China has long waged a war against illegal gambling on its territory, despite the fact that it has a significantly long history of legalized gambling: the very first forms of this type of activity emerged there some three thousand years ago, and the first state lotteries were held in the Tang Dynasty. As the fascination with games of chance grows, China has to consider the possibility of liberalizing the gaming industry, or clamp down even harder on its illegal forms.

For a long time, gambling was considered a harmless social activity that brought people together for some excitement and interaction. China's first modern casinos emerged in the treaty port cities and the international settlement of Shanghai. In 1949, the newly established communist regime banned all forms of gambling activity, which resulted in it going underground until about twenty years ago, when the present state-run lottery system was established.

Today, although gambling is becoming a popular leisure activity in China, only a few legal lottery games exist, while other types of gambling still remain banned. This policy is now lending to a rise in gambling tourism and the spread of illegal gaming, which involves online betting, playing at underground casinos and selling and buying private lotteries. To add to the confusion, at the same time, China allows gambling in the special administrative region of Macao, where the industry generates over 40 percent of the GDP. Against these factors, the central government's efforts to stem illegal gambling seem to be sorrily doomed, as it lacks the resources to organize continued clamp downs on a business that quickly resurrects itself after every crackdown.

State welfare lottery

China allows a type of social welfare lottery, the proceeds of which are used to fund a wide variety of sports and social programs. However, this legal form of gambling, which is available to 95 percent of the population, is mostly favored by lower-income players and thereby does not generate very substantial funds compared to the estimated combined revenues of illegal and legal gambling. Still, in 2005, the Chinese spent over 9 billion euros on these social welfare lotteries -- more than ever before in the system's twenty-year existence.

The Chinese are traditionally a gambling people who also still cherish this activity. The mahjong gaming parlors that dot urban centers throughout the country, and that the authorities have closed their eyes from, are evidence of a growing fascination with playing for stakes. But while China's gambling addiction grows, its flawed legislation and lenient penalties for illegal gambling cause the government to miss out on most of the money its citizens are spending on gambling games annually. In 2005, the state lottery revenue in China was ten times less than the illegal gambling revenue, which means that the government would stand to gain substantially by diverting the flow of money towards legalized gambling. Also, fifteen times the amount spent each year on China's state-run lottery is bet overseas, according to China Daily.

But which is the right road to take? Legalizing gambling and risking the social consequences it can entail or clamping down on illegal gambling even harder, which could be a lost cause considering the amount of internal corruption the government already has to tackle with. In 2005, a nationwide campaign to eradicate illegal gambling was launched in an effort to clean up the public image of the Communist Party, which had been tarnished by a series of embezzlement and fraud cases. Over 4,000 gamblers were detained during the crackdown.

Growing intrigue

China may liberalize the gaming industry in the future to allow additional forms of gambling. (Image: Morguefile)Before the implementation of China's current tighter visa policies, wealthy businessmen and party officials frequented casino resorts on the other side of the border in North Korea or Macao, on easily obtained one or two-day visas. This kind of gambling tourism quickly lost popularity following the introduction of the new visa policy that requires records to be kept of all people crossing the frontier.

But this elite trend was indicative of what was to come. As the wealth of Chinese people grows, many ordinary citizens are now also taking their money to casinos outside of China. In Las Vegas, for example, over half of the casinos' high-end players are Chinese.

The Chinese consider gambling an exciting social activity. Playing a game for stakes has long been viewed as a social activity that helps bring people together. Since the emergence of modern gaming establishments, the Chinese, like most people around the world, feel themselves more and more easily drawn to the betting table by the lure of easy money – after all, it is human nature. But there is also a historical factor which may explain the Chinese people's fascination with wagering money on gambling games.

The LA Times reports of an economics professor at the Beijing Institute of Technology as having said that thousands of years of repression and subordination in a hierarchical imperial system seems to have instilled in the Chinese people the will break the norms and build make their own destinies by striving to become as rich as possible in as short a time as possible, and preferably without the hard work it usually requires...

If you can't beat 'em, join 'em?

While China remains undecided on whether to legalize more forms of gambling on its territory, it is also facing a virtual enemy, which takes on the form of counterfeit lottery websites which threaten to undermine its entire lottery system. In order to vanquish this foe, the sale of lotteries on the internet was banned in China at the beginning of 2008. According experts, the move was prompted by online security problems, which made it difficult for buyers to distinguish between legal and illegal lottery websites, as some counterfeit sites skillfully mimic in appearance state-run lottery sites, CRI writes.

Despite its evils, the online gambling market presents a major opportunity for the government to fatten its money chests. As yet, no new decisions on the reform of legalized gambling in China have been made. However, Researchandmarkets.com says that there have been subtle signs of China leaning towards the possibility of liberalizing the market somewhat which would include permitting more lotteries, as well as horse racing and casinos.

But before China can allow more forms of legalized gambling, it needs to improve the regulations governing its gambling industry. This year, China will issue the very first regulations designed to combat lottery fraud, which will be modeled after the experiences of other countries. According to lottery experts, the fact that China did things in reverse order by installing a lottery system first before introducing laws to regulate it now presents a major challenge for the country.

But if and when this huge country of 1.3 billion people does make the move to liberalize gambling, international gaming companies will be sure to be there - ready to jump in the game!!