Could the China situation affect future NBA salary cap levels?

With China as big a market as it is for the NBA, could the current situation between the country and league bring a drop in the salary cap?

There’s no denying China is a huge market for the NBA, with the 2017 Finals drawing nearly 200 million mobile viewers in the country. In the wake of Houston Rockets general manager Daryl Morey’s tweet in support of pro-democracy protesters in Hong Kong, the league’s main business partners in China have suspended relations.

In simple terms that means a chunk of revenue is gone for the NBA, at least for now, which could have ramifications for the salary cap, which is based on Basketball Related Income for the league. According to Keith Smith of Yahoo!, at least five teams are planning for scenarios where the salary cap could drop between 10 and 15 percent for the 2020-21 season due to the situation in China.

The salary cap for the coming season is just over $109 million, and that will not change. But the NBA’s early cap projection for 2020-21 was $116 million. A 10-15 percent drop would shave between $11.6 and $17.4 million off that number, with a domino effect on the starting point for max contracts. The value of various exceptions and rookie-scale contracts would also be affected since they rise and fall on a percentage basis in line with the salary cap.

Here’s what one team’s cap expert told Yahoo!.

I haven’t really been in this spot before. The cap has only gone up in recent years. It’s really different. I have to wonder if the league would be pressed to consider some measures to not drop the cap down so far from where we are today at $109 [million]. Otherwise, a bunch of us are over the tax. It’d be nice to know now, because that changes how we approach trades and everything else throughout the season.

As a natural consequence of the salary cap dropping, and that shift in the recent reality of the cap only rising, teams would have less ability to spend in the summer of 2020. According to Smith, with the current 2020-21 projection of $116 million, just eight teams are projected to have cap space next summer. A drop in the cap would also push some teams that didn’t expect to be up to, or over, the luxury tax threshold.

Next: 2019-20 NBA win projections and over/unders

The NBA won’t be pleading poverty, but losing the kind of revenue China brings for any stretch of time will have consequences. Teams have to plan for that, and as expected they are starting to.

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