Global gambling hub crumbles in the face of China’s anti-corruption drive and zero COVID policy Global Voices Français
Macau, once the world’s biggest gambling hub, announced another round of COVID-19 PCR tests on the entire population after a single positive case was detected in its neighboring city of Zhuhai on August 8. Similar city-wide testing has become and will continue to be regular. convenient as the city must follow mainland China’s zero-COVID strategy in order to maintain quarantine-free travel to mainland China, especially its neighboring city Zhuhai in Guangdong province.
So far, the zero COVID strategy has been very successful in protecting Macau from the virus. As of August 12, the city of nearly 670,000 people had recorded just 791 total infections and six deaths since the outbreak of the pandemic in early 2020. Yet that feat comes at a price — the former Portuguese colony has lost his crown in the global gaming industry.
After the handover of sovereignty to China in December 1999, Macau presented its development plan to become Asia’s leading tourist, gaming, convention and exhibition destination by opening gaming licenses to foreign operators.
Currently, the six operators are: Wynn Macau, Sands China, MGM Macau, SJM Holdings, Galaxy Entertainment and Melco Resorts. The parent companies of the first three are based in Las Vegas, USA, while the other three are locally based in Macau and Hong Kong.
These operators work with an extensive network of junkets to attract gambling tourists from mainland China where gambling is illegal. Macau overtook Las Vegas in gross gaming revenue in 2007. In 2019, before the COVID-19 outbreak, Macau’s gaming revenue exceeded $29 billion, while Las Vegas, its biggest competitor, only pulled in only $6.6 billion in revenue.
City-wide mass testing and soft lockdown
The global gaming industry was severely weakened by the COVID-19 pandemic in 2020 due to travel restrictions and lockdowns and Macau also saw a 79% drop in gaming revenue to US$7.57 billion the same year.
In 2021, Macau’s gambling activity was mainly supported by mainland Chinese tourists who could travel to the city without quarantine restrictions. Annual revenue reached $10.82 billion, even more than Vegas’ normal annual revenue.
Yet, as Omicron variants hit Macau and mainland China in 2022, the casino city finally felt the pinch and lost its crown.
As part of China’s zero COVID protocol, Macau has banned all foreign visitors from March 18, 2022, to prevent Omicron from entering the city. However, COVID-19 variants quickly emerged in many Chinese cities, including Shanghai, Shenzhen and Zhuhai, leading to a drop in the number of mainland Chinese visitors to Macao.
Worse still, on June 19, 2022, an outbreak of the BA 5 Omicron subvariant was identified in Macau, leading officials to suspend quarantine-free travel between Macau and mainland China. Authorities have tried to rein in the outbreak by imposing rounds of PCR tests and triggering a soft citywide lockdown: non-essential businesses, including more than 30 casinos, must close for a week on July 11. The shutdown came at a huge price, and ultimately authorities failed to stem the outbreak.
Macau’s gaming revenue fell 95% in July to $49 million, the lowest monthly total in the market since the pandemic began in 2020.
COIVD-19 restrictions, including a 12-day stoppage of play, contributed to the decline.
“Macau remains a total black box for operators” @TheNVIndy
— Howard Stutz (@howardstutz) August 1, 2022
Meanwhile, as the licenses of the six current casino operators would expire at the end of 2022, the Macau government opened a new gambling tender from January 2023 for a term of up to ten years. While all existing dealers have said they will participate in the tender, some wonder if the city is still worth the extra investment as rules in the gaming industry have changed.
China’s crackdown on money laundering and outflows
Ahead of the tender, Macau passed a new gaming bill to narrow money laundering loopholes by shutting down junket-operated VIP rooms that facilitate cross-border money laundering, as highlighted Asia Gaming Brief:
Newly passed amendments to Macau’s gaming law reflect ‘significant shifts in policy objectives’ for the industry and align with China’s concerns over national security and illegal cross-border capital flows, writes firm leading local lawyers.
—Asia Gaming Brief (@agbrief) July 15, 2022
The amendments also increase gambling tax to 40% and allow Macau’s chief executive to revoke concessions for national security reasons or when operators fail to meet their contractual obligations.
In recent years, Beijing has been concerned about rumors and reports of the link between US intelligence and Sheldon Adelson, the tycoon behind Sands China operating in Macau. There are also links between Steve Wynn, an American casino magnate and Macau gambling concessionaire, and Sun Lijun, a former vice minister of China’s public security bureau who recently pleaded guilty to corruption charges.
As US casino operators hold a large stake in the city’s gaming sector, Beijing is eager to tighten its surveillance on the sector, believing it to be a major way to squeeze money out of the city. China.
As global investors have retreated from the Chinese market in recent years due to the China-US trade war, China’s growing control over the private enterprise sector as well as Russia’s war on Ukraine, China is facing a capital outflow crisis that has created unprecedented pressure. on the country’s currency.
Beijing’s woes over Macau’s gaming sector are also reflected in recent lawsuits against junkets, including Levo Chan, former head of Macau’s casino junket brand, Tak Chun, and Alvin Chau, former head of the most Macau’s leading casino junket operator, Suncity Group Holdings:
Former executive director of junket group Tak Chun and former CEO of Macau Legend, Levo Chan Weng Li, will be formally charged by the prosecution for founding and leading a “secret association or society”… https://t .co /TeihCFEEwV
— Macau Business (@Macau_Business) August 9, 2022
Junket kingpin Alvin Chau is accused of causing the Macau government to lose at least $1 billion in gambling tax revenue from 2013-21, according to the indictment. Chau faces 286 charges of fraud, money laundering, leading a criminal group and illegal gamblinghttps://t.co/kYVRBDVVHQ
— Pak Yiu (@pakwayne) July 5, 2022
Chan and Chau have both been charged with money laundering and illegal gambling. Their business is to arrange extravagant gambling trips for wealthy mainland Chinese in Macau.
According to the lawsuit of 34 associates of Alvin Chau in the city of Wenzhou in mainland China, in 2015 Chau started operating a number of offshore online gambling platforms in the Philippines and facilitated gambling and illegal cross-border money laundering for over 60,000 members in mainland China. China. Chau will stand trial in Macau on September 2, 2022.
A new model
As stated in the tender for the new casino operator, future gaming licensees must develop a concrete proposal to “monitor and prevent illicit activities in casinos”. Officials hope this will curb past practices of anonymous gambling and credit.
Moreover, there will not be an unlimited supply of players from mainland China in the future, as Beijing sees outflows as a threat to the country’s economic security. Therefore, Macau needs to attract more foreign players.
In the long term, the city plans to diversify the gaming business. The new tender asks casino operators to invest in other non-gambling sectors, including health and culinary tourism, exhibitions, entertainment, arts and culture, among others.
Still, many have doubts about the plan because Macau has never been an international hub for global business. Moreover, while Macau has been entangled in China’s anti-corruption campaign and zero COVID strategy, new competitors from Singapore, the Philippines, Cambodia, Vietnam and others have been expanding their market share in the gaming market in Asia. Some gambling experts believe that with these changing conditions, Macau will never return to its former peak.
Macau has fallen! It’s official: Macau is no longer the center of the casino gaming universe. Macau’s dream is over – at least for the foreseeable future – after a formidable 18-year run https://t.co/Fx5fLnIdwa
— Chris Sieroty (@serotyfeatures) August 2, 2022