Why gambling won't be allowed on Hainan anytime soon

February 06, 2018 17:09
If China wants to pick another city as additional gaming hub, it may opt for a less developed place, rather than Hainan, according to some observers. Photo: Bloomberg

Macau gaming stocks took a dive last week after reports that China is drafting a proposal to allow gambling on Hainan Island. Authorities, meanwhile, sought to dismiss such talk as rumors spread by vested interests, particularly real estate agents. According to some reports, Hainan police detained six people for fabricating and spreading false information.

In my opinion, other than Macau, China is unlikely to allow gambling. A key factor is this: gambling simply goes against the ideology of Communism.

True, many popular mobile games have gambling element. Also, Chinese authorities have already introduced a state-run welfare and sport lottery. However, that's still quite different from casino gambling.

China's neighboring nations and some others in the region, including Japan, South Korea, Philippines, Cambodia, Malaysia, Singapore, Vietnam and Russia have all opened, or are preparing to open, casinos in a bid to attract Chinese tourists.

Although it would be better for China to keep this lucrative business at home, the fact is gambling won't add much to the country's already huge gross domestic product (GDP).

To give a rough idea, Las Vegas' gaming industry contributes less than 0.1 percent of the US GDP.

Even if China considers allowing a region other than Macau to introduce gambling, it won't be Hainan.

The resort island is already a top destination for holiday makers in China who are attracted by its beautiful beaches and pleasant weather.

Given the potential boost to local economy, if China wants to pick another city as additional gaming hub, it will most likely be a less developed, economically lagging region.

To win back some of the lost business in the existing gaming hub, China could perhaps even relax its tight grip on Macau and make it easier for mainlanders to travel there.

After all, higher gaming revenue means higher fiscal income for Macau government, which will in turn provide support to important projects such as Hong Kong-Zhuhai-Macau Bridge and Hengqin free trade zone.

Macau government is currently reviewing its gaming laws as the city's six gaming licenses are to expire from 2020. There has been speculation that authorities may issue a new license.

This article appeared in the Hong Kong Economic Journal on Feb 6

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist