Zhao Tian, holding a newspaper containing horse racing information, argued excitedly with the guy sitting next to him on the shuttle to the Beijing Jockey Club (BJC).

They were picking their horses for the September 11 races.

Zhao, a retired engineer, is one of the hundreds of city dwellers who flock to BJC, in a suburb in eastern Beijing, on the weekends to lay money on the ponies.

Analysts suggest the Chinese Government should take a strategic, long-term view towards pari-mutuel betting on horse racing, and begin implementing scientific measures to better regulate the sector.

"Pari-mutuel betting on horse racing is still not legal in the Chinese mainland, but the government should not ignore the existence of such activities in China," said Wang Xuehong, executive director of the China Centre for Lottery Studies at Peking University.

BJC holds nearly 10 races each Saturday from March to November.

Racing information on horses, trainers and jockeys is published in Beijing Star Daily a day before each race day. Beijing Television-6 broadcasts the races live.

Spectators can bet a minimum of 10 yuan (US$1.20) per race.

Remote wagering from outside the track is not allowed.

Betting methods, which include win, place, win/place, quinella and tierce, are the same as in jockey clubs abroad.

"To jockeys and trainers, horse racing may still be a kind of sport. But to the audiences, as long as there is money involved, it has the characteristics of pari-mutuel wagering," Wang told China Business Weekly.

Lin Sai, BJC's assistant project managing director, said BJC is acting as a "pilot" for horse race wagering operations in China.

The State Sport General Administration (SSGA)'s lottery administration centre, which is in charge of sports lotteries in China, declined to comment on BJC's practices.

Some media have reported BJC has been lobbying the government to issue horse race lotteries with the SSGA in China.

Nothing has been decided, Lin said.

"The government should adopt a strategic, long-term view towards pari-mutuel wagering, which could become an industry," Wang said.

"Horse race wagering can, in fact, raise the country's tax revenues and serve as a unique financial tool for raising money for the sports industry in China.

"The money raised could be used to breed fine varieties of horses, which is essential to improve China's overall level of horsemanship competition, and costs lots and lots of money."

BJC in March began paying about 15 per cent of the betting pool as tax, as personal income taxes of bet winners.

By the end of July, BJC had paid 1.38 million yuan (US$166,200) in taxes, Li Qiu, BJC's board member, was quoted as saying by Beijing Youth Daily.

The winning payout at BJC is 70 per cent.

About 8 per cent of the revenues are used to cover costs arising from the races, and the remaining 7 per cent is BJC's profit, Lin said.

"It is very, very hard to eradicate underground wagering by simply cracking down on it, given the fact there is market demand for it, as Chinese people have higher incomes ... and want to have more recreation choices," Wang said.

"But it is not wise to legalize it over night. The government should speed up efforts to develop scientific measures, including laws and regulations, to manage this sector."

Wang said China still lacks appropriate laws and regulations on lotteries, even though the country introduced welfare and sports lotteries as early as the 1980s.

In the early 1990s, Guangzhou was chosen by the government as a pilot city for horse race wagering. But it was halted in 1999.

According to rumours, some government officials got involved and manipulated the races.

"If China is to approve pari-mutuel betting, government functions must be separated from race operations, otherwise the industry will not grow healthily," Wang said.

Lin said the betting pool currently is not large enough for BJC to make handsome profits.

"Sometimes the pool may reach 700,000-800,000 yuan (US$84,337-96,386) in one afternoon," Lin said. "But every year the operation of the club costs about 100 million yuan (US$12 million)."

The club's main profit now comes from horse breeding, he said.

The club has more than 2,000 thoroughbred horses.

A newborn horse usually costs at least 30,000 yuan (US$3,614.46).

"It's quite popular among the nouveau riche in Beijing. They usually entrust their horses to us, and come over on weekends," he said.

BJC also holds horse auctions every Saturday, he said.

"The horses on auction are usually winners from races. We once sold one for 840,000 yuan (US$101,204.82)," he said.

(Business Weekly 09/21/2004 page8)