China has a new casino: the Philippines

(LA Times) – Gambling is illegal in China, but that didn’t prevent Fan Zheng from betting tens of thousands of dollars online. The 30-year-old store clerk from the island province of Hainan learned about the opportunity early last year from marketing agents who, Fan believes, contacted him because he played no-stakes online card games.

“They knew I was a potential gambler,” he said.

At first, the agents persuaded him to bet on card games. That added thrill and a chance of making money to something he was already doing for fun.

But the card games were slow, and Fan kept losing. The agents suggested that he try a game called Tencent Every-Minute-Lottery, which generates winning numbers based on the total users logged into a Chinese messaging app. As the name suggests, there is a new chance to win every minute.

Soon he was hooked. Sometimes he bet $1.50. Other times, he bet $10,000.

“The more I played, the bigger amounts I’d bet,” he said.

Operating safely out of reach of Chinese authorities, the lottery website and its agents are based hundreds of miles away in the Philippines.

The Southeast Asian nation is being transformed by a massive surge in online gambling companies catering to players in China, where rising incomes have given more people the means to wager.

The demand is expected to drive gambling revenue in the Philippines to $4.1 billion this year, up from just over $1 billion in 2016, according to the government.

Those figures also include traditional casinos, which have gotten their own boost from rising tourism from China.

Still, the portion that flows back to the Philippines to pay salaries, rent, government bribes and other costs has given the economy a significant boost. The annual licensing fees — $140 million last year, more than 11 times the 2016 total — are now the third-largest source of government revenue behind taxes and customs.

The boom is most apparent here in the capital, where gambling companies and their employees have driven commercial and residential rents to record highs.

By some estimates, at least 100,000 people from mainland China have moved to Manila for jobs as gambling company marketing agents, tech support specialists and engineers — all to serve the Mandarin-speaking clientele.

“Everybody is after the Chinese customer because they’re the biggest market and they’re the biggest gamblers,” said Rosalind Wade, the Manila-based managing director of Asia Gaming Brief, a research and consulting firm.

Philippine President Rodrigo Duterte, who once railed against the industry as a vector for crime, recently called for its expansion.

“That gambling-gambling,” Duterte told supporters at a recent rally. “I cannot control it.”

The story of the rise of offshore gambling in the Philippines starts in the world of bricks and mortar.

Over the last decade, the country has built some of the region’s largest casino resorts, none bigger than those located along Manila Bay in a development called Entertainment City.

The gleaming gambling houses and hotels here have helped turn the Philippines into Asia’s third-most lucrative gambling destination, just behind Singapore and very far behind world-leading Macau.

Chinese high rollers once would have scorned the idea of gambling in the Philippines. Then in 2016 Duterte announced his “separation” from the U.S. and realignment with China. Over the next two years, according to the Philippine tourism department, the annual number of Chinese tourists nearly doubled to 1.2 million.

On a recent night at the City of Dreams casino, Chinese baccarat players were wagering tens of thousands of dollars a hand in VIP rooms.

But the biggest bets were being placed remotely. Using computer tablets and headsets to communicate with gamblers watching from abroad on cameras, Mandarin-speaking female employees readied stacks of chips each worth more than $19,000 and waited patiently for instructions.

Proxy betting, as the practice is called, is outlawed in all but only a handful of countries because little is known about the remote gamblers.

That it’s welcome in the Philippines underscores the lengths the country will go to court Chinese money.

The online boom was set in motion when Duterte signed Executive Order No. 13 in 2016, stripping two small regional economic agencies of the authority to issue offshore gambling licenses and handing it to the Philippine Amusement and Gaming Corp., which is both a national regulator and a gambling operator.

Almost overnight, investors in the Philippines and from across Southeast Asia seized the new opportunity to reach Chinese gamblers.

Their online game of choice is baccarat. The sites also featured roulette and the Chinese dice game sic bo. Many feature livestreams with dealers at empty tables.

Several sites each receive more than $3 million a day in deposits — the money players transfer to the sites to bet with — according to a gambling executive whose company provides payment software and operates a site that features virtual slot machines.

He spoke on condition that his name not be printed, because of the sensitivity of his business and how much was at stake. In less than a week, he said, one of his customers lost $300,000.

The faster the industry grows, the more it needs workers with the language skills and cultural know-how to indulge Chinese gamblers.

At first, operators targeted Chinese students already in the Philippines.

Eventually, that labor pool ran dry. Companies grew desperate and started recruiting outside train stations in China, where migrant job seekers would gather.

Today, the industry uses social media or word of mouth to find labor.

Nearly all in their early 20s, the workers are lured to the Philippines with lofty salaries and benefits such as free accommodations, meals and flights home.

“It’s boring work,” said one gambling site manager, who spoke on condition that he not be named because China regards his work as illegal. “It’s a lot of texting and calling. Some have to do it for 12-hour shifts.”

The manager said the creature comforts of home have improved dramatically since he moved to Manila in 2011 to study English at a university there. He can now find his favorite spicy Hunan food with ease.

For many of his employees, the job is their first taste of financial freedom.

“These are people who would have worked in factories if they didn’t come here,” the manager said.

The appearance of so many college-aged foreigners makes some local residents uneasy. Philippine professionals complain about the workers being rowdy, their penchant for smoking and their lack of English. Others scoff that some of the newest high-paying jobs in the Philippines are going to foreigners while millions of Filipinos continue to have to go overseas to seek employment.

“The cultural differences are the main reason there’s hostility,” said Dana Krizia Mengote Sandoval, a spokeswoman for the Bureau of Immigration.

“Now they’re seeing Chinese people firsthand,” she said. “It’s more personal.”

Property owners have naturally been more welcoming. Real estate prices around Manila have soared 40% since offshore gambling took off in 2016.

Some gambling operators, scrambling to find office space and apartments for their workers, are providing a year’s worth of rent in advance, according to David Leechiu, who heads a Manila-based real estate firm.

The Chinese presence, he said, is helping beckon investors from China and other parts of Southeast Asia.

“We can call it a ‘Chinese invasion,’ but it’s more than that. It’s the Philippines opening up to the world.”

Both the Philippines and China have neglected their own laws to allow the industry to thrive.

The law stipulates that the sites are not allowed to target any country where gambling is banned.

Kickbacks are also common. One former security consultant for a gambling operator in Manila said the company paid $500,000 to $1 million a month in bribes.

“Legislators, law enforcement, immigration officials, they all came asking for handouts because they knew the money was coming from China,” said the consultant, who spoke anonymously because of a confidentiality agreement.

For its part, China has done little to pressure the Philippines to stop targeting China. Nor has it moved to break up the black-market banking system the industry rely on.

Rural Chinese residents are recruited to open accounts at major commercial banks in exchange for a nominal fee. Then agents tell gamblers where to deposit their money. The transactions are then masked as retail purchases for everyday items like phone cards or shoes.

That ultimately leaves the gamblers vulnerable.

Within a few months after he started playing the lottery game, Fan was in debt and began borrowing from friends, family and online lenders. When he couldn’t make payments on one loan, he’d open a credit card or borrow from another online lender.

Then one day last June, he got lucky and hit a major payout that would have covered his $150,000 in losses. But when it came time to collect, his account was suddenly canceled. His agent in the Philippines disappeared.

Fan considered going to the police, but thought better of it. What he’s done was illegal, after all.

“They might arrest me,” Fan said. “I’m definitely not going to play anymore. I’m going to slowly do my regular work, try to make money and pay it back.”