Openness and transparency are basic norms for the lottery industry. Wang said the recent public debate on whether the prizewinner of 113 million yuan ($15.3 million) should be anonymous sheds light on a deeper issue that the transparency of the lottery industry in China urgently needs to be improved. Wang said this is not only about the interests of lottery buyers but also the survival and development of the industry in China.

System loopholes

The government has so far failed to define the role of the state-run lottery industry, which has exempted this lucrative business from effective supervision. Many people regard China's lottery industry as an independent interest group, which explains why the lottery industry has been riddled with scandals in recent years. Zhang's corruption case is not pure coincidence, they argue.

It was reported by Shenzhen Daily that according to China's Chief Auditor Li Jinhua's report to the National

People's Congress in September 2005, the Sports Lottery Administrative Center established a print plant and an issuing company and paid them far above market rates, which translated into the two companies' combined profit of 558 million yuan ($75.4 million) from 2003 to 2004.

With the approval of China General Administration of Sport, the two companies also spent 130 million yuan ($17.6 million) buying a building for rental purposes. They also paid 37.5 million yuan ($5.1 million) in dividends to its investors, most of which were central or local sports authorities. They also handed out another 131 million yuan ($17.7 million) in personal bonuses, Li said.

China's sports lottery has tried to separate its issuance from its administration. In practice, the Sports Lottery Administrative Center is in charge of administration while issuance and sales are commissioned to companies. However, there have been no regulations on how to select companies and whether public bidding should be introduced. This blank in regulation has enabled Zhang to obtain profits from monopoly companies appointed by him.

"The roles of government and market forces in the lottery industry should be clearly separated, but in China the government is both supervisor of the market and seller of lottery tickets," said Professor Shen Mingming at the Research Center for Contemporary China, Peking University.

Legislation hindered by interest groups

"Since the lottery industry has strong adverse effects, the lack of laws and regulations for this industry have already harmed its healthy development," said Wang.

A document from the Central Government in 1987 stipulated that only civil affairs departments are allowed to sell lottery tickets. This situation had lasted until the founding of the Sports Lottery Administrative Center in 1994. The Ministry of Education and the State Administration of Environment Protection have also tried to win the rights to issue lotteries, but have so far failed.

All regulations on the lottery industry took shape in 1995. At that time, supervisory authority of its operation went to the People's Bank of China. In 1999, the Ministry of Finance became the supervisor.

Shen believes that two essential shortcomings of China's lottery industry are its high threshold for new players and the failure to publicize the use of money raised by the lottery. He believes these problems can only be solved by drafting new laws.

So far, the highest regulation on the lottery industry is a regulation issued by the Ministry of Finance on lottery issuance and sales in March 2002. The Ministry of Finance and the State Council started to draft a law on the lottery in 2001. Over the last six years, the Ministry of Finance, Ministry of Civil Affairs and China General Administration of Sport have been discussing and revising a draft version of lottery law.

After participating in several deliberations on the upcoming law on the lottery industry, Shen believes the lengthy and difficult legislative process is attributable to two factors. The first is the lack of theoretical studies on the lottery business. The other is that the new law would hinder the interests of many government departments.

This December, Ding Feng, a senior official of the Legislative Affairs Office of the State Council, said that China's first national regulations on the supervision of the lottery industry are expected to come out in 2008. Although these are regulations rather than law, they have drawn on the experience of other countries and regions in making explicit stipulations about each aspect of the lottery, such as distribution, sales, announcement of results and fund management.