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Why Chinese Entrepreneurs Keep Investing In A Sport That's Been Banned For 70 Years

Hong Kong

Horse racing and gambling were popular in China for the first few thousand years of human life on earth. Over the past half-century, though, anti-gambling laws marooned the sport. Today, mainland China sees few races, slow horses and a black hole that eats bright-eyed investors alive and produces boneyards of abandoned dreams and a few ghostly racetracks.

Ren Ningning is the latest newcomer. He made his fortune selling concrete. Now, he is pouring that money into horse racing. By his own account, he has already sunk millions into his new pet venture. Ren owns more than 50 Australian thoroughbreds, including expensive broodmares, and runs two stables. His slow-building plan: to breed and sell world class horses inside China.

It remains unclear where all those horses would race. There are strict, slow, and expensive protocols to move horses in and out of the Chinese mainland. Before entering Australia, for example, any China-based horse must first spend six months or more in an approved buffer zone, such as New Zealand. Only about 60 small races run each year across the expanse of China, compared to 740 between the Hong Kong Jockey Club’s two tracks among the dense, vertical city.

The Hong Kong Jockey Club profited $27.67 USD million last year, breaking the previous year’s record. The potential profits of those numbers with the population found in mainland cities turns heads and then cracks skulls. If Ren decides to hang up the saddle, he wouldn’t be the first victim or the last.

Attempts to revive China's horse culture

The stereotype of China’s wealthy as buy-happy showboats is a global vision so strong it can sell horse racing as a profitable business without any gambling -- which would be a first.

In 2010, the announcement of the Tianjin Horse City, near Beijing, promised a return of horse culture. Since then, “Tianjin Horse City” changed the name to “Tianjin Equine Culture City.” Then, the main business partner changed. Then, the location changed, and construction never began. Entrepreneur Wu Zhala who wrote the business plan, later admitted: “I’m not very clear what the real business model is.”

After the Republic of China banned horse racing in 1945, a decision upheld after the communist revolution by the People’s Republic, racing only lived on in traditional communities on the steppes near the Mongolian border or in the far west. The British Shanghai Race Club, once the world’s most extravagant, is now an art museum. In China today, horse racing tends to evoke stink eyes leveled at rural ethnic minority communities or complicated emotions from a society recently liberated from colonization.

When Byron Constable, a British IT entrepreneur, bought the lapsed copyright to The Shanghai Race Club in 2009, he planned to parlay the name into a luxury brand. Horses would be the new Ferraris.

Constable banked on the idea that rich Chinese swarm to decadence. He threw swanky parties festooned by wide-brimmed hats. The attached web platform, PaoMa.com, live-streamed video, fed from the United Kingdom by popular British racing site AtTheRaces.com. Members could “book a horse,” purchasing the animal only for race day and taking half the profits. Because the ownership rights transferred, it wasn’t gambling.

By Constable’s measure, half-a-million viewers tuned in each month. But few bought horses. He sold six, two to himself. At $25,000 a horse, the actual sales never met the predestined hype.

Today, PaoMa.com features pixelated simulations of cartoon horse races on repeat. Someone could, if their life had gotten to this point, bet on non-existent digital horses with soundbites of whinnies and hoofbeats nickering through the computer speakers.

First in line

The Hong Kong Jockey Club remains the destination for mainland Chinese and their betting money. The club’s profits reap so much tax revenue -- $2.78 billion last year – that in Hong Kong it’s called “the government’s ATM.”

Even with such success, the allure of a foothold in China beckons. After announcing a 2014 deal to open a training facility just across the border near Guangzhou, the Hong Kong Jockey Club became first in line if anti-gambling laws weaken. But they since admitted they underestimated the mainland’s bureaucratic jungle gym.

The 2017 opening date moved to 2018. And on October 2, Australian authorities changed Hong Kong’s quarantine status, accounting for the change in biological environment due to horses visiting the mainland. Profits are already affected -- Australia-bound horses stalled in Hong Kong’s limited stables now await new travel plans. As early as Longines Hong Kong Cup in December, the club will begin to see downstream effects.

Thus far, Ren only sells horses to a small handful of acquaintances and races the odd event. If his idiosyncratic vision holds any graces, it’s his impressively low ambitions. Ren's interests sound less like commercial gambits or cultural revivals, and more like personal whims. If his eyes gaze less beguilingly than his predecessors, and his hands remain full of billions of dollars, he may have a chance to stay in business. But if Ren wants to move forward, the problem remains: No one is quite sure how.

August Rick
Forbes

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