Could China change from a 'disrupted' market to a closed one?

A Closer Look At China And Its Complicated Relationship With Online Gambling

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China has been in the headlines a lot this year, and the past month in particular. The biggest story, of course, has been the large-scale protests which have been going on in Hong Kong since the end of March.

These have recently reached such a size and intensity that many are worried about the possibility of a violent crackdown by the government.

Although the possible ramifications of such a scenario dwarf any other China-related concerns at the moment, the country and its authoritarian government are profoundly intertwined in the global economy in other ways. The effects of this sometimes arise in unexpected places, including, earlier this month, the online gambling sector.

China versus online gambling sites

The Chinese embassy issued a formal statement on Aug. 8 condemning Philippine offshore gaming operators (POGOs) and threatening a crackdown due to their continued service to Chinese customers and illegal employment of Chinese workers.

China is taking the issue so seriously, in fact, that it’s expected that Chinese President Xi Jinping is expected to bring it up in person with Philippine President Rodrigo Duterte in a meeting this month.

What does this have to do with the Hong Kong protests? Simply that one of the biggest concerns for any authoritarian central government is any sort of limitation or boundary to its authority over its own citizens.

The worst ones, like North Korea, solve this problem by simply preventing citizens from leaving the country at all. That’s not an option for China, however, given the extent to which it wishes to be involved in the global economy.

Keeping Chinese citizens within arm’s reach

Hong Kong was a British colony up until it was returned to Chinese control on July 1, 1997. The terms of that transfer of power were that Hong Kong would enjoy special status, so that its citizens could continue to enjoy some measure of the personal and economic freedoms they’d had under British control.

This year’s protests center largely around a proposed extradition bill that would allow the Chinese government to transfer accused criminals to mainland courts for trial. In other words, it’s a classic attempt by the central government to extend its jurisdictional reach.

China is also notorious for internet censorship and for coercing foreign companies like Google to cooperate with them in that regard. But as to why China is going after POGOs specifically, as opposed to other offshore operators, that likely has a lot to do with the fact that they employ Chinese citizens.

Indeed, the embassy’s statement begins by referencing comments by Philippine Amusement and Gaming Corp. vice president Jose Tria that “Chinese working in Philippine offshore gaming operators (POGOs) will be transferred to “self-contained” communities or hubs.”

It frames its complaint as concern for the human rights of those workers, but given its own disregard for those same rights at home, this is more about control than anything else. The idea that its own citizens are engaging in illegal activities, using a foreign country and the Internet to evade its grasp is particularly maddening to the government.

Black Friday envy

There’s also likely some jealousy of the US at play.

All these events play out in the context of a Chinese government that’s frustrated with the trade war being waged by President Donald Trump, combined with Western support for its enemies in places such as Hong Kong, Tibet and Taiwan.

In that light, China may well be annoyed that the US was able to successfully crack down on online poker in 2011 and is now working to re-legalize it and other forms of online gambling on its own terms, while China’s attempts to rein in offshore operators have thus far been unsuccessful.

None of this has much direct impact on online gambling in the West. Although dot-com operators like PokerStars do serve Chinese clientele, these players make up a tiny portion of their liquidity pool, whereas other “disrupted” markets like Russia are far more important to overall traffic.

A greater proportion of Chinese online gamblers play at sites such as these POGOs, which both cater to their language and preferences, and have stealthier, more intricate sign-up and deposit processes to help keep their activities hidden from the government. These can involve private Facebook groups, password-protected websites and the like.

Rather, a more likely indirect effect is that a government crackdown might cause some of the larger and more successful offshore operators serving China to turn their eyes westward as their original market becomes less hospitable.

That has already happened, for instance, with GGNetwork, once unknown in the West but now the operator with the third-highest cash game poker traffic in the world.

Moving westward

GGNetwork first became known to Western players via Natural8, a big, highly-polished skin offering service in 13 languages, both Asian and European. At the time, the network’s selling point in the West was its Asian clientele, leveraging the reputation of the Macau gambling scene and offering Western players the chance to play against supposed “whales.”

More recently, however, it has changed tack and attempted to downplay its original focus on the Chinese market, presumably to avoid the ire of the Chinese government.

Although it still has some Chinese language skins, such as Tianlong, and even runs a few tournaments denominated in yuan, it has rid itself of most of what were once a multitude of smaller, shadier skins serving that market. In 2017, it launched GGPoker, a new English-only flagship skin, for which it has since obtained a license from the United Kingdom Gambling Commission.

Whereas Natural8’s “Team Hot” lineup of sponsored pros is a roughly equal mix of European and Asian players, headlined by Kitty Kuo and Dong Kim, GGPoker signed high roller and perennial Global Poker Index top-10 player Bryn Kenney to be its ambassador.

Aside from the UK, GGPoker has targeted Canada and Ireland, as well as continental European markets not requiring local licensing. It has also launched locally licensed skins in Latvia and Estonia under other brands, through partnership with the Swedish company Enlabs.

Could GG have eyes on the US?

There’s been no indication from GGNetwork so far as to whether it has plans for the burgeoning US market, but it’s hard to imagine that the company’s executives wouldn’t at least be keeping an eye on how things develop there.

The choice of Kenney, an American, as an ambassador rather than a European pro also points in that direction. The big problem facing GGNetwork in that regard is that, despite its size, its brand is essentially unknown in the US because it wasn’t operating prior to Black Friday and doesn’t have much in the way of a presence in the live tournament space.

PokerStars, PartyPoker and WSOP/888 all have a big advantage in terms of brand recognition. Between that and the small size of the available US regulated markets at the moment, it would be an uphill battle with little to gain for GGNetwork – or, hypothetically, other Asian operators looking for a new market in the West. That could easily change as new states look to pass legislation, however.

As one door closes, another opens, or so the saying goes. After first the UIGEA and then Black Friday, the big sites of the boom years had to turn elsewhere, first to Europe and then, more recently, Asia and South America.

The way things in China are going, the reverse situation could easily arise for operators currently or formerly focused on East and Southeast Asia. And ironically, the door that now seems to be opening, if only gradually, is the same one that slammed shut on Western operators not so long ago.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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