Beijing losing the gambling battle

By Stephen Wong

SHANGHAI - Beijing's efforts to crack down on gambling by Communist Party and government officials with public funds seem to have made little headway. While longer jail terms and the risk of losing their jobs fail to deter officials from gambling, visa restrictions to Macau - the most popular gambling destinations for Chinese officials - has only driven officials to online casinos. As a result, online gambling inside China increasingly flourishes and the sums involved are become increasingly staggering.

Police in Central China's Hubei province recently found that government officials and heads of state-owned companies were among the tens of thousands of people gambling on sports and horse races, as well as lotteries like the Mark Six in six online casinos. The casinos have managed to accrue more than 50 billion yuan (US$7 billion) since the illegal operations began in 2004.

The offenders include the head of a state-owned enterprise who gambled away more than 100 million yuan of company money in total, breaking the record set by Li Weimin, the mayor of a small city in Guangdong who lost more than 90 million yuan in Macau casinos between 1998 and 2004.

The news triggered public outrage. Critics asked how such a huge amount of money of a state firm could so easily be "stolen" by its executive without being caught by the state-asset watchdog overseeing the operations of state-owned enterprises. Had police not investigated the casinos, the gambling executive might never have been caught.

Police did not say how many more government officials and managers had taken part in online gambling or how much money they gambled, but the cases - said to be the biggest online gambling case ever uncovered in China in terms of the amount of money and number of participants - shows that Beijing's battle against gambling officials is far from being won.

Chinese leaders have launched recurring campaigns against officials for gambling as part of an effort to curb the widespread corruption that has undermined public trust in the government.

As early as 2005, the Communist Party issued an explicit gambling ban on all officials and threatened to fire those who dared to take part in gambling activities. But apparently the ban has failed to deter officials.

Macau, the former Portuguese colony and gambling center now under China's sovereignty, used to be the favorite destination for Chinese officials. In January, anti-corruption agents revealed that 53 officials from Guangdong province embezzled 22 million yuan (US$3.2 million) in public money to gamble in Macau.

Among those facing charges is Chen Zhiqiang, a Communist Party official in Foshan City who allegedly embezzled 13 million yuan to feed a gambling habit. The Southern Metropolis Daily said that in 2005 and 2006, Chen traveled to Macau 63 times, four times in one week.

Last month, Zhang Jichun, a housing official in Beijing, stood trial for allegedly embezzling 7.3 million yuan to gamble in Macau from 2005 to 2007.

A 2008 study of 99 high rollers from mainland China showed that 59 had some sort of state affiliation: 33 were government officials, 19 were senior managers at state-owned enterprises and seven were cashiers at state businesses, according to the study, which was conducted by Zeng Zhonglu, a professor at Macau Polytechnic Institute.

This prompted the government to impose visa restrictions on government officials last year. The new regulations limit a mainland official to only a single, seven-day trip in at least three months.

While the visa control was hailed as quite effective at the beginning, the active participation of government officials and state managers in online gambling has given Beijing new challenges. Compared with gambling in traditional casinos, online gambling is more difficult to trace - the gamblers don't have to cross the border or transfer money to overseas accounts.

The Chinese have a reputation as gamblers and although banned by the authorities, a small bet is usually regarded as harmless entertainment.

But for government officials, gambling is more than mere entertainment - it's a symbol of wealth, a way to take or give bribes, and to build guanxi connections. So when one official gambles, his co-workers and subordinates can easily pick up the habit.

That explains why all nine top executives of Beijing Urban and Rural Construction Group, a state-owned real-estate company, were hooked on gambling. The former general manager, Nie Yuhe, would stay up the whole night gambling, Xinhua said. All nine have been sentenced to jail for embezzling public funds or taking bribes.

Chinese officials are not highly paid. But they are often seen flaunting decadent lifestyles and betting big in casinos outside China. According to Zeng Zhonglu's study, gambling Chinese officials reportedly lost an average of US$2.7 million each in Macau.

The question is, how can Chinese officials have so much money at their disposal and why are they so reckless with it?

Officials seldom use their own money to gamble. Li Weimin, the mayor who gambled away more than 90 million yuan in Macau, did not spend a penny of his own money, although he owns several properties and shares in several companies, state media reported.

As mayor and head of four township companies, Li could take money from company accounts as easily as if it were his own money. And his power was totally unmonitored: nobody launched any complaints and no auditor raised any questions. He was not caught until after he left his position in 2004.

Similarly, Liu Sicheng, the finance chief of a small city in central China's Hunan province, gambled 8.1 million yuan of public funds from 2002 to 2007 without being noticed until he tried to flee. He was a high-profile gambler at local casinos and even bought a car to carry cash to casinos.

Some critics say that gambling, especially by officials, undermines China's economy because a lot of the money lost went abroad. The welfare lottery research institute of Beijing University said nearly 600 billion yuan (US$72 billion) of funds flow to gambling houses or race courses in other countries as well as Hong Kong and Macau every year, in a 2005 report.

In the recent online gambling cases uncovered by Hubei police, most of the funds that the online casinos took in have been channeled into overseas gambling operations through an elaborate series of underground money laundering ventures.

But what's more, at stake is the government's image, as gambling is often related to corruption. This is a malicious cycle: officials gamble with money from corruption while gambling breeds more corruption.

China's lawmakers have been calling for harsher punishments for gambling officials. The jail term for gambling in the effective Criminal Code is set for three years. As a growing number of public servants, especially high-ranking officials, are involved in cases of gambling with public money, lawmakers requested the term be extended to life imprisonment.

But raising jail sentences will likely do little to scare away officials from casinos. China's up-down method of supervision cannot effectively monitor the leader of a government body, and as long as their power is not better constrained, officials will always have enough public money to feed their gambling habits.

To curb gambling and gambling-linked corruption, China needs a free press and an independent judicial system to expose the wrongdoing of public officials. While heavy handed campaigns can curb gambling for a while, to root out gambling and corruption by officials, Beijing needs political reforms.

Stephen Wong is a freelance journalist based in Shanghai.