Inside Asian Gaming

INSIDE ASIAN GAMING | June 2008 16 C ommentators are fond of reminding their readers that Macau is the only place in China where casinos are legal. While this is true, it does tend to leave a slightly misleading impression about government and grass roots attitudes to gambling inside mainland China. It gives the idea that somehow human nature is required to slip into neutral the moment a citizen takes a few steps north or east of Macau’s border gates and that China is some kind of puritan theme park, with hordes of fresh-faced party cadres standing around waiting to admonish rule breakers or worse, tip off the Public Security Bureau if someone attempts to have a wager. Myth and reality The reality of modern China is that millions of people are gambling every day and often with the blessing of the authorities. The country’s onshore lottery system is clearly gambling and is clearly sanctioned by the state thanks to its ability to raise funds for social welfare and sport development. It’s supported by a sophisticated and expanding network of outlets and by a growing list of delivery systems and products including scratch cards and video lottery terminals. Pooled fund products providing high payouts but long odds—such as Power Ball and Big Lotto—are also increasingly popular. China’s welfare lottery and the sports lottery brought in 100 billion renminbi (US$14.3 billion) in 2007—significantly more than the revenue produced by Macau’s casino industry that year. China’s supply of lottery product looks likely to expand dramatically in the next few years to meet a clear demand. Right offer Statistics from China’s welfare lottery suggest that when governments get the products right, then consumers will follow. A new report from CLSA Asia- Pacific Markets, a provider of brokerage and investment banking services, says that when Power Ball was introduced to China’s welfare lottery system in 2005, it triggered an 80% year-on-year (YoY) rise in welfare lottery turnover. The report adds: “Video lottery terminal [revenue] has also been growing fast since its launch in 2005—more than six times in 2006 and two times YoY in 2007.” CLSA says official lottery revenues have recorded a 28% compound annual growth rate in the last six years and grew 22% YoY in 2007. Partners Encouraged by this growth and its fundraisingpotential,theChineseauthorities are increasingly entering into partnerships with commercial suppliers— including foreign companies—to improve and update China’s lottery system. The authorities may even be ready to move into new products such as fixed odds sports betting. In late 2006, the China Sports Lottery Administration Center,oneof the twogovernment bodies authorized to issue lotteries, invited Hong Kong company AGTech, the supplier of gaming and lottery services, and several other parties to a private meeting, during which it’s understood fixed odds sports betting was discussed. XXXX Big Lotto Gaming companies are betting on expansion of China’s lottery industry