By: John Berthelsen

Beijing is growing increasingly disenchanted with the burgeoning online gaming industry in the Philippines, which is draining hundreds of millions of renminbi through underground banks and cross-border money laundries – even as the industry shows signs of growing into a mainstay for the Philippine economy.

Authorities in Beijing say the government plans to step up action to stamp out illegal gambling and is warning its citizens at home that if they are gambling overseas. They may be committing a criminal act. As Asia Sentinel reported in April, many as 700 million of China’s 1.4 billion people are expected to be gambling online globally over the next five years unless Beijing cracks down.

On August 8, the Chinese embassy in Manila posted a strongly-worded statement warning that the proliferation of Philippine Offshore Gaming Operators, or POGOS is “posing a threat to China’s financial security and supervision” and that all forms of gambling involving Chinese gamblers or targeting the mainland are illegal and will be stamped out.

That threatens an industry that suddenly has grown into a new economic pillar for the Philippines. The POGOs were only authorized by the government in 2016 and have exploded in size, giving Manila a new and unsavory reputation as the Macau of Southeast Asia.

With the advent of convenient, well-developed payment systems through credit cards. Small-time bettors using their phones can live-stream wagers of as little as 10 RMB (US69¢) through Putonghua-speaking computers. More affluent gamblers can use attractive fashionably-dressed proxies wearing headsets to play baccarat and other games. Thus the Chinese at home are finding it easy to spend vast amounts of money and time online, a growing percentage of that passing through Manila With computers and smartphones, they can hide their gambling from authorities.

The Pasay area itself features huge gleaming new casinos with garish interiors, a US$1 billion annual gaming district offering a respite that is thronged with Chinese, outside the range of the sharp eyes of China’s law enforcement personnel on the lookout for crooked mainland officials eager to gamble away government funds. Macau is now closely watched by Chinese authorities. The Philippines has become a route away from state control.

In July, it was announced in Manila that offshore gaming, most of it operated by an estimated 130,000 mainland Chinese – although President Rodrigo Duterte said there could be as many as half a million – who have flooded into the Philippines, either legally or illegally, is due to overtake offshore business processing as the biggest tenant of Manila real estate. The Philippines is the world’s biggest offshore business processing destination, outpointing India.

David Leechiu, chief executive officer of real estate broker Leechiu Property Consultants, told a press conference that the industry is expected to become the biggest demand driver of office space in Metro Manila, occupying as much as 450,000 sq.m by end 2019, which Leechiu told reporters would be “super very close to the office space occupancy of business process outsourcing firms.”

Offshore gaming contributed US$3.57 billion to the Philippine economy in 2018. Ancillary income adds considerably to that. Since the industry’s birth just three years ago in 2016, the Pasay district, where it is centered, has seen a 100 percent-plus rise in average condo rent prices.

It is unsure how China is going to react. But it is clear that Beijing is losing patience. Crime against Chinese is rampant, much of it committed by Chinese loan sharks committed against gamblers who get in over their heads in the proliferating casinos. On Aug. 11, for instance, a Chinese national was found dead wearing handcuffs after he apparently fell six floors from a building in a Manila suburb while trying to escape from his employer, who had handcuffed him over debts.

At the same time, the embassy statement charged, dozens of kidnappings and torture cases of Chinese citizens who gamble or work illegally in gambling entities in the Philippines have taken place. Some Chinese citizens were physically tortured, injured or even murdered.”

The embassy urges the Philippine government “to take effective measures to prevent and punish the Philippine casinos, POGOs and other forms of gambling entities for their illegal employment of Chinese citizens and asked the Philippine government to crack down on related crimes that hurt Chinese citizens,” the statement said.

The statement also warned that illegal online gambling operations are causing social unrest at home. The numbers of Chinese citizens on the mainland who are lured into illegal gambling online “has resulted in an increase of crimes and social problems in China. In particular, some gambling crimes and telecom frauds are closely connected, which has caused huge losses to the victims and their families,” the embassy statement said.

It also expressed concern about the thousands of Chinese working illegally for POGOs in conditions described by the media as “modern slavery.”

“Their passports are taken away or confiscated by the Philippine employers. They are confined to live and work in certain designated places and some of them have been subjected to extortion, physical abuse, and torture as well as other ill-treatments,” it said.

“The Judicial Interpretation of the Relevant Laws on the Application of Online-gambling Crimes jointly issued by China’s Supreme People’s Court and the Supreme People’s Procuratorate clearly stipulates that Chinese citizens gambling overseas, opening casinos to attract Chinese citizens as primary customers may constitute gambling crimes.”

The embassy also called on Manila to step up enforcement and to cooperate with Beijing to stop illegal gambling.