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Licensed online gaming operations introduced in 2016 have been a boon in bringing money to the Philippine economy, but illegal businesses attracting massive numbers of Chinese migrants have also. China, which prohibits gambling, said Manila's online casino industry, led by Philippine Offshore Gaming Operators - or POGOs - is targeting Chinese. Beijing last month called for a ban on online. MANILA: Philippines President Rodrigo Duterte said on Wednesday (Sep 4) that while he was not a fan of online gambling he was unwilling to ban the business, as China has called for, because of the.

China demands that the Philippines stop all forms of online gambling, while the country continues battling a significant illegal outflow of money.

Earlier this month, China asked the Philippine government to “punish” Philippine offshore gaming operators (POGOs), casinos and all forms of gambling structures illegally recruiting Chinese citizens.

China has been pressuring Southeast Asian countries to ban online gambling

Although the Philippine Amusement and Gaming Corporation (Pagcor) has suspended the issuance of new applications for Philippine off-shore gaming operators (Pogos), China wants the Philippines to take harsher measures, by banning all online gambling operations throughout the country.

According to the transcript of his Aug. 20 briefing, posted on the website of China’s Philippine embassy, China’s foreign ministry spokesman Geng Shuang said that, while China “appreciates the move to halt the issuance of new licenses, we hope the Philippines will go further and ban all online gambling”.

China has been increasing pressure on Southeast Asian countries to ban online gambling. These comments are merely the latest signal of their effort to convince their neighbours to support them in the effort to eradicate online gambling, which is said to cause hundreds of millions of yuan to illegally flow out of the Chinese economy.

Round-the-clock livestream and wagers as low as 10 yuan ($1.4) have made online casinos in the Philippines and Cambodia very popular among Chinese customers. They are easily accessible to lower-income Chinese people living in remote villages, who probably do not have the means to travel to Macau – the only spot in China where casinos are legal.

Demands from gamblers in inland China have caused online and phone betting to grow exponentially in countries such as the Philippines and Cambodia over the last few years. As a consequence, according to China’s embassy in Manila, large amounts of Chinese money entered the Philippines via money laundering and underground banking. China added that its citizens were being illegally drawn into the gambling industry, fueling social problems and crime at home, as well as creating instability, family and community problems.

The Philippines won’t shut down existing online casinos, officials say

The Philippine sector regulator said it won’t shut down existing online casinos, but authorities have agreed to refuse further applications for new licenses at least until the end of the year. Meanwhile, the plan is to review concerns about the industry.

Reacting to Chinese requests, the Philippine regulator stated: “We will not halt existing online casinos but will stop accepting applications for new licenses at least until the end of the year to review concerns about the burgeoning sector.“

The same move has been made by the Cambodian authorities. Chinese state news agency, Xinhua, reported on August 18th that Cambodia’s Prime Minister Hun Sen has ordered no new licenses for online gambling operations. Existing licenses won’t be renewed upon expiry, said the report.

China says anti-online gambling measures will bring peace and stability

Chinese officials are content with the developments, but want more. Further steps are necessary, Chinese authorities feel, in order to put a stop to criminal gambling activities. “We hope it will further strengthen law enforcement with China and jointly tackle criminal activities including online gambling and cyber fraud,” Geng said during a press conference. This will help create “peace and stability in the region,” he added, while praising Cambodia’s steps to rein in the practice.

“Online gambling is a most dangerous tumor in modern society detested by people all across the world,” Geng said of the Cambodian move. “It is a shared hope that this problem could be effectively dealt with.”

Philippines’ President Rodrigo Duterte encouraged the gambling sector

Over the last three years, over 50 Philippine offshore gambling operators have received licenses, due to President’s Rodrigo Duterte decision in 2016 to start awarding more permits to encourage the sector’s development. Money has been the driving force behind these licenses. Revenues from the Philippines offshore gambling industry are expected to reach 9 billion pesos ($172 million) this year, according to its regulator.

China’s demand for a ban on online gambling will have to receive the President’s approval, spokesman Salvador Panelo told reporters. “We will have to ask the president on his policy on this,” he said when asked about China’s request for a ban.

The problem goes very deep. The online casinos not only cater to Chinese clients, but they also employ Chinese staff. The Philippine online gaming industry employs about 138,000 workers, the majority of whom are Chinese. Earlier this month, the Chinese embassy in Manila had urged the Philippines to stop its casinos from employing Chinese citizens.

Effects are already being seen in economic areas other than the gambling itself. Property prices and consumption, especially around Manilla, have increased since online gambling has been encouraged. Now, with recent developments rendering the industry’s future uncertain, property stocks have begun to suffer, the performance index of listed builders reaching its lowest level since March.

Inside a well-lit Manila studio, a young Filipino woman in heavy make-up and a low-cut black dress deals card for 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, 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.

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The dealers have their profiles on players' screens and they will interact with players if they get tips, according to a former employee of the tech company

'Their attractiveness is also part of what draws players.'

As China returns to a pre-coronavirus lifestyle, the government is working hard to contain an online gambling scene 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. The Ministry of Public Security published a statement in April 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 traveling 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 $145 billion a year through online sites, according to a 2019 report by Economic Information Daily, an affiliate of state news agency Xinhua.

Philippines Online Gambling China Money

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 pay their money upfront to buy into a game.

'It's worse for the player in that they don't realize how much they are losing,' he said, adding that he was aware of one online gambling platform which turned over around $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 centers 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 licenses and regulating privately owned venues.

Under its new head, Andrea Domingo, PAGCOR began issuing licenses 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.

'(The solution providers) take that signal and they relabel it and then they are the ones basically acting as the online casino,' he said. Names like Galaxy, one of the world's biggest casino operators, and pioneering online gambling website Casino 888, are copycatted to add an air of legitimacy.

The Chinese government is well aware that the Philippines is the linchpin of the country's online gambling market.

In August last year, its Manila embassy put it on the record, saying 'the casinos and offshore gaming operators (Pogos) and other forms of gambling entities in the Philippines target Chinese citizens as their primary customers.'

Philippines Online Gambling China News

The embassy said a conservative estimate of the gambling-related funds flowing illegally from China to the Philippines amounted to hundreds of millions of yuan every year.

According to the former tech employee, some solution providers avoid the Chinese authorities' detection by operating a large number of personal bank accounts.

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Vast sums of money can be broken down among these accounts until they are small enough to be sent overseas without falling foul of China's capital outflow rules.

A call center-like office is then set up in Manila where Filipinos manage transfers to and from the Chinese bank accounts. To avoid suspicion, accounts are left alone for a few days after each transfer.

Since the Covid-19 outbreak, the Chinese government has launched multiple campaigns targeting online gambling on different fronts, from the financial plumbing underpinning the industry to the public allure of placing a bet.

One campaign launched by the Ministry of Public Security in February led to the closure of 27,000 bank accounts involved in cross-border gambling within four months, according to a report by Global Times, a Chinese state-run tabloid.

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On August 13, the Communist Party's propaganda department joined forces with the Cyberspace Administration of China and the Ministry of Public Security to launch a social media campaign against cross-border gambling.

According to Lee, the Chinese government has previously gone straight to the source of the problem.

'They've got their agents crawling on the ground in Manila - and they have done this three or four times already - they will tell the Filipino immigration department we have identified '800, 900, 1,000 mainland Chinese nationals, we've canceled their passports, we will send a charter flight to pick them up, please take them out,' he said.

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The Macau-based consultant said the Chinese government had other weapons at its disposal that it was not using. Most of the internet traffic into China went through Hong Kong as a gateway to the mainland.

'Any digital signal, any signal of any sort that is related to gaming, it is illegal for it to be carried through Hong Kong. The Hong Kong government could set up filters to make it illegal for local telecom providers to let these people access their gateways,' said Lee.

The industry, in turn, is looking for new ways to evolve. According to the ex-employee of the Hong Kong-based tech company, many solution providers are interested in moving their transactions with mainland Chinese users onto cryptocurrency accounts.

However, he said, this brought its own set of problems.

'The Chinese government loses control in this way but then the problem is that the value of cryptocurrency fluctuates.'

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