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FIFA World Cup: China Scores over Brazil

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Moody's Investors Services, a segment of Moody's Corporation (MCO - Free Report) , has played down the positive impact of the 2014 FIFA World Cup on Brazil’s economy. The credit rating agency believes the positive impact will be limited to certain sectors only. Interestingly, China – a non-participating country – has been benefiting more than the host country. Experts believe that China will earn significantly from the costliest FIFA World Cup tournament ever; that too without making massive investments.

It is China’s manufacturing sector that is expected to reap most of the benefits. The nation has been busy manufacturing the official match ball, World Cup memorabilia including the mascot Fuleco and official instrument Caxirola, and the hybrid bus (manufactured by China's South Locomotive & Rolling Stock Corp Ltd). China has also produced electric multiple-unit trains that will be used to connect stadiums with other areas.

According to industry experts, China’s skilled workforce, and the efficient network of material suppliers and infrastructure has helped China become an important seller to the global markets.

Why Too Little for Brazil?

Brazil is reported to have invested $11.5 billion in stadiums, transportations, and other Cup-related projects. However, global credit insurance company Euler Hermes said in a report that neither the ongoing World Cup nor the upcoming Olympic Games will do any good to Brazil’s economy. It projects growth will remain subdued at 1.8% and 2.1% in 2014 and 2015, respectively.

Moody’s had said that the FIFA World Cup would give only a “short-lived” boost to sectors including food and beverage, lodging, TV broadcasting and car rental.

Barbara Mattos, Moody’s Vice President -- Senior Analyst, had said: “Some hope hosting the World Cup will help lift Brazil out of economic slowdown, but the associated economic activity ultimately pales before the country's $2.2 trillion economy, the usual levels of investment spending and the annual revenues of most companies”. The report also noted that Brazil’s estimated $11 billion planned spending accounts for “only 0.7% of overall planned investment in Brazil in 2010-14 and most of the impact has already been felt “.

Recently, Moody’s noted that the financial benefits for Brazil are limited. The agency said tourism sector and advertising revenues is not powerful enough to ‘give a major kick to the national economy’. The social unrest and holidays have been cited to causing losses.

China’s Football Craziness

Interestingly though, China, which last played the World Cup finals in 2002, stands a chance to win from the event this year. Advertising revenues for China’s largest video website, Leshi, is estimated to have hit about $16 million. State television network, CCTV, is expected to boost its earnings from the prior edition of the World Cup by 50% to $240 million this summer.

The nation has been ardently following the tournament. The enthusiasm has been such that Beijing had briefly renamed its subway stations after FIFA World Cup participating teams. Xinhua, China’s official news agency, has even reported death of sleep-deprived football fans. Shanghai’s hospitals are witnessing increasing emergency cases; 40% of them being breathing or stomach problems. Several bars in Beijing are open for 24 hours.

Brands Cash in Their Gains

For a nation with such enthusiasm, it is easier for brands to reap benefits. For instance, when bars are open for 24 hours, it is obvious that breweries would see their sales soar. Moody’s commented that large corporate sponsors would benefit from increased exposure.


Anheuser-Busch InBev SA/NV (BUD - Free Report) , a major sponsor, was focused in establishing themselves as the “King of Beers in China” right from the beginning of this year. They announced plans to buy China’s domestic Siping Ginsber Beer Group early this year. They "wholly" acquired the Chinese brewer in April.

Reportedly, China is the world’s biggest beer drinker and AB InBev would most likely see sales jump during World Cup. In fact, Anheuser-Busch InBev owned Harbin Beer is the official World Cup beer. The company has also been busy with on-line promotions and delivery of beers. AB InBev currently carries a Zacks Rank #3 (Hold). Soccer fans have been gulping the Harbin Beer apart from what beverage maker and official world cup sponsor The Coca-Cola Company (KO) has to offer.

E-Commerce & Internet

Popular e-commerce company Alibaba Group said online shopping website sold 1.6 million cans of beer during a sales promotion on June 4. This generated revenues of about $1 million. Meanwhile, Alibaba Group itself should be a beneficiary from the World Cup. This e-commerce business, where Yahoo! Inc. owns significant stake, has introduced in association with CCTV a mobile application via its cloud computing subsidiary. This application will provide China’s only live streaming for handheld device users.

China soccer fans are following World Cup news on Internet. SINA Corporation (SINA - Free Report) subsidiary Weibo Corporation, where Alibaba too owns a stake, had 22 million visitors on the first day of FIFA World Cup. There were 83 million published posts within the first two hours of the event.
Separately, while Japan-based Sony Corporation (SNE - Free Report) is manufacturing the official tournament television, China has played its role in putting up the live score boards inside the stadiums. Among others, three Chinese companies have been supplying the live scoreboards.


Alibaba Group has also been selling world cup merchandises. Talking of which, China’s Yiwu city has enjoyed robust demand for merchandises. Yiwu International Trade City in eastern Zhejiang province is the world's largest wholesale center for small commodities and accessories. A Caxirola manufacturer said they have sold about two million Caxirolas since April. Zhejiang and Guangdong provinces manufacture 90% of the world’s Caxirolas. A dealer in Yiwu confirmed that sale of commodities to soccer fans has jumped 30% thanks to the World Cup in Brazil. Hong Kong-based Kayford Holdings Ltd is the only company outside Brazil to hold the license for plush mascot and 3D figurines.

Separately, Chinese gifts and souvenirs manufacturer Wagon Enterprises is said to be responsible for 80% of the official World Cup souvenirs this year. The company has produced 8 million world cup related products so far. Company’s president Simon Lee said that they have witnessed sales surge 40% this year and attributed a third of that due to the biggest sporting extravaganza.

Yingli Solar

A major achievement for China has been Yingli Green Energy Holding Co. Ltd. (YGE - Free Report) featuring among the official world cup sponsors. Yingli Solar – the world’s largest vertically integrated photovoltaic (“PV”) module manufacturer – was the first Chinese and renewable energy company to sponsor a FIFA World Cup event even way back in 2010 in South Africa. This time, Yingli Solar is installing solar panels in some stadiums. (Read: Sun Shines on 2014 FIFA World Cup, Thanks to Yingli Solar)

The company’s name is displayed pitchside during all the matches. Yingli Solar features prominently alongside other major sponsors like McDonald's Corp. (MCD - Free Report) , Visa Inc. (V - Free Report) and Johnson & Johnson (JNJ - Free Report) .

Official Match Ball

Adidas AG is entrusted with the responsibility of manufacturing the official match ball – Brazuca. While some of the six-panel soccer ball was made in Pakistan, a major share has been developed by a factory in the southern Chinese city of Shenzhen. A subsidiary of Taipei-based sports gear maker Long Way Enterprise, this factory has been partnering Adidas since 1997 and had also manufactured the 2010 World Cup in South Africa official matchball- Jabulani. Thirteen million official balls were sold during the last edition.

Bottom Line

All these would ultimately translate into broader benefits for the Chinese economy. The manufacturing sector will get some boost. Separately, Chinese products have been flocking the Brazil market. Till May, Yiwu alone saw its total exports to Brazil increasing 31.4% year over year to $160 million. Exports of sports commodities to Brazil jumped 42% year over year to $2.78 million.

The trade relation therefore is being well supported. Brazil and China are the biggest partners among the BRIC nations with trade flows between the nations surging to over $90 billion in 2013 from just $6.68 billion in 2003. China toppled the US in 2009 to become Brazil’s primary trade partner.

No matter the Chinese soccer players failing to represent the nation in the event, the Chinese manufacturing sector has played its due role. The ‘factory of the world’ has won.

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