The Chinese government is hard-pressed to stop the spread of digital gambling in Asia.
It’s 6:30 on a Monday morning in China, and the online gambling platform Guangdong Club is buzzing as a stream of bets placed in Chinese Yuan flows through the portal. The club, which lists its registration site as Costa Rica, hosts operators offering hundreds of sessions for such popular games as baccarat and blackjack, lotteries and sports betting – many in Chinese. A single baccarat table can draw bets of 75,000 yuan ($ 10,500) in a 30-second game.
This is gambling with a digital twist, and it allows Chinese people to bet without traveling to Macau or Las Vegas. It is also a growing problem for China’s Communist Party, which says the transactions are deducting hundreds of millions of yuan from the country. Beijing sees betting as a vice, fueling social unrest, and Chinese law prohibits online gambling. But the anonymity that the Internet offers makes Chinese bettors stream into digital gambling halls. They fuel growth in Asia’s online gambling sector, which is expected to generate $ 24 billion in revenue this year, according to market researcher Technavio.
Beijing has begun lobbying for jurisdictions that allow online gambling – including the Philippines and Cambodia – to close the industry, an ambition that becomes more urgent as China’s economy slows down and escalates with the US has to fight. But stopping businesses is proving difficult, as there is little incentive for these countries to hinder a lucrative industry. “It has become a cross-border business and it is very difficult for China to prosecute,” said David Lee, partner at Taipei-based law firm Lin & Partners.
The Guangdong Club houses virtual casinos operating a-Cambodia and others licensed in the Philippines, in countries where gambling websites are allowed for international players. Costa Rica, where the club’s website says it’s registered, has no industry regulator or laws banning online casinos offering gambling services overseas. The Guangdong Club did not respond to requests for comments sent by e-mail, and its website does not list telephone numbers. “Many online gaming companies are working under the radar,” says Ben Lee, managing partner at Asian gaming consultant IGamiX in Macau. “There are so many of them, it’s like China trying to hit a mole.”
The Chinese government has linked a number of online gambling issues, including telecommunications fraud and citizens, who are being tempted to work illegally in the Philippines. The websites allow bets of only 10 yuan, making them within reach of low-income bettors. Online gaming halls are also threatening to lure gamblers away from Macao, the only Chinese-controlled city where casinos are allowed (although online gambling is still banned). The Guangdong Club has a logo similar to that of a Macau-Junket operator named Guangdong Group, but the Macau company says it has no relationship with the online platform.
Players on the Guangdong Club platform can deposit money and receive their profits through accounts at several Chinese banks, including some of the largest in the country, such as Bank of China Ltd. and Industrial & Commercial Bank of China Ltd., after the club’s web-site. The banks refused a comment.
Many platforms also allow players to buy popular online payment systems from Tencent Holdings Ltd. and Jack Ma to use it Ant Financial Services Group. The payment systems were ready to talk about how they help the government’s efforts to curb online gambling. Over the last few weeks, some virtual operators have warned players that Tencent’s WeChat app and Alipay’s Antipollution have tightened controls. In a statement, Tencent stated that it is taking action to identify transaction risks and take action against those who try to use its system for illegal gambling. Ant Financial says it uses an AI-driven risk engine to intercept suspicious transactions and has zero tolerance for online gambling. If a merchant is confirmed to be gambling, Alipay restricts his solvency, stops working with him, and reports the case to the police.
China gains some concessions from its neighbors. In response to Beijing’s pressure, Cambodia has stated that it will not issue new online gambling licenses and will not renew existing ones when they expire.
Most of the Chinese push was directed against the Philippines, where online betting sites have contributed to a small economic boom. Following China’s calls for a crackdown, the Philippines has stated that it will stop accepting new licenses at least until the end of the year. That is not the complete ban that China wants to see. President Xi Jinping gave birth to online gambling in August when he met Philippine President Rodrigo Duterte, who has since rejected the ban. The Philippines are not interested in drastic steps that would negatively impact the economy but would regulate the sector, said Chito Sta. Romana, the Philippine ambassador to China, in a Bloomberg TV interview on August 30.
Meanwhile, Manila is working on two million-dollar online casino hubs designed to house operations and worker centers. “We’re legal, we’re ensuring fair play,” said Andrea Domingo, chief of the Philippine gaming agency, in a recent speech at an industry event, adding that online casinos are “here to stay.”
China says online gambling will drain hundreds of millions of yuan from the country. But it’s hard for him to stop sites that are registered and operated abroad.