Economy

Markets

Industries

Insights

Reports

Events

Legal or illegal, betting is still big business

By Andrew Moody (China Daily)
Updated: 2009-04-27 08:01

The Orient Lucky City racecourse in Wuhan hopes to bring betting back to horse racing after an absence in decades. Gambling was outlawed since the founding of New China in 1949. [Zhou Chao]

China's lottery could topple those of the United States and become the world's first hundred billion dollar lottery, according to China Center for Lottery Studies at Peking University.

It has the potential to grow more than tenfold from its current level of $15 billion sales with more than 100 million players to one worth $150 billion.

Wang Xuehong, executive director of the China Center for Lottery Studies and a senior research fellow, Ministry of Finance, said the China Lottery has huge potential for growth, if it could capture some of the illicit gaming market.

Related readings:  Wuhan bids to revive betting at the racetrack  Gambling still a fact of Chinese life  China sells $49b of welfare lottery in two decades  Lotteries help boost public welfare funds

"The challenge has to be to win back the 300 billion yuan spent on illegal lottery games and that is where a lot of China's immediate lottery growth could come from, " she said.

"This can be achieved by making a lot of the China lottery games more exciting and interesting to play. I think if this can be done then China's lottery could easily grow to a thousand billion yuan in a relatively short time frame."

If China's lottery was to grow to $150 billion, it would be almost three times the size of that of the combined state lotteries of the United States, the world's largest lottery market, which generated sales of $53.7 billion in 2007, according to US lottery games giant Scientific Games.

It would dwarf those of Italy with annual sales of $21.1 billion, Spain with $14.7 billion, France with $13.7 billion and the United Kingdom with $9.6 billion.

It would also be of equivalent size to the entire economic output of countries such as Egypt and New Zealand.

There has been speculation within the global lottery industry that the Chinese government could be set to issue a third major lottery license, its first in 15 years, to raise revenue for cultural and educational projects.

A new license would coincide with the drafting of China's first Lottery Act, which received the backing of the State Council last week.

Gary Newman, chairman and chief executive officer of Global Lottery Corporation (GLC), based in Las Vegas, Nevada, one of the world's leading lottery technology providers, said talk of a new license in China is currently the major talking point in the world's lottery industry.

"It will be dramatic. Rumors are all out there to lottery service providers that a third license has been issued and it is a national license, " he said.

"We have heard they (the Chinese government) want to go the cellular route. It would mean a person's cell phone would be a retail lottery terminal and it would open up big revenue streams for the government."

A government source, however, told China Daily there was no plans for a third license to be issued.

A move towards being able to play the lottery on mobile phones would be a logical move for the Chinese government, however.

One of the big problems for the existing lottery, which has been running for 22 years, is the relatively small number of participants.

Last year, China's lottery amassed revenues of just $15.6 billion (105.1 billion yuan), compared to an estimated $45 billion (300 billion yuan) spent on illegal lotteries and around $150 billion (1.03 trillion yuan) spent in total on illegal forms of betting.

It is estimated that only 18 percent of China's 1.3 billion people have ever played the lottery and the fact that there are 500 million mobile phone users in China would considerably widen the access.

Newman at GLC, which has offices in San Diego, Vancouver, London and Hong Kong, said he believes cellular is a potential way forward for China.

"The key advantage would be speed, ease and the fact that almost everyone has got a cellphone. There are real problems in such a vast country of doing it through retail outlets since it is immensely expensive," he said.

Tang Namei, a 25-year-old financial manager who lives in Shenzhen and is a regular lottery player, said she would welcome other distribution channels to play the lottery.

"I would play the lottery on my mobile phone if I was too busy to go and buy a ticket because it would be more convenient," she said.

Some such as Huang Yi, 27, a bank accountant from Luxian county in Sichuan province, would still prefer the security of a paper ticket.

"I don't like the idea of playing the lottery on my mobile phone because I like the security and certainty of being able to hold onto a ticket," he said.

China issued the first license for a welfare lottery in 1987 and a second one for sports in 1994.

Wang, who studied gaming management at the University of Nevada in Reno and is involved in drafting China's Lottery Act, said she believes that if China's lottery is to grow and develop it needs the right regulatory framework in place.

"If the lottery is to grow, much depends on the policy of the government. Sometimes decisions can be taken overnight which are not based on either the industry's or the market's needs and there is a need for a much more longer term approach," she said.

"If there are the right laws in place, people feel confident playing the lottery and this leads to greater consumer confidence among players," she said.

The lottery has been a consistent revenue earner for the government. The sports lottery, which celebrated its 15th anniversary this month, provided $400m (2.75 billion yuan) toward last year's Beijing Olympics. It has also funded 8,728 park-based fitness areas, 132 fitness centers and 12 sports parks under China's national fitness program.

Wang Jun, deputy director of the China General Administration of Sport, said it had made a major contribution to sports.

"Without the public welfare fund from the sports lottery, we won't be having such excellent fitness facilities for the ordinary citizens in such a short time," he said.

"It serves as a strong impetus in our effort to let ordinary Chinese do exercise and keep healthy."

Wang at the China Center for Lottery Studies insisted this sort of funding would massively increase if the lottery was made more exciting for players.

"If it doesn't come up with interesting games then people will graduate to the illegal lottery and other forms of gambling," she said.

"There needs to be more products provided to the market. There always needs to be more advertising and promoting of the lottery."

"The key change, however, needs to be in the distribution network. It needs to be enhanced and made better and become much more market-orientated."

For Chinese lottery players, however, winning is everything. Tang, the financial manager from Shenzhen, said she still hopes to win the jackpot one day.

"I have been buying welfare tickets for a year and got several 10 yuan prizes, although a colleague of mine won a big prize a couple of weeks ago. I'll keep buying until some day I win the jackpot," she said.