A China horse-racing punt goes to pot

More people should have listened to analyst Kelvin Tan of Las Vegas Sands, the Nevada-based hotel, gaming and retail corporation. When reports began appearing on various horse-racing websites at the end of October stating that Beijing Jockey Club had been awarded an unprecedented 12-month gambling license, Mr Tan swam against the tide, maintaining that the Chinese government would continue to restrict betting to table games in border casinos. Had his bearish stance been adopted earlier by the main drivers behind the Beijing Jockey Club’s ambitious breeding, training and racing programme -- namely Hong Kong businessman Yun Pung Cheng and his racing director Kevin Connolly -- things might not have taken as dramatic a turn as they did in the last month, when more than 600 thoroughbreds were given lethal injections as fortunes at the club waned. In a country where considerably less humane slaughter methods are widely employed, the mass-euthanasia has been described by the chief executive of the International League for the Protection of Horses as “a tragedy, but not one as bad as neglect, starvation or being sold to work in front of a cart for the rest of your days”. Nonetheless, with the 2008 Olympics looming, it is a major PR blow for animal-unfriendly China, which is having to stage its Olympic equestrian events in Hong Kong as a result of being unable to provide adequate quarantine provision. Not to mention a huge blow for the 600 horses who met their maker.

Beijing Jockey Club was established in 2001 by toy-manufacturing magnate YP Cheng, whose investments in the venture currently lie somewhere around the US$100m mark. He installed Irishman Kevin Connolly, a former trainer, as his racing director, and the two oversaw considerable growth in the last four years as hundreds of horses were flown in, mostly from Australia, but also Britain and Ireland, and cared for by a staff of over 700. The club covers 1200 hectares, and comprises three race tracks, 900 stables, a blood-typing laboratory, two swimming pools, four walkers, sand yards and a series of hospitality suites -- much of which will now lie fallow as the course and its operations have been entirely shut down. Trainer Nigel Smith said, “We’ve been told we might restart in 18 months, but it’s a huge blow.” Connolly himself admits, “Racing will not begin again until we have a clear direction from the government”. And that direction would have to involve some kind of concession regarding gambling activity, upon which the entire racing world is arguably contingent. Anticipation of a relaxation of the rules by Beijing was the lynchpin of YP Cheng’s investment, but as with so many policy issues, the powers that be are essentially inscrutable when it comes to such matters.

Anything ever written about the prospects of the racing industry in China in the last decade has had to temper its pitch with a reference to the fact that gambling is illegal in the mainland, although back in 2004, Connolly was quoted as saying that the betting issue was not an integral factor in the success of the business, with rural regeneration, entertainment and employment also playing their parts. Dr Treve Williams, a long-time veterinary expert who has been involved with the Beijing Jockey Club also played down the gambling component last year, describing the time spent by commentators speculating on the implementation of a wagering system as ‘wasted’. Indeed for a long time, the club effectively circumvented the betting ban by offering race-goers free membership, which duly enabled them to purchase vouchers representing the various runners. Odds were in turn dictated by the number of vouchers bought per horse, an indication of its popularity, and cash winnings were paid out.

According to Connolly, the 2003 season saw the introduction of a full tote system, run as a pilot project with cooperation from the local government. Meetings generated approximately RMB 500,000 (US$62,000) in total on which tax was duly paid. But all these activities, whether overtly or covertly sanctioned by the government, were called to a halt about a year ago, leaving the club to limp through its third season as prospects of any kind of policy turnaround diminished. Whether for want of patience or money -- most likely both -- the course was almost entirely shut down on the eve of its richest meeting at the beginning of October. Entering the market ahead of the game is every player’s dream in China, but for now, the odds are proving too long for the Beijing Jockey Club and its ambitions.