In a strongly worded missive to the Philippine government, China has called for the suspension of illegal online gaming that targets mainland Chinese players, and an end to the alleged inhumane treatment of Chinese online gaming workers in the country, treatment it equates to “modern slavery” and that it says includes kidnapping, torture and worse.
“Dozens of kidnappings and tortured cases of Chinese citizens who gamble or work illegally in gambling entities in the Philippines have taken place,” the statement said. “Some Chinese citizens were physically tortured, injured or even murdered.”
Beijing said it planned to step up action to stamp out illegal gambling, and also warned its citizens that if they are gambling overseas they may be committing a criminal act.
“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,” said the embassy, which called on Manila to cooperate with Beijing to stop illegal gambling.
The brouhaha began with the development of working-and-residential hubs for workers, many from China, who are employed by Philippine Offshore Gaming Operations, or POGOs.
An August 6 statement by Jose Tria, vice president of the Philippine Amusement and Gaming Corp. (PAGCOR), caught the attention of officials at Chinese Embassy in the Philippines. Tria said that Chinese people working for POGOs would be transferred to those “self-contained” communities because of mounting complaints about “unruly behavior.” Tria said the POGO hubs would limit interactions “between Filipinos and foreign workers.”
The embassy then posted a statement on its website, expressing “grave concern for Chinese working for Philippine offshore gaming operators and (urging) the Philippine government to protect the legitimate rights and interests of Chinese citizens.
“The embassy urged 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 the Chinese citizens,” the statement said.
The statement went on to say that the proliferation of POGOs employing Chinese constitutes a threat to China’s financial security and supervision. It said that a conservative estimate shows “hundreds of millions of yuan” are flowing illegally out of the country every year through underground banks and funds are being laundered cross border.
It also warned illegal online gambling operations are causing social unrest at home, with gambling crimes and telecoms fraud closely related.
The South China Morning Post reported that the administration of President Rodrigo Duterte is “reeling” from the blast.
Presidential spokesman Salvador Panelo said: “They should file formal complaints so that this particular concern will be raised in the appropriate agencies of the government so we can properly respond.”
“This involves crimes such as cross-border money laundering through underground banking, which undermines China’s financial supervision and financial security,” the embassy said. “The fact that a large number of Chinese citizens are lured into illegal gambling has resulted in an increase of crimes and social problems in China.”
Beijing emphasized that it would step up its crackdown on cross-border gambling and online payment platforms that provided technical support for such activities, pressing Manila to pay more attention to its position and “prevent and punish” casinos and POGOs for crimes that hurt Chinese citizens.
Ang-See, who has helped kidnap victims and their families for decades, said the issue “can’t be the responsibility only of Philippine law enforcement but needed to be an honest-to-goodness implementation of the agreement (between Beijing and Manila) on joint anti-crime efforts.”
A source told the South China Morning Post that the problems brought about by online gaming had been a topic of intense discussions between the countries since last year.
The source, who spoke on condition of anonymity, called Beijing’s crackdown “a welcome move” and added that law enforcers from both countries had been collaborating on the arrest of Chinese nationals alleged to be behind the slew of kidnappings.
POGOs are a big contributor to the Philippine economy, contributing PHP6.1 billion (US$118 million) to the agency’s gross revenue of PHP67.85 billion last year. Earnings go largely to the national treasury and the President’s Social Fund.
The Chinese embassy’s statement comes as the Philippine finance secretary said the government was losing 24 billion pesos a year in uncollected income taxes, based on a sample of 100,000 Chinese workers.
In July, the Bureau of Internal Revenue said it managed to collect 200 million pesos worth of income taxes from six of the 57 POGOs operating in the country.
The Philippine Bureau of Immigration and Department of Labor and Employment said their reconciled list showed 138,001 Chinese nationals working in the country, of which 54,241 had been issued alien employment permits and 83,760 given special working permits.
The mushrooming of gaming firms under the Duterte administration has also driven up demand for office and residential spaces. A stock market analyst said Beijing’s crackdown on gambling activity would “definitely have an effect on the market, particularly on the property sector”, but said it was too early to tell how much.
The Philippine Inquirer reported that Duterte will try to smooth over the issue later this month when he meets with Chinese President Xi Jinping.
Finance Secretary Carlos Dominguez III said he’s “certain” that the Philippine government was “addressing the issues raised” by the Chinese Embassy.
PAGCOR clarified that foreign workers living in hubs for POGO operations are “free to go wherever they may want to, do whatever they may want, within the limits of the law.”
Adding to the stress, Reuters reported, the industry is highly opaque and its scale is almost impossible to measure, with the official numbers of operators and workers in the Philippines believed to be hugely understated, and little incentive to target unlicensed businesses that are bringing money into the economy.
The Chinese complaint comes as prominent Philippines lawmakers and some ministers have started calling for tighter controls on Chinese entering the country, saying many are working illegally on tourist visas.
It also comes amid strains in ties between the two historic foes that had worsened under Philippine President Rodrigo Duterte, largely due to what Manila sees as a pattern of provocation this year by Chinese coastguard, military and fishing militia in the South China Sea.
Presidential spokesman Salvador Panelo said he was not aware of any official communication from China about abuses.
The Chinese influx started in 2016, coinciding with the rise of Duterte, who backed the gaming regulator’s move to license internet gambling.
A report backed by the Chinese state last month singled out Macau’s biggest junket operator, Suncity, for causing harm to China by facilitating online gaming and proxy betting worth one trillion yuan ($142 billion) annually.
Bloomberg reports that the demand comes largely from two types of activity. In online gambling, small-time bettors wager as little as 10 yuan each time while watching live streams of the proceedings on their smart phones. Then there is proxy betting, its richer, better-dressed cousin, where high rollers communicate with staffers wearing headsets at baccarat tables in offshore or land-based casinos. Proxy betting now accounts for 40 percent of the $1 billion VIP gaming market in the Philippines, according to brokerage CICC.
China’s pushback comes as Macau grapples with a drop in high rollers, which account for 55 percent of the world’s biggest gambling hub’s $40 billion in annual revenue. Many of them have taken their business to Southeast Asian nations like the Philippines, where proxy gambling is permitted, although it is banned in Macau, Singapore and Australia. The drop in VIP revenues has put pressure on growth in Macau, and forced casinos to widen their appeal by building theme parks and concert halls for middle-class tourists.
Proxy betting is a channel for money laundering, according to a 2017 U.S. government report, because the practice allows players to conceal their identities. Some Philippines lawmakers want casinos to be placed on a list of institutions monitored for money laundering due to high profile incidents, like a 2016 heist of $81 million from Bangladesh’s foreign reserves, which were routed through a Philippine casino, a junket operator and a gaming-room promoter.
