Nearly $3 billion generated from China's state lotteries -- a quarter of the funds they raised in recent years -- have been "misappropriated" through embezzlement and other abuses such as buying cars, state-run media said on Friday.

A total of 16.9 billion yuan ($2.7 billion) raised by lotteries was used illegally, the government-published China Daily said, citing official auditors.

Gambling is illegal in China except where it is run by the government or the proceeds donated to charity, and official lotteries -- which sometimes also offer sports betting -- are popular.

At the same time corruption is widespread, with the Communist party attempting to assuage public anger with a heavily publicised crackdown.

The lottery funds -- representing a quarter of revenues from 2012 to 2014 -- were misused "through the purchase and establishment of office buildings, or has been embezzled", the report said.

Lottery funds were used to "organise overseas travel for officials" and to buy vehicles, it added.

It did not specify whether any officials had been punished for the abuses, saying only that some were "blamed", while billions in assets had been "recovered".

Since launching in 1987, China's main state lottery has brought in revenues of around two trillion yuan, according to official media.

Profits from the scheme are meant to fund sorely needed social welfare projects but many provinces do not routinely disclose how the revenues are spent.