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Wagering not a sure bet for 2008 Games

  • Story Highlights
  • China's lottery business grown by as much as 50 percent a year, analysts say
  • Black market generated as much as $100 billion in Chinese wagering
  • Lottery companies see 2008 Olympics as opportunity for growth in China
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By Shirley Lau
For CNN
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HONG KONG, China (CNN) -- Huang Ming considers himself to be a good Chinese citizen. "I work hard, I support my family and I don't commit crime," says the 39-year-old courier from Guangdong Province.

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People in Beijing purchase soccer lottery tickets to predict World Cup results in the summer of 2006.

Huang also gambles, which -- with the exception of Macau and Hong Kong -- is still illegal in China. "Yes, I gamble," he says. "Sort of illegally, but it's harmless stuff. Many people do that for a bit of fun."

Huang Ming -- not his real name -- is able to gamble because of his connection with a circle of friends connected to an underground betting syndicate. Through his intricate "guanxi" networks -- personal relationships typified by mutual obligations and favors -- he can bet on anything from the Hong Kong Mark Six to international football matches.

Now his eye is on the 2008 Beijing Olympics, which he believes will bring to the black market a slew of new betting opportunities.

People such as Huang represent a big headache for the Chinese government. Currently, the only main forms of legal gambling in China are the state lotteries, and there are only two of them. But the revenues they generate pale in comparison to that of the underground betting syndicates.

The China Center for Lottery Studies at Peking University estimates that the black market (including betting on overseas Web sites), generated as much as 800 billion yuan (about US$104 billion) in 2006. That's 10 times the amount spent on both state-run lotteries last year.

"People are drawn to the illegal market because the games are more entertaining than the official ones. It's a serious problem," says Wang Xuehong, director of the center.

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The 2008 Olympics could change all that. Some industry players and analysts believe the Chinese government -- the sole operator in the mainland's legal betting industry -- could turn the situation around by loosening restrictions and introducing new forms of gambling, such as fixed-odds sports betting, a favored form of gambling in the black market.

"A lot of illegal gambling activities in China have to do with fixed-odds betting, which is more exciting to gamblers," says Sun Ho, chairman of AGTech, a Hong Kong-based company that provides technical solutions to China's sports lottery market.

"Based on what we understand, the government is actively looking into this area. We expect the government would consider introducing fixed-odds sports betting in time for the Olympics," Sun says. "The Olympics are a good opportunity [for opening up the gambling market],"

Sun should know. Back in late 2006, the China Sports Lottery Administration Center, one of the two government bodies authorized to issue lotteries, invited AGTech and several other unnamed parties to a closed-door meeting. During that meeting, Sun says, officials sought advice on "what kind of fixed-odds betting would be good for China."

"There were six parties and we were one of them. The government is actively trying to find a way out," Sun says. "If anything is to be launched, I believe it would happen before June next year."

So confident is AGTech, which sports a corporate logo uncannily similar to that of the official Olympics set of rings, that it has already formed a joint venture with Ladbrokes, a leading British sports betting company, to explore opportunities for introducing fixed-odds sports betting products in China.

The Sports Lottery Administration Center declined to comment on the issue.

China weighs its options

Gambling was banned in China back in 1949, not long after the Chinese Communist Party took power, the communists declaring gambling a "social evil," along with prostitution and drugs. But the party cautiously lowered the bar in 1987, launching the country's first lottery, the Welfare Lottery. The second one, the Sports Lottery, was introduced in 1995.

By 2005, the country's lottery business was expanding at an annual rate of 50 percent. According to The China Center for Lottery Studies, Chinese gamblers spent around 70 billion yuan (US$9.25 billion) on lotteries that year, ranking China ninth in the world lottery rankings based on sales, according to state media.

But offshore gambling has proven to be a powerful lure for Chinese across the board during the past decade, from low-skilled workers to high-ranking government officials. In 1999, according to local news reports, a deputy mayor from northeast China embezzled enough public money to pay for 17 trips to the gambling mecca of Macau, allegedly losing as much as 10 million yuan at one point.

Such is the appeal of Macau that out of its 20 million or so visitors every year, between 80 percent to 90 percent of them come from mainland China, according to professor Zeng Zhonglu, head of the research division of Macau Polytechnic Institute.

In a bid to lure gamblers back to the mainland, the Chinese government has in recent years taken a series of steps, including introducing video gaming machines and increasing payouts.

But what is in store for Chinese gamblers in the run-up to the Olympics still remains a mystery. What is pretty certain though, is that any new betting products will be fairly unsophisticated.

"For a country that is trying something new, it would initially go for the easy options," Sun says. "I can't specify what products but in my opinion, some easy-to-understand features related to the Olympics would be introduced. You wouldn't see sophisticated things like those in Hong Kong or the UK."

One thing that is for sure: the Chinese government will remain the sole operator of all forms of legal betting, Sun says.

Meanwhile, Huang is happy at the prospect of cashing in on the Olympics legally. And if his take on the government's moves are representative in any way, Beijing should be very happy.

"It's always good to have more options to choose from," Huang says. "If legal and illegal games are equally interesting and the payback is the same, of course I'll go for the legal ones. Who wants to [be] sneaky?" E-mail to a friend E-mail to a friend

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