Beijing  - Police in the eastern Chinese city of Hangzhou have arrested 11 suspects in an illegal gambling network linked via the internet to a casino in the Philippines, state media said on Thursday.

A local businessman, identified only by the surname Li, set up the network last March after meeting representatives of the unidentified casino during a gambling trip to Macao, the official China Daily quoted police as saying.

Li paid the casino a deposit of 5 million yuan (730,000 dollars) to act as its agent in China, allowing customers to see real-time images of the casino and place bets through his account.

Li recruited other agents and the gambling network took stakes worth more than 500 million yuan.

"About 80 per cent of the gamblers are local businessmen and the chances are that the money they bet came from their companies' accounts," local police spokesman Wu Jun told the newspaper.

Police discovered the network after finding that a local businessman who defaulted on bank loans had used most of the money for gambling through the online casino, Wu said.

Online gambling is a huge business in China, where most forms of gambling remain illegal apart from state-run lotteries and small-scale totalizer-system betting on horse racing in some areas.

A court in Shanghai sentenced 20 people to prison in February after convicting them of running an online sports gambling operation worth nearly 1 billion dollars. (dpa)