Call for lottery sales revamp

The mercury hit 35 C on the July afternoon in Beijing, cicadas filled the air with their scratching and a heated discussion was taking place among a group of men at a storefront in Xiaoguan community, Beijing.

"I have a feeling that I'm going to get something this time. I've done an AC analysis," said a young fellow wearing slippers.

'No way! Your numbers don't add up. Learn some probability theory," an older man said, swishing his fan.

The earnest attitude, professional terms, along with thickly dotted analytical graphics on the wall and the changing numbers on a plasma screen, had all the hallmarks of a stock exchange.

However, the owner of this local China Welfare Lottery store, who would only give his family name as Zheng, said he had never seen any of them making any decent returns on their "investment".

"But they were indeed more enthusiastic after hearing about the 570 million yuan ($90.5 million) jackpot in Beijing last month," he said.

A survey conducted by the Lottery Research Center of Beijing Normal University showed that there are more than 200 million lottery ticket buyers in China, of which about 7 million are "problem buyers" who are addicted to the game.

Most of the lottery buyers - 93 percent - are male, and 73 percent of them are aged between 26 and 34. Seventy percent of them earn roughly 3,000 to 5,000 yuan a month.

"A common feature of this group is they may have qualifications, technical skills, families, dreams, budgets, but very little social status," the report said.

According to Zheng's experience, lottery stores are only opened in lower-income communities because people from upscale communities pay little attention to the game. Each lottery store makes a 7 percent commission from sales of lottery tickets.

Although there is a small banner in his store that reads "help the poor", a much bigger poster in a more obvious position marked with the latest prizes won at this betting center is what drives customers in.

"It's all about dreams of quick fortunes. Nobody cares about public welfare," Zheng said.

In the past decade, the lottery industry in China grew even faster than the rampaging economy. Lottery ticket sales increased from 18 billion in 2000 to 220 billion yuan in 2011 - an annual growth rate of nearly 30 percent.

Li Gang, who conducts research into the lottery industry at Shanghai Normal University, said lottery ticket sales this year are expected to exceed 250 billion yuan. However, he doubts the sustainability of this rapid growth.

"Normally speaking, each lottery product has a life cycle of just three to five years. In the constraint of policies, there will be no new products that can be launched in China in the near future," Li said.

Meanwhile, Li said, what concerns him more is the lack of professionalism and negative attitude of the administrators and operators of China's lottery industry.

"Sometimes the design of the game is a joke. For example, in the game to guess the last eight teams in the 2002 FIFA World Cup, there was even an option for three teams from one group," he said. A maximum of two from each group could get through to the next stage.

Misplaced expectations of lottery buyers have led to many conspiracy theories about winners, he said.

When the 570 million yuan prize was reported, many netizens expressed their suspicions, putting forward all sorts of "evidence". The Beijing Welfare Lottery Center refused to comment on any of the questions raised.

"People should realize that the lottery is definitely not an investment channel because its average input-output ratio is always below one," Li said.

"For example, many football fans buy lottery tickets but what they end up doing is to just losing less money. It is those people who know nothing about football who win the jackpot because there are always dark horses."

Li accused lottery administrators of being uncooperative and not promoting the games as well as they could. "The jackpot news was supposed to be a good opportunity for brand promotion but the authorities have turned something good into something bad," he said.

Meanwhile, Li said, the authorities should play a more positive role in developing the social welfare function of the lottery industry.

Currently most of the lottery sales income is used to replenish the social security fund. Li suggested that more should be given to lower-income groups because they bought most tickets.

"It could be an effective way to balance income distribution," Li said.

Since 1987, China's lottery rights have been in the hands of the Ministry of Civil Affairs and the General Administration of Sport, while the Ministry of Finance is responsible for the supervision of the industry.

Due to the many issues caused by multi-headed management, some suggested that there should be a lottery regulatory commission to oversee the issuing, management and supervision of the multibillion yuan business, just like the regulators in the banking and securities markets.

But Su Guojing, a lottery expert who is also the founder of Asian Responsible Gaming Alliance, said a more feasible way would be to establish a "National Lottery Development Bureau", which brings in all the administrative bodies, apart from the issuing function, from the three ministerial bodies.

Meanwhile, there should be more rules to replace the "Lottery Regulations", a 10-page document that has been the only law for the multibillion yuan industry.

"Internationally, the lottery is only a small part of the commercial gambling industry but in China it represents a much wider concept, including the traditional lottery, the sports lottery and other products," Su said.

According to Su, approximately 50 percent of the lottery sales revenue in 2011 was used as prizes.

The return rate of the traditional lottery is on a par or more so than those overseas but the sports lottery is slightly lower, resulting in many players participating in overseas lotteries via underground networks.

Although there isn't a precise survey, widely accepted data based on statistics from betting shops during the World Cup and European Cup is that 70 to 80 percent of the stakes come from Chinese customers, among whom about 70 percent are from the Chinese mainland, Su said.

Meanwhile, about half of the 160 billion yuan revenue of the gaming industry in Macao is from Chinese mainland players.

"On the Chinese mainland, the revenue of the underground lottery industry is no less than the official sales figures," Su said.

The lottery industry can be an effective measure for adjusting a country's economy. A good example is Singapore opening its lottery industry to battle the Asian financial crisis.

However, in China, the lottery business has always been a sensitive issue because gambling is strictly forbidden in the constitution, Su said.

"The lottery industry is developing fast among our neighbors such as Macao, Far East Russia, Vietnam and Japan, which have already formed a 'ring of encirclement' around the Chinese mainland," Su said.

"It's like if you like soy sauce and you find a group of people who open a soy sauce store near your home," Su said. "The best way is to make your own."