Is there a Communist Takeover Plot in Macau? By Ken Adams October 5, 2016 at 7:50 pm The government of Communist China and its surrogate in Macau may be laying the ground work to take the licenses of foreign-owned casinos and give them to Chinese operators. Of course I have no hard evidence; I am just speculating while trying to read between the lines and looking for conspiracies. SJM, the company founded by Stanley Ho, Macau’s godfather of gambling, recently announced it was delaying the opening of the Grand Lisboa Palace in Cotai until 2018. SMJ has said it will have room for 700 table games and trusts its request will be treated fairly. SMJ is spending $3.9 billion on the project and probably hopes in two years it will have a better idea of the regulatory and market conditions when the intent of Communist China is clearer. In the meantime, SMJ is letting Wynn, Sands and Melco test the waters; each received a much smaller allotment of VIP tables than anticipated in the original plans. And now they must try to service their debt with the revenue from mass market gamblers, restaurants and hotel rooms. Missing from the revenue mix are the high rolling VIP gamblers who existed before June 2014; you know the guys who paid the bills. The construction work will be completed at the end of 2017 and we hope that it can be open in 2018,” So said the Grand Lisboa Palace casino will have room for up to 700 gaming tables. Macau News, 8-11-16 Stanley Ho owned gambling in Macau until the government ended his monopoly in 2002. The first of the new casinos – Las Vegas Sands’ Venetian – opened in 2004, others opened in rapid succession with each taking a bit of Ho’s apple. Three years ago SNJ had close to a 30 percent market share, now it is less than 20 percent and shrinking. SMJ has lost market share month after month to the Sands, Melco, MGM and Wynn – the foreigners. Given the circumstances, Ho’s company might be plotting a bit of revenge. However there could be more to the postponement than revenge, construction delays or marketing strategies. The Wynn and Sands allotment and the timing of SMJ’s announcement make me wonder if something else is not afoot. Could it be that the government’s long-term plan includes Chinese ownership of Macau’s resorts? Stanley Ho is, after all, Chinese. He might have inside information. The government took over a magazine, changed management and then continued publishing under a new name; and a steel company had its license seized for falsifying records. If a magazine or steel company, why not a casino? The ousted editors of a liberal Chinese magazine are suing the government in an effort to wrest back control of one of the country’s best-known political journals. The struggle for the journal’s reins comes at a time when President Xi Jinping’s administration is quashing dissent and revisionist voices. Macau Daily Times, 8-17-16 The Court of Final Appeal last week turned down an appeal from Central Steel to overturn the government’s abolition of its license. The Securities and Futures Commission of Hong Kong discovered that CMR had been falsifying the majority of its annual revenue figures and official documents. Macau Business, 10-3-16 The plan that I think might be unfolding is part of a bait and switch strategy. The foreign casino developers have been encouraged to invest in Macau. In 2014, they were asked to invest even more to attract a broader audience. But once the investments have been made and the infrastructure is in place, the foreigners are expendable. I think SMJ is right – the government will treat them fairly and certainly better than Melco, Wynn and Sands have been treated. Taking control of the foreign-owned casinos would not be as difficult as one might think. In 2020, the licenses will be up for review. Reissuing a license will depend on whether the government thinks the operator is doing a good job. There are no fixed and measureable standards, just “good jobs” and “bad jobs” categories. “It is the government that judges whether we are doing a good job, and it will decide how to deal with the licenses during the renewal,” Lui Che-Woo Galaxy Entertainment said. Bloomberg, 9-7-16 So, the casinos are investing huge sums and working very hard to do that good job; two casinos opened in September that cost $7 billion to build. Regardless of the amount invested by Wynn and Adelson, I suspect they will find that Chinese companies like SMJ are capable of doing a better “good job” than those owned by Americans.