Government Crackdown on Golf Memberships

Golf in China is really expensive, a combination of the opulence and social status associated with playing the game.  Memberships in clubs in Beijing can run as as high as $150k for initial fees, and membership to clubs are often presented as gifts among the elites.  In most countries, a multitude of world-class golf courses would be regarded as an obvious and inevitable by-product of rapid growth and soaring living standards.  However, despite the sports’ popularity, there is a public, negative connotation that playing golf is exclusive only to the country’s wealth elite.  These individuals include government officials and rich businessmen, alike.  Despite the initial 2004 ban on construction of golf courses to preserve dwindling farmland, save water, and reduce the huge number of villagers thrown of their land, golf courses have nearly tripled from 170 in 2004 to nearly 600 as of 2011.  More than 100 golf courses in the last 5 years have been shut down by the government, yet the sport still endures culturally with the wealthy elite.  Xi Jinping’s anti corruption campaign, which serves as a vehicle to promote less extravagant lifestyles, targets mainly these government officials who as public figures of the state indulge in excessive wealth.  Many in China are angered by these high living officials where sharp divisions of wealth exist, yet even the central governments’ actions shows the relative, social ineffectiveness of this crackdown.

This crackdown has largely failed because local governments have encouraged the building of clubs to boost tourism and increase development opportunities.  As long as developers are well connected they can ignore warnings from regulators, who will rarely risk their careers by “enforcing laws that could offend powerful interest groups higher up in the food chain” (Financial Times).  This is a problem that China deals with as refuted by Professor Smitka, who states that the local governments’ inefficiency in generating local, public finance gives them incentives to pursue ventures such as building golf courses.  tThe continued popularity of golf suggests the inability of the central government to force its golf course ban, perhaps a reflection of other policies they might try to implement as well.

In regards to these membership gifts mentioned earlier,  there still has been some short term damages in golf membership prices for individuals who own the rights to sell their memberships.  In short, a speculative bubble for these membership appeared from 2004 until the recent government crackdowns.  Memberships were seen as a lucrative asset, and many elite purchased these memberships as if it were stocks.  Membership fees, in that regard, have been affected from an economic standpoint (though it does not affect the entire general public).  It remains to be seen how much value can come back to these golf memberships in the next few years, as their fees are now much lower as means to attract more individuals.  And maybe it is a good thing that these prices have shimmered down.

Sources Consulted

https://www.ft.com/content/e514b5cc-74d7-11e0-a4b7-00144feabdc0

http://www.telegraph.co.uk/news/2017/01/23/china-driving-against-golf-closure-100-courses/

 

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14 Responses to Government Crackdown on Golf Memberships

  1. Alden Schade says:

    One question I had while reading this article relates to public finance and building golf courses. Are these projects really a good way to boost tourism or development if they are so exclusive and expensive? Are local governments building them for any other reasons?

    • zhengm18 says:

      From what I observed from going to China every summer, it is a pretty superficial country from a materialistic standpoint. There is high social status associated with expensive items, not restricted to just golf memberships. The elites high up in China crave “exclusive” opportunities like this. I am sure these local officials have other agendas on their mind, and maybe a lot is driven by individual incentives. Hence, the widespread corruption in China.

  2. feldsteinp18 says:

    I think that this is an interesting dilemma but I question the effectiveness of combating government corruption with shutting down the courses. It seems as though it would be more effective to address the source rather the manifestation of this corruption. It also seems as though these golf courses are growing too quickly to make sense. Golf courses can be a risky investment and it seems as though too many are being erected in China.

    • zhengm18 says:

      I agree, how do you fight a decentralized entity like this? Yeah the growth rate is absurd, but demand still remains very strong among the classes who can afford it. To do business in China now, you have to be at least be able to show your prowess on the courses to establish “guanxi”.

  3. hendersonn17 says:

    While the government is cracking down on memberships, I wonder what the market for public courses is like. I would imagine that more public courses means increased competition, which would in turn drive down prices, making it a more accessible sport. While golf has historically been seen as an elitist sport, we have seen initiatives here in the US by the PGA Tour to increase the game’s exposure across socioeconomic classes. Instead of opening the sport up, I wonder why the Chinese government is trying so hard to crackdown.

    • sackettm18 says:

      I think it must be for appearances sake. The government is happy to show off by shutting down golf courses, but are less willing to go after real corruption that (like the original post noted) could threaten a regulator’s career if unveiled. That is, of course, the nature of corruption in general, and part of the reason it is so hard to weed out.

    • zhengm18 says:

      The coverage of golf on TV is actually very popular in China, and if China can produce future stars in the game, then popularity will continue to increase.

  4. masonw17 says:

    What is consumer sports culture like in China? I know that branding of particular sports in America is an essential part of establishing a fan base. I wonder if there is some centralized organization which overseas golfing in China, and if they intentionally marketed golfing to cadres as a “high class” sport.

    • choia18 says:

      I do not know specifically for golf but China does have leagues for basketball (CBL), soccer (CSL, China Football Association Super League) and so on. Are they good teams? No. I have never, if ever, seen the national Chinese soccer team qualify for the world cup or the Asia Football Cup (heavily dominated by Korea, Japan, Australia and Iran). If golf does have a league overseeing national golf tournaments in China, I feel like its more of a casual show than an intense professional game.

  5. gristt18 says:

    Mac, it’s interesting you mention how the culture could change if China were to produce a superstar golfer. From my limited knowledge, this is what happened with Yao Ming and basketball. Could one person really change the entire government’s approach to handling golf? Clearly, basketball is different than golf, and the costs of golf courses – financial, environmental, and cultural – are much higher than basketball. Still, an interesting precedent may exist, and looking at how Yao changed Chinese culture in that regard would be interesting and relevant.

    • zhengm18 says:

      you bet ya. When Li Na won the French Open, the whole country started really getting into tennis similar to The Yao Ming craze in China. Li Na was actually a top 10 highest paid female athlete in the world at the time. There is probably alot of money to be made from expanding on the sports culture in China.

  6. bonesc18 says:

    It’s funny to hear “wealthy elite” associated with golf. While it is a country club sport, per say, it also seems to have intensely middle class connotations here in the United States. Every suburban dad (and now a lot of moms) has a set of clubs somewhere in the garage and can belong to a course for a relatively small sum of money. China’s middle class is growing rapidly due to the influx of private innovation in the economy. I wonder why the Chinese middle class hasn’t taken to the game more even despite the membership ban. It seems that if the middle class were to flock to the game in large numbers it could build to political will to make the game popular. As suggested above, this may take one Chinese phenom golfer to break the mold and greater popularize the sport.

    • choia18 says:

      Perhaps the equipment to purchase and play golf may still be a little too high for China’s middle class. Or the culture simply does not really identify with the sport. Whatever the case may be, I do believe as you do that one amazing professional could cause a huge influx of people into the sport. The United States simply loves sports so it’s rather easy to find yourself sucked into one or in most cases multiple sports and athletes.

      Perhaps someday China will produce an amazing golfer or perhaps not. They still have a pretty awful national soccer team and the Chinese basketball league is not something to brag about either.

  7. Christopher Tyler says:

    It seems as if every expensive commodity or attraction (i.e. theme parks) in China is faced with competition. I wonder if the barriers to entry in the golf market are too high to produce inexpensive courses that would attract China’s booming middle class. Unless there is overwhelming public discourse against golf, it seems inevitable that China’s elite may soon begin to target lower income individuals. This would even the playing field, and golf would become a welcome recreational activity.

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