All bets are off

Beijing wants to eradicate illegal gambling. The big beneficiary: the lottery

All bets are off

Full house: poker is played outside Beijing's Great Hall of the People

In Xiyang, home of the Terracotta Army, the historian John Man comes across a building contractor. They strike up a conversation about the relocation of his home – to make way for a new park and museum.

“Usually they offer Rmb100,000 ($14,600),” says the builder. “But my house was so big they gave me Rmb300,000 and I was able to build a new house for Rmb150,000.”

Man suggests that he made a tidy profit. “Not really,” shrugs the man. “I lost it all gambling.”

The anecdote is telling: gambling is big in China. Or to be more precise, illegal gambling is big in China.

Last year, China’s two official lotteries took in $15.6 billion in revenues. But illegal wagers probably amounted to at least 10 times the country’s legal take, says Wang Zuehong, director of China’s Centre of Lottery Studies.

Since 1949, all forms of gambling activities have been banned by the Communist government. But 20 years ago a state-run lottery system was set up. It has done little to curb illegal practices.

According to Wang, private lotteries, underground casinos and online betting are popular favourites. Earlier this year, twenty people were caught running an illegal gambling website that bet on soccer matches in Europe. The website, which began operations during the 2006 World Cup, hoovered up Rmb6.6 billion in stakes in just a few years.

“People are drawn to illegal gambling because it has much higher returns and it is more entertaining than the state lottery,” says Wang.

Beijing’s response is a further clampdown. From this month, sellers of underground lottery tickets will face criminal charges. But the country also stands to benefit from controlled gaming, as Beijing allows a type of social welfare lottery, the proceeds of which are used to fund a wide variety of healthcare and education programmes. There is speculation that a third state-run lottery will be launched, to help fund cultural and educational projects.

The challenge for the government is how to attract the billions of yuan curently being waged at underground odds.

If they can do so, experts predict that the mainland would have a lottery worth $150 billion a year. This would be almost three times as big as the combined worth of all lotteries in the world’s current largest lottery market – the US.

Beijing should know the potential better than most. Macau is already the biggest gambling market in the world, with annual gambling revenues higher than the Las Vegas Strip and Atlantic City combined.

A sizeable chunk being wagered in the gambling enclave 50 kilometres from Hong Kong is sourced from public funds, improperly appropriated by government officials.

Officially, the Communist Party regards gambling – albeit not the lottery – as a threat to social stability. But the South China Morning Post argues for fuller legalisation: “Just like the prohibition of alcohol and drugs, outlawing gambling has never worked and never will.”

Gambling can, however, encourage criminal behaviour.

The newspapers reported last month that a lottery fan in Shenzhen was so desperate to win that he hacked into the city’s lottery database and falsified entries for five winning tickets. The man, a software engineer at a high-tech company, was later arrested. The tickets could have amounted to a win of Rmb33 million.

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