Why Asian Gaming Hub Macau is getting tougher on its big casinos

For many serious casino patrons, Chinese-ruled Macau has been a gambling mecca, with high-end shopping and even higher-stakes tables. One of the biggest gambling hubs in the world before the COVID-19 shutdowns, Macau is now under greater scrutiny of its casino scene in what analysts describe as an effort to control crime and capital outflows that have impacted mainland China’s economy.

A gaming bill currently pending in the Macau Legislative Assembly would prevent casino operators from issuing junket licenses, which are for larger organized tours, and from sharing revenue with any player-casino intermediary . It would limit the number of newly licensed casinos to six, with terms of 10 years, half the current time, while specifying the maximum number of gaming tables and slot machines.

Efforts to remake gambling in the former Portuguese colony that has long thrived on casino revenue are in line with Chinese President Xi Jinping’s ideals for a less corrupt and more controlled China, some analysts say.

Tourists from mainland China, the casinos’ main source of income, had brought so much money to the offshore territory in 2013 that China began to tighten rules to combat money laundering. The Chinese Communist Party is increasingly unhappy with the outflow of money from mainland China to Macau bank accounts and has been trying for years to slow this process down, said Dexter Roberts, American author of The myth of Chinese capitalism.

“I think in many ways, in Xi Jinping’s eyes, Macau is ugly and reprehensible,” Roberts said. “I think he would hold his nose and put up with it, knowing that the last thing they want to do is destroy Macau’s economy, but I think Xi Jinping actually has an attitude where he despises excessive wealth. (and) despises vice to some extent.

Controlled return of tourism

The COVID-19 pandemic has sealed Macau’s borders, even as far as Hong Kong, since the start of 2020, inflicting a “devastating shock” on casinos, said Rajiv Biswas, chief economist for Asia-Pacific at IHS Markit in Singapore.

Tourists from mainland China started returning in August 2020 when COVID-19 was brought under control, a tourism board spokesperson said. They are allowed to visit today in limited numbers.

“With the relatively stable COVID-19 pandemic situation in Macao and mainland China, tourism flows have started to resume between the two places gradually since mid-August 2020, putting the city’s tourism on the right track. path for a gradual recovery,” the spokesperson said. noted.

Arrivals totaling 7.7 million in 2021 were up 30% from 2020, but were 80% below pre-pandemic levels, according to data from the Macau Government Tourism Board. About 91% of visitors came from mainland China, up 48% from a year earlier, the data showed.

Macau, like Hong Kong, is a special administrative region of China with its own currency and immigration controls.

Straitjacket game

Macau pre-COVID mainly served day-trip groups from mainland China or Hong Kong. In the open-to-all casino areas, visitors played baccarat and poker alongside handfuls of tourists from other parts of the world, usually elsewhere in Asia.

Different from their American gambling hub counterparts in Las Vegas, Macau’s giant casinos eschew cheap eats and kiddie arcades and instead feature upscale shopping malls with designer clothes, jewelry and watches. .

Among the clientele are junket players. Junkets form when outside operators paid by casinos contact wealthy gamblers with offers of luxury travel. Some junket middlemen lend players money and collect debts.

As a sign of China’s goal to stop the practice, Macao police arrested junket organizer Alvin Chau in November on suspicion of criminal association, illegal operation of gambling and money laundering.

High-end shopping for tourists is expected to gain momentum over time. Macau could eventually turn into a place expressly reserved for wealthy Chinese who shop lavishly, said Stuart Orr, director of the School of Business at the Melbourne Institute of Technology.

Chinese officials will feel pressured to reopen in a pre-COVID fashion again, he said.

“I think it’s a challenge,” Orr said. “The economic consequences of continuing to shut down is that the economy starts to slow down, and I think many countries are dealing with that.”

Casinos that remain in the game will find that the bill removes “considerable uncertainty” about the scope of the new regulations in Macau, said Rajiv Biswas, chief economist for Asia-Pacific at the company. market researcher IHS Markit.

“Like these [COVID-19] restrictions are being gradually eased, this should allow for a strong rebound in Macau’s gambling industry in the medium term,” Biswas said. “Nevertheless, Macau’s gaming industry will need to adapt to operate in an environment of greater regulatory scrutiny.”

Wynn Macau, one of the territory’s largest casinos, did not respond to questions in this report about its future operations.

China’s economic repression is not limited to Macao. Regulators have tightened their grip over the past year on private education, internet technology and the listings of Chinese companies on offshore exchanges.

Last year, China paired Macau with neighboring China’s Guangdong province in a special economic zone with special tax policies and other policies aimed at diversifying Macau’s economy away from gambling into finance, high tech , traditional Chinese medicine, tourism, exhibition and trade.

But Chinese domestic arrivals remain a priority for now, according to the tourism board. “While at this stage, due to travel restrictions in place, the focus remains on attracting visitors from mainland China, with a synergy of online and offline promotions and events in the city, this office has similar plans pending to be launched in other destinations in the region and abroad, the once secure travel links with Macau are resuming,” the spokesperson said.

Chinese officials realize that gambling and tourism drive Macau’s economy, Roberts said, so they will avoid any crackdown so strong it hurts those core businesses.

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