A series of recent pronouncements by the Chinese government appear to suggest that China’s willingness to accept Macau as a “special case” in the global gambling landscape has reached its limit.
The prevailing wisdom within the industry, and specifically for those operating in the tiny Chinese enclave, is that while China strongly opposes gambling (among other forms), it would rather its citizens do so in Macau than nearby Philippines, Vietnam or Cambodia. At least that way most of the money stays on home soil.
Yet there is no escaping the fact that recent crackdowns on illegal gambling in China look likely to hurt Macau’s bottom line – in some cases there more so than in any other jurisdiction.
The most immediate concern relates to a recently launched three-year campaign targeting the flow of cash out of the mainland using underground banking systems – a campaign that strikes right at the heart of Macau’s VIP junket industry. While many believe that the days of junkets are numbered anyway, as operators increasingly move their focus to the higher margin premium mass segment, VIP still contributes a substantial amount to the SAR’s coffers. In 2019, for example, the VIP segment in Macau contributed gross gaming revenue of US$14 billion – more than double the entire gaming revenue brought in by Las Vegas casinos over the same period.
But there may be more for Macau to worry about than just the VIP segment. In August, China’s Ministry of Culture and Tourism announced that it had established a “blacklist” of cross-border tourist destinations it said were disrupting the nation’s outbound tourism market by opening casinos targeting mainland Chinese customers.
While none of those destinations were named, the Ministry said at the time that the blacklist system would see travel restrictions imposed on Chinese citizens going to overseas cities and scenic spots named on the blacklist.
Fast forward to October and news dropped that China has been eyeing amendments to its criminal law that would make it a new crime for foreign casinos to target Chinese players.
Both of these reports have been largely dismissed by analysts as irrelevant to Macau and perhaps even of benefit in the long run, because, as brokerage Sanford C Bernstein put it, “Macau is never discussed in terms of ‘overseas’ or ‘foreign’, as Macau is part of The People’s Republic of China and Macau has a legal casino market that supports much of the city’s economy and provides much of the government’s revenue.”
Yet, according to analysts from Credit Suisse, such thinking may well be contradicted by recent evidence appearing to show provincial Chinese governments taking aim at gambling in Macau.
“Although the crackdown rules have not provided a clear definition of the meaning of ‘cross-border’, at the provincial government level we note that Macau, including the junkets, casinos and shadow banking, are being named time and again on their list of crackdowns,” they state.
At the end of the day, it seems unlikely that China would see any great benefit in harming the prosperity of Macau, whose rising fortunes over the past two decades remain a shining beacon of just how the mainland’s “One Country, Two Systems” theory is supposed to work.
But perhaps there are also limits to just how much goodwill those fortunes can buy.
