College student Li Aihua wears his tattered, grungy Li Ning basketball sneakers with pride.

Li Ning is our Olympic gymnast and his brand is China's most famous so I like to support them, the student at the South China Agricultural University said, sitting in Guangzhou's chic Shangxiajiu shopping area.

Li, whose given name Aihua means 'love China', is among a growing number of young consumers who are buying Chinese sportswear from home-grown brands, such as Li Ning and Anta, as Beijing gears up for this summer's Olympic Games.

Li Ning, the eponymous company founded by the Chinese gymnast who won three gold medals at the 1984 Los Angeles Games, and other sportswear makers such as Anta, China Hongxing Sports, Peak, and Kangwei still lag global giants Nike and Adidas.

But they are catching up fast.

They understand the Chinese market better than international players, and their prices are lower, said Rui Wu, an analyst at JP Morgan. Li Ning is definitely the market leader because it started earlier than the others.

Analysts say the sportswear sector is a good way for investors to benefit from China's surging consumer boom. Retail sales in the country jumped 17 percent last year to $1.3 trillion as increasingly well-heeled Chinese took an interest in better products and lifestyles.

China's sportswear market is expected to grow to $7.2 billion in 2009 from $3.84 billion in 2006, according to Shanghai-based brand strategists ZOU Marketing.

In 2006, Nike controlled roughly 16.7 percent of China's sportswear market, compared with Adidas' 15.6 percent, ZOU Marketing says.

Li Ning claimed third place with a 10.5 percent slice, and Anta fourth with 4 percent, but those figures are climbing as aggressive marketing lifts their brand recognition.

Some foreign investors have seen the writing on the wall. Houston Rockets owner Les Alexander, who provided a home for basketball superstar Yao Ming -- China's top sports celebrity-- invested $30 million for a stake in Anta, which raised $406 million in its Hong Kong IPO last year.


Li Ning, whose aerodynamic logo bears an uncanny resemblance to Nike's famous swoosh and whose logo Anything is possible echoes Adidas' Impossible is nothing, is planting a flag in the United States.

In 2006 the company struck a five-year $1.25 million deal with U.S. basketball celebrity Shaquille O'Neal in 2006. It also has sponsorship deals with U.S. National Basketball Association (NBA) stars Damon Jones and Chuck Hayes.

Other Chinese sports brands are striking deals with foreign stars in a bid to break into the global brand consciousness.

Anta sponsors three players for U.S. basketball team the Houston Rockets, and Peak signed a fourth, Shane Battier, to a $4 million endorsement deal.

Chinese brands aren't just looking at the United States. Anta is also trying to sell in the Middle East and South America.

So aggressive is that push, some deals have raised eyebrows. Li Ning sponsors Sudan's track and field team, and Hongxing's Erke logo will grace North Korea's Olympic team in Beijing.

Earlier this month Hollywood director Steven Spielberg quit as an artistic adviser to the Beijing games, saying China was doing too little to help halt bloodshed in Sudan's Darfur region, where Khartoum-linked militia have battled rebel groups.

For China, ordinary consumers do not really care about these political implications, JP Morgan's Rui Wu said. They might not even know about Sudan.


Some analysts warn that margins are too tight in a cut-throat arena dominated by deep-pocketed global brands. UBS estimates that wages are rising 10-20 percent annually in the clothing industry as labor unions and authorities clamp down on alleged sweatshop conditions and low wages.

Footwear is one of, if not the most susceptible industry to cost pressures from China, UBS said in a Feb 13 report.

What we have also observed, however, is that the strongest brands have been able to offset these costs with selective price increases on new products, and that selective improvements along the supply chain are providing some help.

Local sportswear firms, whose products are often churned out in the same factories used by their global rivals, must simultaneously build prestige and also compete on price.

Their sneakers cost on average 200-400 yuan ($30-$56) compared to Nike's 600-1000 yuan.

We offer value for money products, Anta CFO Paul Ling Shing Ping told Reuters. We always tell investors we want to be just like Toyota is in the car industry.

Anta runs a network of roughly 4,700 shops, all run by distributors. Li Ning -- whose products are roughly 30 percent pricier than its rivals -- has about 5,000 shops across China.

Not all are sold on Chinese brands -- yet. U.S. sports and U.S. brands continue to thrill. On February 2, between 100 to 200 million Chinese tuned in to watch Yao and Yi Jianlian battle when the Houston Rockets played the Milwaukee Bucks.

Nikes look cooler but they're more expensive, said Li Haiming, another South China Agricultural University student. If you have the money, you'll buy Adidas or Nike.


(AS AT 2:10 a.m. EST)

NIKE 17.3 +14.3 pct

ADIDAS 16.2 +14.4 pct

LI NING 52.2 +57.8 pct

ANTA 41.5 n/a

CHINA HONGXING 23.8 +8.5 pct

($1=7.148 Yuan)

($1=.6790 Euro)

(Editing by Edwin Chan and Louise Heavens)