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With its rapid economic growth and improving standard of living, China is widely seen as an emerging giant consumer of sporting goods.
It is estimated that the country, currently preparing for the 2008 Olympic Games, is likely to become one of the top three sports goods markets around the world by the time the Olympic torch arrives in the Chinese capital.
Many of the world's leading sports goods suppliers are racing to grab the business opportunities offered by this massive market.
In the latest move, the world's second-largest sports goods maker Adidas-Salomon AG signed a sponsorship agreement with the Beijing Organizing Committee for the Games of the XXIX Olypiad (BOCOG) on January 24.
Under the agreement, Adidas will supply sportswear for all of the staff, volunteers and technical officials of the Beijing 2008 Olympic Games and the Beijing 2008 Paralympic Games.
In addition, Adidas will also provide outfits for the Chinese Olympic teams at the Turin 2006 Olympic Winter Games and the Beijing 2008 Olympic Games.
Such sponsorship is seen as an efficient way to promote the brand both in China and throughout the world.
"As our fastest growing market, China is tremendously important to Adidas, and this agreement will be a powerful contributor to increasing our brand profile with consumers in that market," said Adidas-Salomon Chief Executive Officer Herbert Hainer.
The deal is just part of Adidas' big ambitions for the Chinese market.
The German-based company intends to have 4,000 stores in China by 2008, up from the current 1,300.
It also aims to expand its revenue here to more than 1 billion euros (US$1.3 billion) by the end of the decade. Last year, the company generated sales of well over 100 million euros (US$130 million) in the country.
In addition to the Olympic sponsorship, Adidas also will also start sponsoring China's national volleyball teams this year.
It will provide sportswear and equipment worth nearly 200 million yuan (US$24 million) over the next five years.
Rival brands like Nike and Reebok -- as well as other multinational corporations -- also have their eyes on China's increasingly expanding sporting goods market.
They have recruited sports stars like Yao Ming, the Shanghai-born centre of the Houston Rockets basketball team, and Liu Xiang, China's gold-medal hurdler, as icons to promote their brands among China's emerging affluent and image-conscious young consumers.
"In the past two years, world-leading brands like Adidas and Nike strengthened their efforts in the Chinese market," said Zheng Zeyun, vice-chairman of the China Sporting Goods Federation.
This underscores the importance of the Chinese market to them, he said.
It is believed that the Chinese people spend about US$5 billion annually on sports merchandise and events. In comparison, US citizens spend US$200 billion or more every year.
"There's no doubt that there's huge demand for sports goods in China," said Zheng.
Despite these well-known brands, some other players, who are not so familiar to the Chinese, also hope to get a share of this emerging market.
French sporting goods producer and retailer Decathlon opened its first store in China and moved its Asian headquarters from Hong Kong to Shanghai in 2003, in a bid to better develop its business in the mainland market.
So far, the company has opened four stores in Shanghai and Guangzhou, selling sportswear and equipment from big international brands as well as its own brand for some 60 sports.
"The business here is much better than what we expected," said Zhuang Ying, assistant to the company's Asia managing director.
Given the success of these four stores, the company has decided to open many more outlets in the country.
"China is definitely a huge market," said Zhuang.
Decathlon is now preparing to open its first store in Beijing and aims to have at least four outlets in the capital before the 2008 Olympics.
Leading Japanese sports goods maker Mizuno Corp also showed its interest in business opportunities brought about by the Beijing Olympics.
The supplier announced last year that it would step up its business expansion in China over the next four years.
It aims to open more than 1,400 outlets by 2008, with sales reaching 1.2 billion yuan (US$145 million) in that year, according to a report in the China Sports News.
The company plans to open three flagship stores in Shenyang, Beijing and Shanghai, and expand to other large and medium-sized cities.
But the rapid expansion of foreign firms will pose great challenges to domestic sports goods manufacturers, according to industry insiders.
"China's sports goods industry has enjoyed rapid development in recent years," said Zheng Zeyun from the China Sports Goods Federation.
According to Zheng, China is already a major global sports goods maker. It can independently produce facilities and equipment for more than 100 sports.
And in the world market, about 65 per cent of sporting goods are made in China.
However, most domestic manufacturers are producing for foreign brands, and lack their own brand names and the capability for researching and development.
And these OEMs (original equipment manufacturer) are even losing their only advantage - lower labour costs. There are signs that many foreign brands are shifting their production from China to some Southeast Asian countries, where labour is cheaper.
Zheng suggests domestic companies, when conducting OEM businesses, should make efforts to research and develop products with their own intellectual property rights (IPR).
"It will take time to develop our own big brands," he said.
"We have only dozens of good brands in the sector, but even the most famous ones in the domestic market like Li-Ning and Double Happiness do not receive much recognition in the world market."
Currently, no domestic sporting goods company is able to compete with foreign players, he added.
Facing the big challenges from foreign names, some domestic brands have started to adjust their business strategies.
China's leading sportswear producer Li-Ning, previously a leader in the lower and medium-end market, has started to develop high-end products, in a bid to compete with its major foreign rivals like Adidas and Nike.
The company launched an initial public offering on the Hong Kong stock exchange last June and used the proceeds from this for research and development into new products.
It is expected to beat its rivals with equally high-quality goods but lower prices.
Li-Ning has also stopped its sponsorship of provincial sports teams in the country's national games, and has instead started to explore new channels to promote its brand both domestically and internationally.
The company signed a contract last month with the National Basketball Association (NBA) of the United States.
According to this long-term strategic co-operation deal, Li-Ning Co Ltd will use licenced NBA stars and other NBA resources like NBA's official website to promote its brand.
"Through this co-operation, the NBA's influence will help promote the Li-Ning brand in the high-end market," said company President Li Ning.
(China Daily March 10, 2005)
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