Macau VIP casino industry out of luck as China cracks down on capital flows
By Farah Master HONG KONG (Reuters) - China's move to stamp out online gambling to help contain capital outflows is hitting liquidity in Macau's VIP segment, at a time when the world’s No.
By Farah Master
HONG KONG (Reuters) - China's move to stamp out online gambling to help contain capital outflows is hitting liquidity in Macau's VIP segment, at a time when the world’s No. 1 gambling hub is hobbled by slowing economic growth, Sino-U.S. tensions and coronavirus lockdowns.
In June, Beijing identified the cross-border flow of funds for gambling as a national security risk.
Since then, financing channels used by the online gambling sector and cryptocurrency lending platforms have been cut off, with tens of thousands of suspects arrested.
Authorities have frozen thousands of bank accounts and seized more than 229 billion yuan (25.14 billion pounds), according to government statements, while illegal gambling rings across the country have been purged on a near weekly basis.
Casino executives and junket operators in Macau, a special administrative region where casino gambling is legal, say the crackdown is hitting big spending VIP customers due to worries over their financing channels via the junkets.
“It definitely impacts liquidity,” said Lam Kai Kuong, director of the Macau Junket Association, adding the VIP industry may never return to revenue levels hit two years ago unless China stops its suppression of VIP gambling.
Gambling is illegal on the mainland and junkets operate in a grey area, luring big spending gamblers with luxury perks and lines of credit, often using underground banking networks and payment channels.
The VIP junket sector in the former Portuguese colony accounts for almost 50% of overall revenues, which hit $36.5 billion last year.
While many top junkets are not directly involved in online gambling, agents under them use these channels to settle debts and provide credit for high rollers.
"The junket sector in Macau has been living on borrowed time for years, and the end is drawing nearer," says Anthony Lawrance, managing director of Greater Bay Insight, a consultancy.
"China clearly intends to cut out these middlemen and gain better control over the outflows of renminbi (yuan) through Macau.”
Macau junket executives said while China was not targeting the Macau casino industry itself, the focus on money laundering and illegal transactions put pressure on liquidity.
The crackdown prompted some speculation that Asia’s top junket operator, Suncity, had been targeted by authorities last month.
The speculation saw around 900 players withdraw deposits from Suncity’s VIP clubs across casinos in Macau between July 9-11, according to an internal email sent among operators.
Macau’s police and gaming regulator were advised of the withdrawals, the notice said, while photographs on Wechat showed dozens of investors lining up outside Macau’s luxury parlours to withdraw cash amid fears it would be seized by authorities.
Following the withdrawals, Suncity’s Chairman Alvin Chau spoke in rare detail about the company’s financials in a seven minute online video, denying the company had been targeted and saying it had enough cash to cover bad debts and deposits for its customers.
Macau’s gaming regulator told Reuters last week it was paying close attention to the matter although so far it had not seen any “irregularities” concerning Suncity’s business.
Separately, in a notice to customers and reviewed by Reuters, junket AG Asia Entertainment, which targets Chinese gamblers via online operations in the Philippines, said it was ceasing operations and asked them to withdraw deposits before Aug. 12.
The crackdown comes as casinos struggle with a dearth of travellers due to coronavirus restrictions.
China has announced the resumption of Macau tourist visas for nationals from Sept. 23.
Ben Lee, founder of Macau gaming consultancy IGamiX said even if there was demand from high rollers to come to Macau, the ability of the junkets to finance gaming activity remains severely constrained and would put further onus on casino operators.
“The only way for the VIP segment to recover is for the casinos to expand their lines of credit without corresponding cash collateral (from the junkets) which has been a prerequisite for them in the past.”
(Reporting by Farah Master)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.