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China 2.0

Solid Odds That China's Lottery System Is Rotten To The Core

Checking the results of sports lottery in central China
Checking the results of sports lottery in central China

-OpEd-

BEIJING — After studying China's lottery operations, the country's National Audit Office recently identified "violations of discipline, misuse of funds, system deficiencies, poor management, and a lack of supervision in certain cities and provinces." The disclosures around this murky institution are startling, but sadly, Chinese citizens are hardly surprised.

The China Welfare Lottery Management Center is a state-owned holding company that manages and operates lottery scratch cards, whose proceeds are intended to help the poor, vulnerable and elderly. But a 60% controlling share of this operation has fallen into the hands of a man named He Wen.

Right from beginning, it turns out, the lottery has been more private than public. By the end of last year, the Zhongfu Online Scratch lottery had generated a turnover of 137 billion RMB ($22 billion) over the previous 12 years. It had also pocketed as much as 4.5 billion RMB ($73 million) in service charges. Yet the state-owned China Welfare Lottery Management Center received just 1.8 billion ($29 million), while the shareholder, He Wen, received 2.7 billion ($44 million).

A public-private partnership could be feasible. But it should be questioned whether the controlling stake of such an operation whose mission is to help bankroll the welfare state should fall into the hands of a single person.

A game of chance

China began its first lottery in 1987 with the purpose of "helping and assisting the old, the disabled, the orphans and the poor." Its operation involves astronomical sums, even dwarfing the annual net profits generated by China's three major oil companies put together.

According to Financial Ministry data, over the years, China's welfare and sports lotteries' cumulative sales have respectively led to the the distribution of 310 billion RMB ($50 billion) and 212 billion RMB ($34 million) in public welfare funds. But nobody knows where this money has really gone.

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 Lottery in ShaoYang, Hunan Province — Photo: PanShiBo

Over the years, the Chinese public's doubts about the way the lottery is run have been persistent. Some were convinced that the jackpot results were obtained using modifications to the back-end database, though this was never proven. At one point, though, someone hacked the lottery's online system with a Trojan program, trying to tamper with the winning numbers. Since then, security has been reinforced. Even so, who knows whether or not internal falsifications exist? Everything lacks transparency. Even the identities of jackpot winners are kept secret.Â

The lottery operator has repeatedly emphasized that winning numbers are drawn at random, and that "the issuing of lotteries is under the state's jurisdiction and, therefore, its fairness is not to be questioned." The National Audit Office's disclosures beg to differ. Not only is the controlling stake of the supposedly national lottery operation not in the hands of the government, the drawing of the Union Lotto was discovered to be recorded before airing, instead of being broadcast live as was claimed.

As early as 2009, Wang Xuehong, director of the China Lottery Research Institute at Peking University and one of the drafters of China's Lottery Ordinance, had already noted that China lacked uniform national standards. He has argued that it needs a professional third-party organization for testing and certifying the technical system, the drawing and the betting equipment.

Corruption involving high officials has been frequent in the past. There's no reason to believe the lottery is any exception. What the public wants is for authorities to shed more light on the dark side of lottery operations.

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