The Chinese lottery: a tax on hope

Critics of lotteries the world over often describe them as taxes on the poor, and for good reason. From the US to Spain, lower-income citizens are the biggest buyers of lottery tickets, and, as a group, they will lose at least 35 per cent of what they spend.

In China, though, it is more accurate to describe the lottery as a tax on hope. Those buying tickets tend to earn more than average, but they have run into the chasm that is China’s wealth gap and see the lottery as their best bridge across it.

As my article in the FT explains, Mao enforced a strict ban on gambling but punters who are feeling lucky today need look no further than the state-run lottery – and tens of millions are doing just that. Nationwide ticket sales topped $40bn last year. Having only just started in the late 1980s, China is on track to eclipse the US as the world’s biggest lottery market in the next decade.

If the pattern seen in other countries repeated in China, you might expect peasants and migrant workers – the poorest of its people – to be the biggest buyers of tickets. That is not the case.

A survey last year by the lottery research centre of Beijing Normal University gave a profile of China’s 200 million-strong lottery-playing population. Several points jump out:

  • 73 per cent are between the ages 26 and 34
  • 70 per cent have salaries of Rmb3000-5000 a month, higher than factory workers although lower than white-collar professionals
  • 70 per cent have university degrees
  • 80 per cent believe their social status is not high

The picture that emerges is of young people who are reasonably comfortable but have hit a ceiling in their career and social progression.

Chen Haiping, a researcher at Beijing Normal University, told me that China’s huge wealth gap was driving these people to pay:

With property prices so high, lots of people, especially low and middle income earners, feel they will never be able to afford a home relying on their own hard work alone, so they buy lottery tickets hoping to change their fate.

In other words, the more extreme the inequality, the greater the incentive to play. Even if those buying tickets in China know the odds are long, they see quick-fix solutions like the lottery as the only way to get ahead.

As China’s government admitted last week in publishing a Gini coefficient (a gauge of income disparity) for the first time since 2001, inequality has indeed risen to alarming levels. Independent economists pointed out that the wealth gap is probably even bigger than what the official data reveal. This chart shows China’s official Gini coefficient readings:

A booming lottery industry is yet one more indicator of the distressing rise in Chinese inequality.