Sports firms bet their shirts on London

Actually, Li Ning's gloomy performance is in line with the decline of China's sportswear industry, added Qu.

The growth rate of the industry dropped to 13 percent last year, from 20 percent in 2010 and an Olympic-generated 30 percent in 2008, according to China Merchants Securities.

All the leading domestic brands are also facing increasing difficulties, including high inventories, mounting costs and competition from foreign brands, including Nike and Adidas. Adidas is The Olympic Worldwide Partner of both Beijing and London Games.

Domestic sponsors

Some Chinese sports brands have adopted a similar strategy to Li Ning's - leveraging the London Games to show themselves on an international stage, while at the same time boosting their business at the domestic level.

The Fujian-based Anta - now the archrival of Li Ning in China - is among them.

The company announced at the end of May that it will be the exclusive outfit sponsor for the Chinese delegation to the London Olympics and its tailor-made champion sportswear has been named the Champion Dragon Outfit.

Anta was also a beneficiary of the Beijing Olympics.

The sales revenue of the Hong Kong-listed company increased 55 percent year-on-year to 4.63 billion yuan in 2008, and its profits will increase by 94.2 percent to 931 million yuan.

It passed Li Ning in its number of outlets, profit growth and market share in China last year, according to China Merchants Securities.

"It might be worthy for Anta to invest a huge amount of money to explore the international market via Olympic sponsorships, since its brand is lagging far behind Li Ning Co Ltd abroad so far," said Qu.

Steven Chang, CEO of ZenithOptimedia Greater China, calls Olympic sponsorship an expensive and high-risk investment, but the returns can also be huge if the operation is successful.

Both Li Ning and Anta declined to disclose the amount of money involved in their support of the Olympics.

Li Ning's financial report showed that its advertisement and marketing expenditure reached 1.17 billion yuan in 2008 compared with 696 million yuan a year earlier.

Taking into account inflation and the cost increases of sports marketing worldwide, analysts suggest Li Ning's support of London sponsors may exceed 1.5 billion yuan.

According to the terms of the agreement between Anta and the Chinese Olympic Committee, Anta was authorized to also sponsor the Chinese delegation's sportswear at 11 important international sports events, including the 2010 Vancouver Winter Olympics, the 2010 Asian Games in Guangzhou and the 2012 London Olympics.