Organized crime and illegal gambling: How do illegal gambling enterprises respond to the challenges posed by their illegality in China?
| Date | 01 June 2016 |
| DOI | 10.1177/0004865815573874 |
| Published date | 01 June 2016 |
| Subject Matter | Articles |
Article
Australian & New Zealand
Journal of Criminology
2016, Vol. 49(2) 258–280
Organized crime and illegal
! The Author(s) 2015
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DOI: 10.1177/0004865815573874
gambling enterprises respond
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to the challenges posed by
their illegality in China?
Peng Wang
Department of Sociology, The University of Hong Kong, China
Georgios A Antonopoulos
School of Social Sciences, Business & Law, Teesside University, UK
Abstract
Since China initiated its economic reforms in 1978, illegal gambling has become the primary
source of revenue for organized crime groups. However, there remains a startling paucity of
literature on the subject. This paper provides the first scholarly account in English of Chinese
illegal gambling organizations and examines how three major types of enterprising entities
(local gambling dens, trans-regional gambling rings and online gambling networks) mitigate
external uncertainties. Using Chinese- and English-language sources, it explores how gambling
organizations develop strategies to achieve optimal efficiency in the face of substantial chal-
lenges, including finance, marketing, debt collection, and police suppression.
Keywords
China, gambling, organized crime, personal networks, police corruption
Introduction
Even if gambling and organized crime are considered by criminologists as being twin
ventures, the following questions remain unanswered or only partially answered: how do
these two phenomena link and how do illegal gambling organizations operate in an
environment characterized by extreme uncertainty and high risk? Although little empir-
ical evidence is available, the existing literature seeks to provide a framework for under-
standing this complex social problem. Based on a thorough review of the literature,
Spapens (2008) suggests three possible ways in which organized criminals are involved
Corresponding author:
Peng Wang, Department of Sociology, The Jockey Club Tower, The University of Hong Kong, Pokfulam Road,
Hong Kong.
Email: pengwang@hku.hk
Wang and Antonopoulos
259
in the gambling business: the illegal supply of gambling services, the penetration of the
legal betting and gaming sector (e.g., the Italian–American mafia in Las Vegas), and the
improper use of legal forms of gambling (e.g., fixing matches and money laundering).
Gambling can not only provide good opportunities for loan sharking, illegal drug dis-
tribution, money laundering, and prostitution but also offer working capital to invest in
legitimate businesses, strengthening organized criminals’ entire illicit operations
(Ferentzy & Turner, 2009; Smith, Wynne, & Hartnagel, 2003). In addition, the corrup-
tion of police officers and other government officials is a by-product of organized crim-
inals’ infiltration of the gambling business (Liddick, 1999; Steffensmeier & Ulmer, 2006).
The involvement of crime groups in illegal gambling is therefore a serious challenge.
This paper examines an understudied but potentially very important area: the involve-
ment of organized crime groups in illegal gambling in the People’s Republic of China.
Illegal gambling emerged as a major source of revenue for organized crime groups in
China after 1978, when the ‘‘open door’’ policy and economic reform made profit and
economic development a national movement (quanming jingshang) (Liu, 2008). The eco-
nomic reform facilitated the heavy involvement of organized crime in illegal gambling in
a variety of ways. Firstly, with regard to the demand for gambling-related services,
China’s economic reform has created the overwhelming desire to ‘‘get rich quick’’
among the Chinese. Gambling is another arena for this consumption. Secondly, eco-
nomic reforms introduced a new ethos of entrepreneurship. Deng Xiaoping’s saying, ‘‘Be
the cat white or be the cat black, it is the clever cat that will catch the mouse,’’ is
indicative of the desired new mentality, emphasizing success and exploitation of oppor-
tunities by any means necessary. The increasing political emphasis on market forces has
promoted a blurring of the legal and illegal sectors, particularly those sectors involving
practices that are historically and socially embedded in Chinese society, such as
gambling.
Social gambling is very popular in Chinese communities around the globe (Loo,
Raylu, & Oei, 2008). But throughout Chinese history, gambling has been under strict
legislative control (Cheng, 2011; Tse, Yu, Rossen, & Wang, 2010). In mainland China,
all forms of gambling were outlawed from the establishment of new China in 1949 until
1987, when the first welfare lottery was initiated. The lottery industry (including China
Welfare Lottery and China Sport Lottery) has witnessed huge success in a relatively
short time (Liu, 2012). The Ministry of Finance discloses that China’s regulated lottery
sales reached 309 billion RMB (AUS$ 58 billion) in 2013, up 18.3% year on year
(Xinhua, 2014a). The same period witnessed a significant development of the illegal
gambling market. Xinhua News Agency reveals that the revenue from illegal gambling
markets is estimated to be 10 times higher than China’s two officially sanctioned lotteries
(Xiang, 2009; Xinhua, 2009a).
Article 303 of China’s Criminal Law states: ‘‘Whoever, for the purpose of profit,
assembles a crowd to engage in gambling, establishes a place for gambling or makes
gambling his profession shall be sentenced to fixed-term imprisonment of not more than
three years, criminal detention or public surveillance, and concurrently be sentenced to a
fine.’’ A Judicial Interpretation1 issued by the Supreme People’s Court and the Supreme
People’s Procuratorate in 2005 suggests that ‘‘the purpose of reaping profits’ is the key
feature in determining whether an activity is subject to criminal law.’’ That is to say,
private bets between individuals (e.g., mah-jong and card games) are legal, while any
260
Australian & New Zealand Journal of Criminology 49(2)
game organized by an unlicensed and profit-oriented third party is illegal. The interpret-
ation also emphasizes that whoever sets up online gambling websites or acts as an online
gambling agency will be regarded as ‘‘opening gambling houses’’ and will be punished
according to the Article 303 of the Criminal Law.
The prohibition of most forms of gambling in mainland China results in rapid expan-
sion of the illegal gambling market. It has been widely acknowledged that the legal
prohibition of the production, distribution, and financing of certain goods and services
will create a breeding ground for the emergence of organized crime (Skaperdas, 2001). If
a certain kind of service, such as gambling, is criminalized, private parties cannot enforce
contracts through the normal channels. This creates a power vacuum that can then be
filled by quasi-governmental organizations, such as ‘‘mafias’’ (Gambetta, 1993; Varese,
2001). As American Prohibition demonstrates, when the demand for an illegal product is
huge, such demand is bound to be filled at high prices. As a result, the provision of
unlawful commodities or services is an attractive business for organized crime groups
(Varese, 2010; Wang, 2011).
Although there is no existing literature focusing explicitly on organized crime and
gambling in mainland China, some general accounts of Chinese organized crime that
touch on gambling are present (see also next section). The study conducted by Curtis,
Ellan, Hudson, and Kollars (2002) investigates the major areas of international activity
of Chinese crime groups during 2000–2003, and suggests that gambling is one of the
major types of crime of these groups. It also discovers that, for transnational Chinese
organized crime groups, gambling activities are closely linked with prostitution and
human trafficking businesses. Chin and Godson (2006) offer an in-depth analysis of
14 influential criminal gangs that were dismantled between 1998 and 2003, 7 of which
were involved in the gambling business and their operations were predominantly local.
In his widely cited book Mafias on the Move, Varese (2011) explores the role of Hong
Kong triads in China’s booming illegal markets and concludes that the newly arrived
triad societies do not enjoy comparative advantages over locally based criminal groups.
Based on a comprehensive analysis of open sources, Varese offers a valuable table
summarizing the information on 74 ‘‘organizations with an underworld nature’’ (i.e.,
influential, well-financed and well-organized criminal syndicates), which were destroyed
by both central and local governments from 1992 to 2009. His analysis reveals that
approximately 35% of criminal groups regard gambling as one of their main sources
of revenue.
The current paper emphasizes the effects of guanxi—the Chinese version of personal
connects, networks, and social capital—on the management of the gambling business.
Different languages use variant words to refer to the term ‘‘personal connections,’’ for
example, ‘‘guanxi’’ in China, ‘‘blat’’ in Russia, and ‘‘wasta’’ in many Arab countries. The
level of significance of personal connections is largely dependent on whether the country
has a strong institutional environment. When the state has efficient formal institutional
support, private enterprises have fewer tendencies to rely on personal connections for
protection (Xin & Pearce, 1996). When the nonmarket mechanism is prominent (e.g., the
state controls all economic resources and the formal legal system lacks transparency), the...
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