Manila’s big bet on China’s online gambling habit gives Beijing post-coronavirus headache
27 Aug 2020

Inside a well-lit Manila studio, a young Filipino woman in heavy make-up and a low-cut black dress flips card after card. She is the dealer in a game of baccarat, a popular game in casinos worldwide. But she stands alone – the players are thousands of miles away in mainland China.

A camera directly opposite produces a video stream which is then marketed to the mainland – often under the guise of an innocuous gaming or video streaming website – where gambling is illegal. Anyone who wants in on the bet must use a VPN to circumvent China’s Great Firewall, which the government uses to keep a tight leash on its domestic internet.

After each hand, the dealer deftly swipes the card across a bar code to update the website and show the players if they have won or lost. More data is sent to a server, operated by a Hong Kong-based tech company, that works around the clock to keep hackers at bay.

“The girls have their profiles up on the players’ screens and, if you tip them, they will interact with you. Their attractiveness is also part of what draws players,” said a former employee of the tech company.

As China returns to a pre-coronavirus lifestyle, the government is working hard to kick its citizens off an age-old vice that has worsened due to months of strict lockdown measures. “Covid-19 was good for business, there was an increase in users that even caused the system to break down a couple of times,” the former tech employee said.

China’s security apparatus hinted at the uptick in online gambling since the Covid-19 outbreak when the Ministry of Public Security published a statement in April – ostensibly about the dangers of cross-border betting and associated telephone fraud – which said “especially since the outbreak of the new coronavirus, overseas casinos and gambling websites have increased their efforts to lure our citizens”.

Gambling was outlawed in China when the Communist Party took power in 1949 and has remained banned. Despite the legal restrictions, mainland Chinese have found ways to place their bets – going overseas or travelling to the gambling hub of the Macau special administrative region.

The emergence of online gambling – also illegal under Chinese law – has provided another opportunity for China’s gamblers who bet an estimated 1 trillion yuan (US$145 billion) a year through online sites, according to a 2019 report by Economic Information Daily, an affiliate of state news agency Xinhua.

But, according to the former tech employee in Hong Kong, there are dangers for players online where, unlike a real casino, they can gamble on credit rather than paying their money up front to buy into a game.

“It’s worse for the player in that they don’t realise how much they are losing, I think that’s the way Chinese like to gamble,” he said, adding that he was aware of one online gambling platform which turned over around US$130 million in daily transactions.

Ben Lee, managing partner at Macau-based gaming consultancy iGamix, said most online platforms targeting the mainland China market were based in the Philippines, where gambling is legal. “Many of these firms are in A-grade office towers, fronting as call centres, located in Makati,” he said, referring to Manila’s financial district.

According to Lee, the Chinese market took off in 2016 with the election of President Rodrigo Duterte. Soon after taking office, Duterte appointed a new chairman to the Philippines Amusement and Gaming Corporation (PAGCOR), a state-owned enterprise that runs its own casinos as well as issuing licences and regulating privately owned venues.

Under its new head Andrea Domingo, PAGCOR began issuing licences specifically for online gambling firms catering to markets outside the country, granting them the official designation of Philippines Offshore Gaming Operator (Pogo).

As the playing field quickly became crowded, mainland China’s huge, albeit illegal, demand for gambling opened up a new frontier. Lee – who has worked in the Filipino casino industry – estimates that for every Pogo there are eight to 10 solution providers that pay a lease fee for the video signal. These unlicensed firms are the main drivers of online gambling into mainland China.

By Eduardo Baptista, South China Morning Post, 26 August 2020

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