Macau Casinos’ Uncommon Prosperity Is at Risk
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Investors are folding their bets on Macau as they worry the gambling hub could be the next target of China’s all-encompassing regulatory crackdown.
Shares of casino operators in Macau plunged Wednesday after the semiautonomous Chinese city launched a public consultation on amending its gambling laws, ahead of the next June.Wynn Macaufell 29% while Sands China lost 33% on the news.
The most surprising suggestion in the consultation document is that the government should introduce representatives to supervise casino operators directly, even though it hasn’t provided details of how exactly that would be done. That has raised fears of tighter control of the industry, in an echo of the recent Chinese crackdown on the internet and education.
Glitzy casinos and high rollers certainly don’t sit easily with the populist “” theme now receiving a strong push from PresidentXi Jinping.If Beijing is focusing on , gambling could also be a potential target. Casino gambling is banned in mainland China but Chinese tourists are key customers for Macau casinos. That said, gambling, unlike tutoring and videogames, isn’t a specific issue for children—many observers believe falling birthrates highlighted by the recent dreadful census are one key factor driving recent regulatory crackdowns in China.
Social responsibility is one key aspect of the consultation, which may force future operators to devote more resources to the community. The document also suggested operators should fulfill certain conditions and get government approval before distributing profits to shareholders.
through Macau is also an issue that Beijing will be keeping an eye on. China’s anticorruption drive led to yearslong decline in gambling revenue there in 2014 to 2016.
The consultation document mentions that the government should focus on quality instead of quantity when granting new licenses. It also said that license length should be reviewed as the environment has changed dramatically since the city opened up its gambling industry two decades ago. Cutting the number of licenses or reducing their lengths would mean enormous uncertainty for current operators.
The worst case scenario is that some of the existing operators lose their licenses. But even if that doesn’t happen, they could face higher costs and stricter regulations. Despite the deteriorating U.S.-China relationship, American casino operators in Macau have so far remained unscathed. Their shares did worse than local operators in Wednesday’s selloff as investors worry that geopolitics might finally catch up.
The pandemic has already : Macau’s gambling revenue in the first eight months was 69% lower than in the same period in 2019. All bets are still off as new regulations—and an ever-broadening effort up north to reshape China’s economy and society—add even more uncertainty.
