What on earth is Formula 1 doing in China?

Formula 1 folk do not much like the Chinese Grand Prix. This is unfortunate because as everyone knows that China is a country of great importance these days in the world economy - and offers the greatest opportunities for the future for the major global corporations involved in the sport. Economic growth in China should be creating vast new classes of customer, all wanting western products. That is the theory.

The reality may be a little different as the signs are that the Chinese companies have examined the foreign competition and are now producing just as good products, sometimes to the annoyance of the multinationals.

F1 seems to believe that going to China is a good thing. It certainly works for Bernie Ecclestone and his chums in suits with CVC name tags. They are making a killing out of the Chinese. Thus it was no real surprise that during the Chinese GP weekend Bernie let it be known that he has signed a new deal for the race to stay at the venue. This was big news in Shanghai and Bernie was mobbed by the local press (see my blog for more details). He did not say how long for but just before the Australian GP he told me it was for seven more years. This will no doubt work wonders for the Formula One Management bank account as China is rumoured to be paying as much as $50m a year. It is hard to know whether these figures are correct because most of the deals these days have 10% annual hikes so the numbers are always on the move upwards.

No-one in F1 understands how this can make sense for the Chinese because the numbers do not add up at all. Shanghai has a population of at least 20m (no-one is quite sure really) and the place is booming with construction everywhere. More importantly there is no real sign of any slowing down in the economy.

The problem is that the average monthly wage in the city is $480, which astonishingly was the cost of the cheapest F1 tickets in 2008. If you transpose that concept to the United States, it would be like asking an American to pay $4000 for a ticket to the Indianapolis 500.

No wonder there were so many empty seats...

Shanghai has a crowd capacity of 200,000. If you do the sums you can see that there is little chance that the circuit will ever make any money. Dropping the prices and increasing the seating might work, but you would still need half a million seats at $100 a pop to break even. The Chinese will earn more as the years go by but F1 tickets at these prices are still out of reach of all but a few. This year in an effort to cut losses the organisers dropped seat prices to $143 a ticket. There was a good crowd, but being charitable it is unlikely that this raised even half of the fee payment.

If all goes to plan the Shanghai Metro will reach the circuit by next year, and fans will be able to take a 40-minute train ride straight from downtown Shanghai, assuming that China's rich do not mind riding the subway. If not, it will simply mean that there will be more people trying to sell things to the crowds...

Will this result in Chinese kids being inspired to go racing? Will the images of the race track result in a vast influx of tourist dollars into Shanghai? The answer to both questions is probably: "No".

So what is the point?

The Shanghai International Circuit is an impressive facility - truly world-leading. It is stunning architecturally, with two vast flying bridges, nine storeys up, that link the main grandstand with the pit buildings. We lucky F1 media get to sit in one of these with views of the whole race track and many miles beyond that. The cars pass beneath our feet. At the other end of pitlane the super-VIPs of the Paddock Club get a similar experience.

The city spent an astonishing $240m on the construction of this incredible place and yet last Sunday it was clear that the drainage needs to be looked at.

But where is the raison d'etre? Why are the Chinese willing to go on paying? When he took power in 2004 the Chinese leader Hu Jintao made much of his desire to reduce the amount of public funds being wasted...

Clearly, however, the race in Shanghai does not qualify as a waste of money for the top dogs in government. Hu's desire is to see China develop its power internationally in a peaceful way, while maintaining a harmonious society inside China. This is a hell of a juggling act but one of the ways that this can be achieved is by staging big events such as the Olympic Games, and the forthcoming Expo 2010. The Formula 1 race is an event that gives China international status and this helps to gloss over less acceptable faces of the current regime. Media and political life remain under strict control, something that Hu and his chums believe is essential if China is to stay united and not blow apart as the Soviet Union once did. To give him credit Hu seems to aspire to some form of democracy as and when it is judged that the moment is right. Getting to that point, however, requires social stability and a sense of national purpose. Grand Western ideas such as free speech and democracy are not going to help that happen...

I am not about the decide on whether that is right or wrong but one can see the argument, just as one can see that the idea of an Indian GP may appear immoral given the poverty in that country, but that opening up India to the world may ultimately be a better way to solve the problems than using the money to buy bread for the poor.

When all is said and done, F1 does not care what is going on in China as long as the cheques arrive...

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