China to support horse racing, sports lotteries in Hainan

China said it would encourage horse racing and expand sports lotteries in the southernmost island of Hainan, moves that people familiar with the discussions have said may eventually open the door to gaming on the nation’s mainland for the first time.

China will support the development of horse racing and other projects including beach and water sports in Hainan, according to a reform agenda approved by China’s cabinet and announced in the official Xinhua News Agency Saturday. The province should also “explore the development of sports lottery and instant lottery on large-scale international games,” it said, without elaborating.

While the government bans all forms of gambling, it officially allows two types of lotteries – including one in which players predict the outcomes of international soccer matches. It also permits some horse racing, though betting is banned and the central government had previously refrained from promoting the sport.

Any shift in China’s approach toward gambling could end up threatening the USD33 billion casino industry in Macau – the world’s largest gaming center – as well as other casino hubs in Asia. Macau has been shifting to attract Chinese tourists and families to the territory, which is the same market that Hainan currently draws.

“Horse racing has grown quickly in China in recent years, but it’s the first time the central government has promoted the game for a city and simultaneously encouraged further development of sports lottery,” said Su Guojing, chairman of China Lottery Industry Salon, a business group. “Although it still takes time to explore, Hainan may try to launch a lottery for more sporting events, including horse racing and rowing, to help boost Hainan’s tourism.”

Macau is expected to unveil plans in coming months on how it will review and issue casinos licenses that are up for rebidding from 2020. The bulk of casino earnings in Macau comes from foreign operators of local units. Hainan could favor local developers and operators to dovetail with President Xi Jinping’s emphasis on a resurgent China taking its place on the world stage.

In February, Bloomberg reported that government agencies under a party reform group headed by Xi were considering proposals to support the island, including allowing online gaming and a lottery, relaxing visa rules and enhancing infrastructure. The proposal could one day open the door to physical casinos, which are currently banned on the mainland, people familiar with the talks said.

The moves were part of a package of reforms unveiled while Xi visited the island, which is often called “China’s Hawaii.” Hainan will adopt more open duty-free shopping policies, boost the number of international flights and and prioritize tourism.

Xi’s plan should increase the flow of local and foreign tourists to Hainan, where entrepreneurs and real-estate developers have been pouring in billions of dollars to build resorts and shopping centers that have stayed mostly empty. The province faces a fiscal deficit amid the debt woes of HNA Group Co., it’s biggest conglomerate that’s facing pressure from creditors after a global expansion.

Xi attended the Boao Forum for Asia in Hainan last week, which brought world leaders to the island. At the forum, Xi reiterated pledges to open sectors from banking to auto manufacturing, and warned against “Cold War mentality” amid trade disputes with U.S. counterpart Donald Trump.  MDT/Bloomberg