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What the Chinese Government Thinks about Gambling and Why

What the Chinese Government Thinks about Gambling and Why

Gambling has been big business in China, particularly in Hong Kong and Macau, for quite some time. This is largely because vacationers from other countries visit these regions for gambling, entertainment and fine dining. However, it’s clear that the future of gambling in the country may not be promising. Andrew Lo, the executive director for Suncity Group Holdings, Ltd., confirms this. He states, “We are not seeing a rosy picture for 2019.” Lo goes on to explain the negative outlook is because “Macau’s business depends on China’s economy and policies so much.” Suncity Group Holdings, Ltd. is the publicly traded sector of the business. Lo’s department handles the dealings in casino gaming rooms and provides credit for affluent gamblers. Lo states, “If next year we can still have some growth, it’s already good news for us.”

It’s also clear that the patronage of wealthy Chinese gamblers is tied to the property and stock markets on the mainland. Both of these markets are currently in a downturn. Bloomberg surveyed analysts, who predict there will be a decline in Macau gambling. The survey indicated the growth of gaming revenue will decrease from 19 percent in 2017 to 14 percent in 2018. Analysts also predict revenue will further decrease to 5 percent in 2019.

The Growing Gambling Industry in Macau

Macau, China

A growing amount of the gambling industry’s profits come from mass-market tourists. These tourists spend significantly on entertainment and food and are often in gambling facilities when doing so. Macau also boasts some new casinos and tourist attractions. Many of these locations are brand new. These businesses have opened despite that fact that some companies aren’t clear on Macau’s gaming licensure. The Macau government refers to these businesses as “concessions.”

There are only six gaming operators in Macau with gaming licenses. In 2020, the licenses for MGM and SJM will expire. The licenses for Wynn, Sands, Melco Resorts, and Galaxy Entertainment Group will expire in 2022. These companies were contacted for comment about licensure, but didn’t respond.

The Macau government stated some of the details of the bidding process will be announced at the end f 2018. According to government officials, casino operators will have to place a bid for license renewal. The government will also have to approve the request for renewal for the companies to continue to do business.

Hoffman Ma, the deputy chairman of Success Universe Group Ltd., spoke on the state of gambling in Macau. Ma says “We are confident that Macau still has great potential to attract more tourists and gamblers.” Success Universe Group Ltd. invested in an SJM Holdings Ltd. casino’s gaming license. Ma also states, “In the next one or two years, Macau operators are unlikely to make investment decisions in Macau.” The chairman said the reason for this was because the process for license bidding is still “unclear.” He confirmed that investing in a business that may not be able to operate in two or three years is “too risky.”

American Gambling Companies in Macau

The changes occurring with Macau will likely affect American companies in the country most significantly. Ben Lee, a Macau managing partner for Asian gaming consulting firm iGamiX, commented on this. Lee asserts, “The trade war has increased the risk for U.S. operators.” American companies account for half of Macau licenses. Lee confirms that the negative changes in gambling “Already does not sit well with Beijing.”

However, some executives remain optimistic. Jim Murren, chief executive officer for MGM Resorts, is one of these executives. He states that he doesn’t think tensions between the U.S. and China will affect gambling licenses in Macau. Murren states, “It’s not for me to say, but I believe that Macau is a very unique economic engine for China and the Macau government.

Carlos Lobo, Macau gaming consultant and lawyer, also speaks on the issue of Macau’s gambling licensing. He says licensing applicants are likely to be treated fairly. Lobo states there likely won’t be preferential treatment for companies based on nationality. The lawyer states that companies focus on projects that produce long-term returns for Macau. However, Lobo also shares that “If operators try to play international politics in Macau, they may get into trouble.”

Gambling in Other Countries

In the meantime, money is going to smaller gambling hubs like the Philippines and Vietnam. The gambling industry in Japan is also growing. Japanese lawmakers approved a landmark bill this year making casinos legal. Junket operators, like Lo from Suncity Group, are expanding their companies to Vietnam and other countries due to Macau’s licensing uncertainties.

The first casinos in Japan are projected to open in 2025. However, the country is already expected to become one of Macau’s major rivals in terms of gambling. Some experts also believe some tourists may be more attracted to Japan than Macau for gaming and leisure. Lobo says, “I’m mostly worried about Japan–and even the Macau government now seems to be acknowledging that.” He asserts, “The Philippines, Vietnam, and South Korea are somewhat complementary to Macau, but Japan is a direct competitor.”

Mary Wang, a tourist visiting Macau from northeastern China, recounted the air of caution in Macau. Wang vacationed in Macau during China’s Golden Week in October. She states that after she won a poker bet, she and her friends decided to leave. Normally, they would have stayed to gamble more. Wang said, “It’s fun that we are together to gamble a little, but not too much.” Wang is a business owner on the mainland. She further states, “China’s market condition is not very good–not so easy to earn back the money if you lose too much.” Wang’s sentiments are likely ones that other gamblers can relate to. This can influence vacationer’s desire to come to Macau, which could cause the gambling market to suffer even more.

China’s Gambling Laws

Under Chinese law, gambling in the country is still officially illegal. However, Chinese citizens can participate in gaming “in practice.” This means they are allowed to participate in lotteries that are run by the state. Chinese citizens can also gamble in specific regions of Macau and Hong Kong. The legal system in these regions is similar to those in Portugal and the UK. These are the European countries that were former administrators in those Asian regions.

The Chinese government currently operates two lotteries: The China Welfare Lottery and the China Sports Lottery. According to the government, these lotteries are not considered a form of gambling. Even though gambling is not legal in the country, a significant number of citizens still participate in illegal gaming. There have been several attempts to establish casinos on China’s mainland. It is not likely there will be more casinos in China. This is especially true due to the revenue decline in Macau, which is one of China’s most popular gambling hubs. In 2018, the Chinese Government also banned all online poker, which indicates that gambling will likely slowdown in the country overall in the next few years.

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Jean Carter is from Oakland, California and studied jewelry design at the Fashion Institute of Design and Merchandising in San Francisco, California. After graduation, and pining for a warmer climate, Jean relocated to the Tule Springs suburb of Las Vegas, where she owns and operates her own online jewelry boutique incorporating traditional native American styles with her own unique designs. A true fan of the sophistication and glamor of Las Vegas casino life, Jean is also a freelance blogger specializing in all things suave and fashionable surrounding the casino lifestyle.