Bad bet

Illegal gambling: now a $148 billion industry

Bad bet

Do Chinese like gambling more than other people?” was the question put by Ivan Yiu, an addicton services worker, at the G2E Conference in Macau.

A safe bet, that one. As the author James Fallows reports, Yiu reckons the answer is a definite yes. “Here is one of Yiu’s pieces of evidence: in the United States, the overall rate of ‘pathological gambling’ is 1.8%; for Chinese American and Chinese immigrants, it is about 3%.”

Yiu puts it down to cultural characteristics and assumptions. In Chinese culture he says a lot of people display the following traits: a lack of probabilistic thinking, a belief that skill can surmount the odds, and the delusion that one can foresee results by intuition and control outcomes through ritual.

And as Yiu told Fallows there was a further distinctive factor: “a traditional belief that money won in gambling is as respectable as money earned any other way. According to Yiu, a gambler who has a good run at the roulette table will be just as esteemed as, say, Warren Buffett, with allowances for difference of scale.

Put in this context, it is not hard to see why the Chinese government worries about gambling, or more specifically, of it getting out of control. It tolerates the casinos of Macau. In 1987 it even decided to harness the population’s love of chance for the greater good. A welfare lottery was established that has generated $66 billion since inception, reports the Shanghai Daily, citing a lottery administration official. Funds raised have been used to build 150,000 facilities, ranging from homes for elderly rural folk to schools for ophans.

Much illegal gambling still goes on, of course (see WiC24), and football betting is a major part (see WiC39). The World Cup in South Africa – which ended on Sunday – has brought the subject to the fore once more. Last week the Ministry of Public Security revealed it had broken up 600 online soccer gambling groups and arrested more than 810 gamblers since the tournament began on June 11. About Rmb50 million was also seized in the crackdown.

But this haul was the tip of the iceberg. The Chinese media reckon that E6 billion was bet on the World Cup in Asia, with the bulk of that punted illegally by mainland Chinese.

Wang Xuehong is the director of the China Centre for Lottery Studies of Peking University. According to Global People magazine, Wang now estimates the scale of illegal gambling in China at Rmb1 trillion ($147.5 billion) a year.

That’s enough, he says, to build 400 Shanghai Disneyland theme parks. “Illegal gambling has caused very serious harm to China’s society and economy,” says Wang. “It gives birth to usury, gangs and other criminal organisations that affect social stability.”

The internet has also made the practice more difficult to control. Most of the online sites are organised offshore in places like Macau. But the industry has a pyramid structure where local agents provide credit guarantees for gamblers – taking a percentage of each bet as commission.

Wang’s view is that you won’t curb the urge to bet on football; and current lottery offerings are patently failing to satisfy local demand. He says simply cracking down on illegal sites won’t work either – there are too many. Instead he suggests the government must “create a channel to meet the needs of consumers”. That means legalising fixed-odds bookmakers, and taxing their profits – much like the UK does.

But with a government focused on ‘social harmony’ – and worried about the effects on families of wanton gambling – such pragmatism may fall foul of ideology.

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