What the Chinese Want Even More than Oil or Gold
By Braden Copeland, editor, Inside Strategist
January 25, 2010

I thought I was prepared for my first visit to China.

Back in 2006, I started visiting the country regularly for a business venture. But my first time there, I saw something completely unexpected...

It wasn't the booming economy. Or the jungle of brand-new skyscrapers. Or even the sheer number of people.

No. What amazed me most was how much the Chinese love gambling. Gamblers are everywhere. At one of the factories I visited outside Shenzhen, I noticed groups of workers playing billiards for money during their breaks. And every third storefront along the city streets had guys sitting out front playing cards and other betting games, with a pot of cash in the center.

For years, the Chinese have indulged their fanatical gambling habit by playing illegal lotteries and informal betting games.

But this year, all that will change. Dramatically.

Last summer – on July 1, 2009 – the Chinese government quietly approved a new gambling law, allowing lotteries to operate across the entire nation... and expanding China's gaming markets for the first time in decades.

According to Peking University researchers, China's lottery is estimated to grow into a colossal $150 billion industry, thanks to this new law. That's almost three times the size of the U.S. lottery market, which is currently the world's largest. It's also equivalent to the economic output of entire countries like Egypt and New Zealand.

And that's a conservative estimate. David Green, a gaming expert at PricewaterhouseCoopers, says the market could be as big as $600 billion per year. That's how big the illegal betting market is right now.

So how much money is at stake here? Let me show you...

This isn't the first time a new gambling law has been passed in Asia. And it's not the first time you could have made a fortune riding the wave of profits that almost always follows the passage of such laws.

For example, in 2001, a tiny independently governed region off the southeastern coast of China legalized casino gambling for the first time in its history.

You've almost certainly heard of it: Macau.

What you may not know is that, within just a few short years, Macau overtook Las Vegas as the most profitable gambling destination in the world. When one of the first casinos – operated by U.S.-based Las Vegas Sands – opened in May 2004, a phenomenal crowd of 30,000 folks clamored to get in. Ninety percent of them traveled from mainland China, just to experience a new and exciting gambling phenomenon.

And for U.S. investors who got in on the Macau trend early, the payouts were simply astounding...

• Las Vegas Sands (LVS) shot up as high as 320% after the company's December 2004 initial public offering.

• Wynn Resorts (WYNN), another American company that opened a profitable casino in Macau, could have made you 1,325% gains in just five years.

• Melco International, a Macau casino stock, shot up as high as 1,700% after the new law was passed.

And Macau isn't the only place you could have seen phenomenal gains recently... Something similar happened in neighboring Thailand.

After years of tightly enforced bans on gambling, the Thai government decided to pass a new law allowing online lotteries last year. A company called Loxley cut a deal with the government. If you had been following the story, you could have banked 228% gains on the stock, right after the deal was announced.

On the Ground in China's Gambling Capital Would You Like a Lamborghini for $40?

More recently, VoDone Limited, a Hong Kong-based company, took advantage of China's new lottery law. It has launched lottery games through its website and through mobile phones.