26 May 2019
President Xi Jinping's intensified campaign against corruption has led to a disastrous year for major casino operators in Macau. Photo: Bloomberg
President Xi Jinping's intensified campaign against corruption has led to a disastrous year for major casino operators in Macau. Photo: Bloomberg

Xi visit to show support for Macau diversification

Macau, the world’s largest gambling hub, cannot remain a one-industry town.

That is likely to be the message of President Xi Jinping when he visits the territory on Friday to mark the 15th anniversary of its return to Chinese sovereignty.

Xi’s intensified campaign against corruption has led to a disastrous year for major Macau casino companies, which have lost a combined US$58 billion in market value over the past six months as high-rolling gamblers stayed away, Reuters said.

Much of the illicit money from corrupt activities in mainland China found its way into the former Portuguese enclave, which became a paradise for Chinese officials and businessmen to flaunt their wealth and indulge themselves with private jets and sumptuous hotel suites. Gambling revenue hit US$45 billion last year, seven times Las Vegas’s take.

And that’s why Beijing’s crackdown on graft has to include Macau. China’s Economic Crimes Investigation Bureau has been given access to transactions made through the state-backed UnionPay credit card, the news agency said, citing a report from the South China Morning Post.

UnionPay has been a conduit for growing numbers of Chinese to illegally send billions of dollars abroad, Reuters said.

The corruption link helps explain Beijing’s interest in seeing Macau expand beyond casinos into more family-friendly entertainment.

Li Gang, China’s representative in Macau, warned on Sunday that “the dominance of one industry can lead the city to prosperity, but it also can lead to its demise”.

During his visit, the President is expected to voice his support for Macau diversifying beyond gambling.

“Xi’s visit definitely means more control on the gaming path, especially for VIPs,” said one junket operator who declined to be named, referring to the high-rollers who accounted for two-thirds of Macau’s revenue last year but now represent just 56 percent.

Hong Kong-listed casino stocks have plunged 32-51 percent since the start of the year, underperforming the benchmark Hang Seng Index, which has dropped 2 percent during the period.

China wants Macau’s casino companies to shift their focus to culture, sports and retail, and the local government has a way to make them comply.

Discussions on casino license renewals start next year, and the earliest concessions expire in 2020. The government has said it’s looking at how effectively operators provide non-gaming amenities in their new resorts.

Casino moguls including US billionaires Sheldon Adelson and Steve Wynn are also under pressure to add non-gaming elements to secure coveted gambling tables.

Adelson, who has led diversification efforts in Macau with an exhibition arena and hotels, is building a mock Eiffel Tower replica, while Wynn is building a palatial US$4 billion resort with a massive lake and air-conditioned gondolas, the report said.

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