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03 January 2012

Macau and the Chinese Gambler



Ballooning casino gaming revenue has put Macau yet again in the gaming limelight. Today, Macau has overtaken Las Vegas as the biggest gaming city in the world, drawing thousands of eager Chinese players across the border from Mainland China each day. Macau seems likely to maintain the enthusiasm of savvy investors worldwide. IPM guest blogger Desmond Lam, PhD, author of The World of Chinese Gambling shares some insights into the culture and business of Chinese gaming.

More than 20 types of games are available in Macau’s 34 casinos. With roughly one casino every one square kilometer, Macau is officially a powerhouse of global gaming. In 2010, 25 million visitors entered its border and surveys revealed that slightly more than 50% of these visitors claimed to have gambled in its casinos. VIP gaming is prevalent, accounting for more than 70% of Macau’s multi-billion gaming revenue (US$23.5 billion in 2010 to be exact). It is not widely known just how many players there are in this segment, but some estimates put it near 100,000 VIP players arriving in Macau each year.

One way to build an understanding of the world of Chinese gambling – and why the Chinese are so eager to patronize casinos around the world - is to look back through time.

Records of gambling among the Chinese people are documented in Chinese history books. Among these, Sima Qian (109 - 91 BC)’s “Shiji” (史记) recorded horse racing and cock fight betting during the Warring States period (475 - 221 BC). Wagering activities have been recorded in every Chinese dynasty since then. In fact, many modern games such as lottery, pai gow, fan tan, and mahjong are thought to have originated in China. Simple but innovative ancient Chinese games such as liubo, shi pai and gu pai laid the foundations for later Chinese gambling games.

Culture plays a key role in Chinese gambling. But it is incorrect to suggest that Chinese culture encourages Chinese people to gamble more than any other cultures. On the contrary, traditional Chinese values as advocated by Confucius discourage gambling since it is perceived to be wasteful and can lead to social disorder. In fact, gambling has been subjected to control and sometimes ban over the history of China. The earliest documented control of gambling can be found in “The Book of Law” by legalist Li Kui of Wei kingdom during the Warring States period. In the Taiping Heavenly Kingdom (established by Hong Xiuquan during the mid-1800s), officials and soldiers caught gambling were subject to being executed.

A few studies have shown that Chinese gamblers have an exceptionally high illusion of control. They believe they can control the outcome of gambling events, be it baccarat, Black Jack, Sic Bo, or lottery. This characteristic may have to do with traditional Chinese beliefs and values. It seems that the ancient belief of heaven/earth and rituals to please the gods was a starting point for further development of Chinese people’s obsession with the supernatural (e.g. luck, feng shui, fate, and destiny). Three major religions, namely, Confucianism, Daoism, and Buddhism adopted many ancient beliefs and practices. These three religions and/or philosophy (Confucianism, in particular) have, over thousands of years, shaped the thoughts and behaviors of Chinese people (also Japanese, Koreans, and Vietnamese).

More than their Western counterparts, Chinese people believe that luck, destiny, chance, and powerful others control their lives more than their own actions. An external locus of control can potentially lead to a higher illusion of control on the gaming table. Superstition aggravates the illusion of control. Chinese people’s unique form of superstition on lucky/unlucky objects, feng shui, and numbers has added to their high illusion of control. This perception also somewhat enhances the value (i.e. entertainment, fantasy, and escape) that Chinese people obtain from gambling, and may lead to high risk taking and/or more gambling.

In addition to culture, external forces may also explain why Chinese people are so drawn to gambling. The transition from poverty to prosperity, the widening income gap between the poor and rich, and negative real interest rates can all explain to a certain extent why Chinese people tend to take such excessive monetary risks when they gamble. Some observers believe that Chinese people liken gambling in Macau’s casinos to investing. Nationally representative studies, however, found a large percentage of Chinese people tend to gamble for fun and entertainment; not just for money.

Many Chinese people see gambling as a form of social interaction. There is no fuss about it. Leisure gambling is often viewed as a positive activity. Mahjong playing, for example, helps elderly Chinese to think better by exercising their brains. It is a celebrative game for all Chinese people. Gambling is also considered perfectly acceptable for anyone during festive periods such as the Chinese New Year. Social gambling as a positive when practiced in moderation seems to reflect Chinese values and culture; practiced excessively, it is considered a taboo. A Chinese person who falls into gambling pathology is seen as unable to control his own actions and morally bad. There is no sickness; he is just a weak-minded person.

By examining Chinese gambling from historical, social/cultural, psychological, and environmental perspective, one can then begin to understand why Chinese gamblers behave the way they do. One thing is for sure: The world of Chinese gambling is huge and expanding, and likely to continue to grow for the foreseeable future.