Think-tank questions state-run lottery spending

China’s state-run lottery raised more than RMB100bn (USD16.3bn) for sports and welfare projects last year but a report from a top government think-tank has raised serious questions about where the bulk of that money has gone, the Financial Times reported on Sunday.
An article by Jamil Anderlini in Beijing notes that the state run sports and “social welfare” lotteries are the only legal form of gambling allowed in mainland China and on current rates of growth lottery ticket sales are expected to eclipse those in the US by the end of next year, making China the world’s biggest lottery market.
According to the FT, in its recent annual report on charitable donations, the Chinese Academy of Social Sciences (CASS), China’s main government think-tank, included a section on the state lotteries for the first time. Unusually for a state think-tank, the report contained some scathing conclusions.
CASS researchers found the lotteries raised RMB104bn for government coffers last year but could only find evidence that RMB40bn had been spent on social welfare projects, such as building exercise equipment in public parks. It was unclear where the remaining RMB64bn had gone.
“These funds come indirectly from the public and how they are used is a big problem,” Yang Tuan, the CASS researcher who edited the report, told the paper. “The most important problem is that the government’s use of these funds is completely unconstrained and a share of the funds is not being used for public welfare.”
The state-run lottery did not respond to the Financial Times’ request for comment.
The report did not explicitly mention corruption as a reason for the missing funds but the newspaper notes that there is a spectacular history of officials embezzling lottery takings.
In 2012, the former director of the Qingdao lottery center in eastern China was given a suspended death sentence for buying a luxury yacht worth RMB20m and embezzling an additional RMB49m.
In November last year, China’s National Audit Office launched a surprise month-long audit of the lottery system that found extensive evidence of rampant corruption throughout the country, according to state media reports.
“The lottery industry in China has had very impressive growth for a number of years . . . and when you have massive expanding revenue, like buzzards the corrupt elements will gravitate towards these places,” said Martin Williams, Taiwan-based Asia Editor at Gambling Compliance, a research company, as quoted by the paper. “If this [missing] money is being embezzled, I suspect it is being embezzled in the same way that money is embezzled throughout the rest of the Chinese government, which is a combination of personal aggrandizement and network building.”
Even when money is not siphoned off by individuals, the lack of oversight for lottery takings often allows government departments to treat them like slush funds to be used for anything they like.
Since the first ticket was sold in 1987, China’s state lottery has earned revenues of more than RMB2tn, with RMB-­382bn worth of tickets sold last year alone, the FT states.
According to regulations, about 15 per cent of total ticket sales should be used to cover issuance and administrative costs, 50 per cent should go to jackpots and prizes and the remaining 35 per cent should be used for social welfare projects.
But according to the government’s own numbers, published in state media, the total amount that has gone into social welfare coffers since 1987 is RMB608bn, far short of the RMB700bn implied by the 35 per cent ratio (of RMB2tn) stipulated in the regulations.
The central government is required to split its share of the lottery proceeds among various social security and public welfare funds and provide a small portion to civil affairs and sports ministries but local governments are effectively allowed to spend the money as they see fit.