Seven years ago, Shanghai decided that it needed Formula One to bolster its standing in the world and spent vast sums of money to bring a race to town.

With that contract expiring, the shoe is now firmly on the other foot. Formula One — and the automakers and sponsors that make the sport such a huge business — cannot do without China, which overnight has become the world’s largest car market.

While both F1 and race organisers are confident there will be a Grand Prix in Shanghai next year, fierce negotiations in the coming months will pit the sport’s boss, used to getting his way, against an increasingly confident country, with billions of dollars of commercial interests caught between the two.

The Formula One circus hit Shanghai for the seventh time two weeks ago accompanied by a flurry of sponsors events and a thrilling race won by McLaren’s Jenson Button.

The huge losses made over the last seven years, however, had led to suggestions from Shanghai sports officials that the option to keep the race may not be taken up.

Formula One commercial supremo Bernie Ecclestone confidently predicted the race would return next year and Leon Sun of race promoters Juss Events, while less bullish, concurred.

“It hasn’t been announced because there are still a few technical issues to be sorted out but we’re in good shape,” Sun told Reuters by telephone on Friday.

“It looks good at the moment. We’ve got until October this year to sort it out but I’m confident that we’ll have something before that.”

MOST IMPORTANT

Although Formula One has no shortage of races — there will be a record 20 next year if the Indian Grand Prix gets off the ground — the race in China’s financial capital has importance well beyond the sporting arena.

“It is one of the most important from a business point of view, for your customers and your potential customers,” Norbert Haug, Mercedes motorsport vice-president, told Reuters.

“We sell more S-classes here than in any other country in the world. We produce C-classes here.”

McLaren team principal Martin Whitmarsh said it was not just about selling cars either.

“Being here is important not just to our road car companies but is important to all of our partners in Formula One,” he told Reuters.

“We’re here to create brand exposure and differentiation for the Vodafones, the Exxon Mobils, the Mercedes Benz. This is an important market, so Formula One must make sure that it continues to make a success of the Chinese Grand Prix.”

That success, however, has not always been evident in the grandstands of the stunning circuit, built at a cost of $350 million and capable of holding 200,000 spectators.

Although the official figures were not yet in, Sun said the 2010 raceday attendance had been up at around 85,000 with the three days of action attracting some 155,000.

Ecclestone put the blame for the empty seats squarely on the shoulders of Juss Events, and others in the paddock commented on the lack of obvious promotion for the event in downtown Shanghai.

“We are trying to build something,” Sun said. “Obviously, compared to races in Europe we still have a long way to go to build the market. We improve every year and I think Bernie appreciates and understands this.”

POLITICAL WILL

Stories of losses of $150 million a year would not have hurt Shanghai’s hand in their negotiations with Formula One, of course, but the sport’s desire to be in China would not override all other considerations, Haug said.

“The figures need to be right but we would love to have the grand prix here in the future and I think Bernie wants to have that as well. But certainly, China will not get the grand prix for nothing.”

Sun said Shanghai was also benefiting from the race and that focusing on the losses was simplistic.

“To have Formula One is not only a commercial deal, it’s also about the image of the country and the image of the city,” he said.

That requires a political will to sustain those losses, of course, and with the man behind the circuit’s construction now serving a prison sentence for corruption, some local commentators have said the race has become a liability. Sun disagreed.

“Any time a decision like this is made in China it’s not just the decision of one, it’s the decision of the whole city. We feel the great support of the government.”

While the race remains important to the teams, manufacturers, sponsors and the city, even enthusiastic fans like Luo Xiaoyu say that China does not really have a deep car culture yet.

“For wealthy Chinese having a good car is a kind of symbol,” said the bridge designer, who was attending his first grand prix.

“They may not really appreciate cars, but they definitely want to have a luxury car. They want to have at least one BMW or Mercedes, but it doesn’t mean they really like it.”

(Editing by John O’Brien;

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