The significant and what some would call “over the top” reaction to the publication by Macau’s Gaming Inspection and Coordination Bureau of proposed amendments to gaming laws raises some interesting questions about how China views gambling within its local casino enclave.
It is no secret that, broadly speaking, Beijing frowns upon most forms of gambling, and as such has been actively letting the world know of increasing efforts to clamp down on what it calls cross-border gambling.
Over the past year or so, these efforts have included the establishment of a “blacklist” of overseas tourist destinations said to be disrupting the nation’s outbound tourism market by opening casinos targeting mainland Chinese customers; a plan by the Ministry of Public Security to destroy all cross-border gambling syndicates operating in China and cut off capital and technology chains; the People’s Bank of China pledging to target “capital chains” within the financial sector seen to be aiding gambling; and the Cyberspace Administration of China outlining its own plans to crack down on offshore gambling groups and activities which solicit gamblers via websites and mobile applications in its territories.
It is no doubt with this in mind that investors reacted so strongly to September’s long-awaited gaming law announcement, wiping 26% or US$18.4 billion off the market capitalization of Macau’s six gaming concessionaires in the space of 24 hours.
Although the proposed amendments were light on detail, insecurity around how many new licenses will be issued once the current concessions expire next year, a plan to require government approval before paying dividends, and the potential planting of a government representative into each concessionaire (possibly in a boardroom capacity) have raised more questions than answers.
At their most dramatic, some news outlets suggested this was the end of Macau’s casino market with China clearly determined to put an end to the days of multi-billion-dollar profits.
In reality, the proposed amendments to Macau’s gaming law suggest no such thing, other than a determination to ensure the citizens of Macau reap the benefits of the world’s largest casino market. This in itself was fully expected.
One has to wonder what China would gain from bringing down an industry that has made one of its territories so prosperous. Thanks to the immense pulling power of Macau’s integrated resorts, tax revenue from the industry makes up almost 80% of all tax revenue in the SAR each year, which in turn has helped the Macau government build a healthy fiscal reserve of some MOP$664 billion (US$83 billion) – a handy buffer in times like these.
The next few months will shed much more light on the future landscape for Macau’s gaming operators, but I’d be willing to bet that the sky is not falling in.
