Punting the ball

Can Chinese bet on World Cup?

Brazil's Neymar fights for the ball with Cameroon's Allan Nyom during their 2014 World Cup Group A soccer match at the Brasilia national stadium

The Chinese have been making big bets on World Cup results

In the decades after Mao Zedong took power in 1949, gambling was considered an immoral practice. It was deemed symptomatic of a decadent era when landlords and eunuchs ran China. That taboo was broken in 1984 when the Chinese Athletics Association ran out of money while hosting the 4th Beijing International Marathon. The organiser raised funds by holding a lottery, the first since the 1940s. Lottery sales then took off as government bodies began selling tickets to fund other sports events and charity projects.

According to the Ministry of Finance, lottery sales had grown to Rmb309 billion ($50 billion) last year from Rmb166 billion in 2010. But the World Cup in Brazil has helped to spike the lottery’s popularity to new heights.

Before the football tournament began last month daily ticket sales averaged less than Rmb100 million. Since then they have more than quadrupled. The China Sports Lottery Administration (CSLA) expects World Cup lottery sales to top Rmb10 billion this year, up from the Rmb4 billion spent gambling on the 2010 event in South Africa. Even the Macau casinos may be feeling the impact, reporting that gaming revenues dropped in June, the first monthly fall in five years.

Mind you, the betting bonanza could be much greater if it were not for a rigid regulatory regime. The CSLA (a body that reports to the State General Administration of Sport) and the China Welfare Lottery Issuance and Administration Centre (part of the Ministry of Civil Affairs) control the issuance of lottery tickets nationwide. After a lottery is opened for public sale, the Ministry of Finance will keep 22% of the proceeds and 13% goes to distributors as commission, leaving 65% on the table for winning punters.

The football lottery was only introduced in 2001 and only one format was available for years: to predict 13 outcomes (home win, draw or away win) for 14 matches. It was as good as a lucky draw, given the odds of pulling off such a forecast. But in recent years the CSLA has begun to offer betting options on standalone matches. The World Cup-related lotteries have become more sophisticated still – for example, they allow bets on the tournament’s top scorer and eventual winner. That said, Xinmin Weekly reports that the odds offered by CSLA are generally 15% lower than those from international bookmakers. “Thanks to an administrative monopoly, bettors are being pushed to overseas and underground bookies,” the magazine writes. Economic Information Daily has even estimated that more than Rmb1 trillion in cash, or 2% of the Chinese economy, finds its way to offshore bookmakers. “It is a serious threat to the country’s financial security,” the state-run newspaper reckons.

Perhaps that explains why regulators have been flexible in allowing some of the domestic internet giants to offer online football betting. The likes of Tencent don’t have licences for internet betting, but they are starting to offer betting sites on which lottery distributors can sell football bets. And because the service is integrated with China’s most popular mobile messaging app WeChat – which has about 400 million users – it has a big market to tap into., China’s second-largest e-commerce firm after Alibaba, also offers a betting service. “I have never bet on soccer before but I found it really convenient,” one fan told China Daily this week. “You don’t even need to go out as you can place a bet on a computer or even on a mobile phone through a credit card or online payment app.”

Competition between Tencent and Alibaba for this new business opportunity boiled over into a public spat last month. As World Cup-related betting volumes rose, users of Tencent’s QQ Lottery were told they couldn’t use Alibaba’s online payment unit Alipay to make their bets. This caused a war of words between the two companies, as Alipay took a distinctly uncorporate tone in describing Tencent’s explanation for the blocking as “bullshit”.

Taobao, Alibaba’s largest consumer-to-consumer portal, has also changed its web page to make football betting more prominent. More than 4 million wagers were made on the opening day. Meanwhile, local brokerage Huatai Securities has predicted that online sales of sports lotteries will surge by 1.5 times this year, accounting for 70% of the overall lottery market. As volumes increase, clearer regulations will be required, says China Business Times, especially for vendors of sport lottery tickets online.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.