Basketball is back, with the NBA set to resume play in Orlando on Thursday. But the league’s largest overseas fanbase, in China, will have a tough time tuning in.

Following Houston Rockets general manager Daryl Morey’s October 2019 tweet in support of protests in Hong Kong, Chinese sponsors and the country’s state broadcaster, CCTV, pulled their support for the league. Players, owners, and even Morey himself went into damage control immediately after, hoping to preserve one of the biggest cash cows for the Rockets — the former home of Chinese basketball star Yao Ming — and the league.

How is it that Chinese business interests came to hold such sway over a major U.S. sports league? This week we’re exploring the NBA’s Chinese subsidiary and the litany of business deals that have made it so valuable to the league.

The NBA has had a Chinese subsidiary for over a decade.

Basketball is big business in China, and it’s been growing steadily since the formation of NBA China in 2008.

The company, formally known as NBA Sports and Culture Development (Beijing) Co., Ltd. (NBA体育文化发展（北京）有限责任公司), was established as a joint venture between the NBA, representing its 30 teams; ESPN, a division of The Walt Disney Company, which broadcasts games in the U.S.; and four Chinese investors. At its founding, ESPN invested $115 million for a 5 percent stake in the Chinese entity, while Bank of China Group Investment, Legend Holdings, China Merchants Investments, and the Li Ka-Shing Foundation invested a total of $138 million for 6 percent between them.

Bank of China Group Investment is an arm of one of the largest state-owned banks in the country. Legend is best known as the controlling shareholder of Lenovo, the world’s largest personal computer maker. China Merchants Investments is a division of China Merchants Group, which set up one the nation’s first privately owned commercial banks. The Li Ka-Shing Foundation is a charitable entity controlled by its namesake, Hong Kong’s richest man, Li Ka-shing. ESPN parent Disney is deeply entrenched in China, with theme parks in Shanghai and Hong Kong, entertainment properties including films and a streaming service and, until recently, a chain of language schools.

The NBA has a lot of money at stake in China.

NBA China has full rights to all commercial activities of the league in the country. These have grown to encompass product sponsorships from smartphones and dairy makers, an annual series of pre-season games and even a real estate development project. Morey’s tweet led most of the NBA’s sponsors in China to pull their support for the league, with NBA commissioner Adam Silver estimating the financial hit to be “probably less than $400 million” this season.

The annual pre-season league games in China, called the NBA Global Games, are enormously popular. Last year’s contests, played in Shanghai and Shenzhen, reportedly sold out in less than a minute, with ticket prices reaching up to ¥18,888 (about $2,675). Sponsors included some of China’s largest companies, such as smartphone manufacturer Vivo (the presenting sponsor), travel website Trip.com (formerly Ctrip), fast food chain Dicos and financial services firm X Financial.

The league has a sizable consumer presence in the country. Last year in Beijing it opened its largest NBA store outside of North America. NBA merchandise is also sold at more than 180 retail outlets in the country. In Tianjin, an NBA-themed “lifestyle center,” spanning nearly 130,000 square feet, opened in 2018 with a ceremony featuring former NBA star Dominique Wilkins. The complex was built in partnership with Hongkun Real Estate, a Beijing-based developer with operations in China and the U.S.

For the league, the most lucrative deal involves selling the NBA broadcast rights in China. NBA games have been made available on television by CCTV, a state network, but the channel has suspended broadcasts since the Morey incident.

CCTV has paid the league about $70 million per year for the rights, according to a report from Jiemian, a Chinese news agency. Tencent, which struck a $1.5 billion streaming deal with the league last summer, has bucked the trend and continued to feature NBA matches on its platforms, though the company still has not confirmed whether it will show Houston Rockets games.

Chinese sponsorships also extend to players’ sneaker deals.

Basketball shoes and athleticwear are big business in China, just as in the U.S. Chinese brands like Anta, Li-Ning and Peak have been aggressive in their promotional strategies, signing players to lucrative deals to wear their shoes.

Anta, the largest Chinese-owned sportswear brand and the official merchandising partner of NBA China, posted revenue last year of nearly $5 billion — well short of Nike’s $39 billion and Adidas’ $21 billion but impressive considering its limited presence outside of Asia. The company also counts President Xi Jinping among its fans. Li-Ning, the next largest Chinese sportswear brand, pulled in $1.5 billion in revenue last year. Peak, which was taken private in 2016, does not publicly report its revenue or earnings.

Li-Ning made the biggest sponsorship splash in 2012 when it signed Miami Heat superstar Dwyane Wade to a 10-year deal worth an estimated $100 million. The relationship was expanded in 2018, when Wade, who had previously endorsed the Jordan Brand under the Nike umbrella, signed a “lifetime” deal. As part of that, Li-Ning launched a sub-brand called Way of Wade that includes a signature shoe and activewear line. 

Following the mold of the Jordan Brand’s relationship with Nike, last year Way of Wade signed D’Angelo Russell, now with the Minnesota Timberwolves. Russell joined CJ McCollum of the Portland Trail Blazers, amongst others, as an on-court representative of Li-Ning.

With Wade now retired from the NBA, Golden State Warriors all-star Klay Thompson is the most notable active player signed to a Chinese sports brand. Anta signed him to a deal in 2014 and extended the partnership in 2016 for an additional 10 years and an estimated $9 million annually.

Like Li-Ning’s arrangement with Wade, Anta has given Thompson a signature shoe line, the latest release being the KT5, and capitalized on his social media fame in its advertising. Anta has also signed Gordon Hayward of the Boston Celtics and Rajon Rondo of the Los Angeles Lakers to endorsement deals, with Hayward’s also including the production of a signature shoe.

Peak Sport, based in southeast China’s Fujian Province, also has a presence among NBA players, with the Los Angeles Clippers’ Lou Williams (multiple-time Sixth Man of the Year Award winner) acting as the brand’s chief representative in the NBA. 361 Degrees, a newer entrant to basketball, recently signed NBA Slam Dunk Contest champion Aaron Gordon to a multi-year deal that includes a signature shoe and line of athleticwear.

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