Were he not lying in state, Chairman Mao would be spinning in his grave. Only a few blocks from the mausoleum where thousands of visitors solemnly file past the glass-encased body of the Great Helmsman, other Chinese gaze longingly through the window of a Rolls-Royce showroom.
Such is the dichotomy of contemporary Chinese culture. Free enterprise thrives – as does a lust for life’s finer things – but under the watchful eye of a rigid Communist Party central government that has ruled the country since Mao Tse-tung seized power in 1949.
“Our government is smart,” says Le Lu, dean of the College of Foreign Languages at the University of Shanghai for Science and Technology. “The people are preoccupied with making money rather than politics. The government is getting practical. Very practical.”
Of course, traveling in a Rolls to one of the capital city’s 30-plus golf courses is as out of reach for the average Beijing resident as it is for the average American. But more and more Chinese can afford to buy Volkswagens, Volvos and BMWs. (Auto sales grew by 75 percent in 2003.) It’s that growing class of upwardly mobile consumers over whom the golf industry is salivating.
Chinese today no longer aspire to “serve the people.” They are more concerned about making a buck. And when they start making enough, history says they’ll spend some of that disposable income on golf. The PGA Golf Merchants Federation Asia estimates there are 3,500 golf courses in Asia and 23 million golfers. It reports Thailand alone has 200 courses, 1.5 million golfers and an estimated $11 million in annual golf trade. Thailand’s population is 61.5 million.
A Chinese painting from the Yuan Dynasty (1279-1368), which is housed in the Chinese History Museum, depicts women playing a stick-and-ball game that looks like golf. But the modern history of golf in China dates only to 1984, when the Chung Shan Hot Spring Golf Club opened in the southern province of Guangdong. Accurate numbers are difficult to pin down, but there are no more than 200 golf courses in China – nearly all private clubs that cater to wealthy Chinese and expatriate businessmen – and approximately 1 million people who have tried the game. Participation is expected to soar if golf is approved as an Olympic sport for the Beijing Games in 2008. Just last week, the PGA European Tour played its first event in mainland China at the BMW Asian Open at Tomson Shanghai Pudong Golf Club in Shanghai.
What excites the golf industry is the comparative math: Nine percent of Americans, or 26 million in a population of roughly 291 million, are counted as golfers. Nine percent of China’s population of 1.3 billion would be 117 million.
Even a far more conservative projection yields eye-popping numbers. Close to 30 percent of the Chinese population, or 390 million people, lives in its urban areas. Nine percent participation from that group would yield 35.1 million golfers.
Far fetched? Japan grew from a smattering of golfers in 1960 to nearly a 14 percent participation rate at the game’s peak in 1994. Korea has reached a 6 percent participation rate in about half that time.
A study by the Grandville, Mich.-based market research company E-Composites Inc., forecasts a Chinese golf industry annual growth rate of 25 percent over the next five years. And consider this: According to the World Bank Group, the Chinese city of Chongqing, home to more than 35 million people, is the largest metropolitan area in the world. And it doesn’t have a golf course.
“That’s just an illustration of how deep this market is,” says Greg Sproule, the Singapore-based IMG vice president who oversees that company’s golf course development business in Asia. “There is a lot of money in China. And it’s not stupid money.”
But many circumstances, political and economic, could impede the growth of golf in China. In January, for instance, the central government imposed a moratorium on new course development, citing the rampant misappropriation of valuable agricultural land. The central government can be heavy-handed when it chooses, as evidenced by its resistance to free elections in Hong Kong (of which it regained control in 1997) and threats to forcibly repatriate Taiwan.
Other signs occasionally indicate the government’s reluctance to embrace golf. In December 2003, the head of the Communist Party in the Hunan province town of Changsha was killed at a golf course when he lost control of his cart and it plunged over a cliff. The accident sparked questions about the propriety of a party honcho spending time at such a capitalistic pursuit as golf.
The party investigated the incident and why the official was being entertained by businessmen at a golf course. No wrongdoing was found, but the state news agency, Xinhua, noted: “Whatever the truth, public perception of corrupt officials seems to have been reinforced.” The report added that such perceptions might be unfair, citing a commentator who said corruption among party officials was so pervasive that “people tended to associate golf with it.”
More foreboding than the government’s attitude is fear that the Chinese economy, No. 2 in the world behind the United States, could overheat. Many economists warn that unbridled growth in Chinese factory construction will result in overcapacity, or the production of more goods than can be sold. That could result in widespread worker layoffs, management downsizing and factory closings, which would curtail domestic consumer spending.
Should the China bubble burst, hundreds of thousands of the aforementioned upwardly mobile consumers could find themselves out of work. That in turn could fuel a political backlash against the central government, which enjoys unchallenged power in part because of the country’s growing prosperity.
In addition, there are worries about the consequences of unchecked lending by Chinese banks. The banking system is widely regarded as archaic and corrupt. Loans often are made with little scrutiny of the recipient’s creditworthiness, or to people solely because of their political influence. As a result, a high percentage of those loans are non-performing.
Those who question how long China can sustain its robust economy point to Japan in the late 1980s, Southeast Asia in the mid-1990s and the United States during the Internet boom of the late 1990s as economies that went bust after periods of heavy investment spending similar to what China has experienced over the past six years.
Others, however, argue that China is so big that its growing domestic consumer market will be able to absorb the volume of production. And many observers are optimistic that President Jintao Hu and Premier Jiaboa Wen will gain control of the banking crisis and force Chinese lenders to bring their practices in line with those of Western countries.
If the Chinese economy remains healthy, the country is a golf powerhouse waiting to happen.
Perhaps nowhere is the emergence of a Chinese middle class more evident than at Shenzhen International Airport. On this weekday morning, the concourse is teeming with young adults, many in business attire, others fashionably dressed for leisure travel. The lines are 40 people deep at each of the 10 security checkpoints. Cell phones and Palm Pilots abound.
Shenzhen is a city in an experimental 333 enterprise zone in the southern province of Guangdong, a vast landscape of factories, apartment buildings and worker dormitories. Occupying a small niche in this industrial behemoth is golf club manufacturing, with most of the world’s premium brands being made here (see Golfweek, Jan. 26, 2002).
Advertising for cars, credit cards and electronic devices is everywhere at the airport. In the gate area, kiosks sell how-to books and DVDs on golf. The target audience is an upwardly mobile middle class, generally defined as households that earn 54,250 yuan (approximately $6,500) or more annually. Income varies by region, but the cost of living in China “is very low by any standard,” says David Lim, vice president of marketing for Mission Hills Golf Club in Shenzhen.
“If you’re making 8,000 to 12,000 (yuan) a month here, you’re doing well,” says Lim, a UCLA graduate from Singapore. “That would be middle class. You can buy an apartment, buy a car, and indulge in things like golfing.”
Among the passengers on a China Air flight to Beijing this day is Vivian Cao, 26, a marketing supervisor for cell phone provider TCL.
She and her husband, a financial analyst for IBM China, own clubs and play golf with friends four or five times per year. Even though most golfers in Shenzhen “are old men from Hong Kong,” Cao says, she still likes to visit “the golf yard.”
“I enjoy the grass and the fresh air,” she says.
Golf slowly is rising on the priority list for many young professionals in China. First comes home ownership, then a car. Leisure time is precious, but the notion of spending it on a trendy pursuit such as golf is appealing. It’s a good way, says Cao, to relieve the stress of everyday life.
Spurred by the prospect of cashing in on China’s booming economy, college graduates are flooding the job market.
“The pressure is great,” says Cao, alluding to the fact that there are hundreds of recent graduates who covet a job like hers. Cao holds a degree from the Beijing College of Economics and is in the MBA program at Webster University in Shenzhen. She works long hours for TCL and likes to relax on weekends. She wishes golf was a more frequent option.
“Unfortunately,” she says, “the price is too great.”
There are only two daily fee courses in China: The Jockey Club Kau Sai Chau in Hong Kong and Longgang Golf Club in Shenzhen. The green fee at the latter is 250 yuan, or about $30. Most private clubs offer mid-week play for nonmembers, with green fees ranging from $35 to $150.
“We have a lot of discussions with our developer clients about the need to embrace the public golf concept,” says IMG’s Sproule. “People (in Asia) think generally that public golf means not a good golf experience. It can be a good golf experience. And it can be a profitable golf experience. But it requires a different orientation.”
Which could be nudged along by Beijing. It’s not inconceivable that forthcoming governmental guidelines regulating course development will include a stipulation that a certain percentage of new courses be public.
The likelihood of that would increase if golf becomes an Olympic sport.
“Of course the government will enhance the effort to build golf courses and develop the sport,” says Jian Guo Hu, vice chairman of the China Golf Association.
“This is something we realize,” Hu says of the lack of accessible golf in China. “We are working to assist the local governments to build some golf courses for the public.”
It’s more likely, however, that public golf will increase only after the private sector goes through a bust cycle.
Sproule uses Thailand as an example. Course development was booming there in the late 1980s and early ’90s. But much like the embryonic stages of golf in Japan, Korea and China, nearly all the facilities were expensive private clubs.
“In 1995 we did some research, and the average member of a golf club in Bangkok had five memberships to golf courses,” says Sproule. “These are obviously wealthy people; they’re paying $30,000, $35,000, $40,000 for a membership.
“All the new courses that were coming on stream were going after the same person at the very top of the wealth pyramid. The demand couldn’t keep up with the supply.”
Then came 1997, when Thailand was the flash point for an Asian economic crisis from which the region has only recently begun to rebound. The membership market went “absolutely dead,” says Sproule, sending most Thai courses into bankruptcy. “All they’re doing at that point is trying to generate operational cash flow,” he says. “So they lower green fees and more people flood to the game because it’s accessible. Golf all of a sudden becomes affordable to people. You can play for $5 or $10 a round. So that’s great for the health of the game in Thailand.
“To the point about golf becoming more accessible to more people in China, I think Thailand is a great example of that. It needs to bottom out.”
Once that happens, or if the central government makes an Olympian effort to promote golf at the grass-roots level, a new wave of golfers can be expected to aspire to bigger and better things.
“We’re selling a lifestyle,” says Sproule. “We talk a lot about that to our developers. The people who have arrived economically – they have the nice car, the nice house, all the material things. Now they’re considering quality of life in other ways – playing golf, traveling. They want to have a house on the golf course. They see that in the United States, they see that in Australia . . . and to them, living on a golf course or being associated with a golf course means you have arrived and you have a lifestyle that is very modern.”
But dreams of owning a home on a Chinese golf course will have to be put on hold, at least for the time being. On Jan. 10, the Administrative Department of the State Council (China’s ruling body) temporarily suspended all new golf course development.
No government entity at any level is permitted to approve a new project. Development in progress cannot proceed until the project’s history is investigated to determine if it is in violation of any laws. Existing courses also are being investigated, and noncompliance issues must be rectified. Course developers that fail to comply with existing regulations will be punished, the decree stated.
“This is the real deal. The party’s over,” says IMG’s Sproule.
The moratorium was handed down after the Ministry of Land and Resources reported last fall that it had handled 168,000 cases involving illegal land use, twice as many as the year before. The Ministry said there were 176 courses in China, but only 10 had been officially approved by the central government.
Hardly surprising, says Sproule, for the golf course permitting process in China “has been murky at best.”
Owing to the breakneck speed of development in China, central government regulations often are ignored by local officials and companies eager to make deals. China lacks strong zoning laws, making it difficult to track land use and transfer.
“It all boils down to sensitivity over farmland,” says Sproule. “There is tremendous urbanization under way in China. Golf is an easy target. They believe it takes up a lot of farmland.”
Sproule said 37 courses opened in China in 2003. In Beijing alone, he said, there are seven courses under development.
The decree states that the moratorium won’t be lifted until the Development & Reforming Committee, National Land Resources Ministry, Construction Ministry, Environmental Protection Bureau, Sports Management Bureau, Tourism Bureau and related departments collaborate on guidelines for future development of golf courses.
The document did acknowledge a positive influence of golf facilities and growth of the game, giving those in the industry reason for optimism.
It may be set back temporarily, but golf ultimately will benefit from the central government’s attention, Sproule says.
“We welcome regulatory clarity,” he says.
Sproule predicts the moratorium will end by early 2005. O’Brien McGarey is more hopeful. He is president of Denver-based Dye Designs Group, which was in the process of opening a Shanghai office when the edict came down.
“China is the biggest market in the world, even with the government shutdown,” McGarey says. “But it will open up again, probably in the next three to six months.”
Environmental issues are part of the equation, but agricultural interests carry even greater clout with the central government. Appropriation of collective farmland is at odds with the Communist Party ethos.
On the other hand, Beijing wants to keep foreign investors happy. That means catering to the golf lifestyle that’s so popular with the business community.
Provincial governments, especially those in coastal areas, are keenly aware that the growing Chinese middle class is eager to pursue Western leisure activities such as golf. Those officials know it will behoove them to actively and speedily participate in the creation and enforcement of new guidelines for developers.
“Yunnan Province is very pro golf,” says Sproule. “They recognize (the value of) properly conceived golf that fits within the government’s master plan for their own economic development and developing their tourism business in particular. They get it.”
Current moratorium aside, Sproule says, the central government has tacitly supported golf development.
“Let’s be honest,” he says. “The way China operates, a renegade province would not exist for long. If the Yunnan government was out of line, they would be told so by Beijing and there would be changes.”
Sproule says the China Golf Association appears to be engaged with the State Council in establishing the new guidelines for course development.
“Hopefully, there’s a sense of pragmatism,” he says.
If not, the anticipated golf boom in China won’t materialize anytime soon. And Mao can rest easy.