communists after they took over in 1949 and only legalized in the mid-1980s, it is growing in popularity among an emerging middle class, which only enhances the efficacy of the game as a marketing tool.
“Golf is becoming more popular and more accepted in China,” says Dominic Wall, the director of the Asia-Pacific region for the R&A. “Especially after Shanshan Feng won the bronze medal in the 2016 Olympic Games in Rio. That gave the sport some real credibility and helped its development.”
But with concerns about how China handled the coronavirus outbreak – news outlets and politicians are referring to it as “China’s Chernobyl,” comparing it the nuclear meltdown in the old Soviet Union – it seems doubtful at this moment that any corporation based in, say, the United States or Japan might be inclined to sponsor a golf tournament in that country.
With regards to golf equipment and apparel manufacturing in China, a number of companies began moving parts if not all of their operations to lower-cost alternatives in places such as Vietnam, Thailand, India and Bangladesh well before the COVID-19 pandemic, diminishing the importance of China in their supply chains.
Several businesses also found themselves turning more often to local factories, making goods for the South Korean market, for example, in South Korea. That made it easier to deal with the disruptions that occurred in January when travel bans prevented workers in China from returning to their factories after the Chinese New Year holiday. And it makes the option of relocating production much more viable.
But industry insiders believe if such moves are made, they likely will be driven by factors unrelated to the pandemic, such as quality, price and risk, and not geopolitics.
“Likely” is the operative word at this point, for no one can be entirely sure how the next several months or years will shake out.
“Things will be different,” Morgan says. “In what ways, we cannot be sure. But we will certainly have to adapt to them.”