Macao’s Casino Industry Is Struggling
A high-profile arrest and political disapproval add to COVID-19-induced woes.
Welcome to Foreign Policy’s China Brief.
Welcome to Foreign Policy’s China Brief.
The highlights this week: The arrest of a famous Macao-based entrepreneur spells bad times for the gambling hub, the Women’s Tennis Association suspends tournaments in China, and fears of new COVID-19 variants justify China’s zero-tolerance policy.
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The Good Times Are Gone in Macao
The arrest of a prominent Macao casino CEO on Saturday is another blow to the territory’s gambling-dependent economy—and a sign anti-corruption campaigns and purges continue throughout China. Suncity Group CEO Alvin Chau was known as the “junket king” for his skill in steering high-rollers, the ultra-rich who make up 15 percent of Macao’s casino earnings, into his VIP rooms. But that put Chau on dangerous ground. Macao, a former Portuguese territory, is close to Hong Kong, where gambling is legal. On the mainland though, gambling is illegal, and while it remains a common practice, it is becoming far less tolerated.
When Chau reportedly confessed to organizing cross-border gambling and illegal virtual gambling, Suncity’s shares plummeted by 48 percentage points. Shares in other casino operators have dropped by 5 to 10 percentage points as tougher times are anticipated for the industry. The day before Chao’s arrest, as vague rumors swirled of a crackdown to come, shares in casinos slid sharply. Already this year, COVID-19 regulations have made travel to the gambling hub difficult, and shares were down by between 23 and 56 percentage points. In 2019, gambling revenue in Macao was $3 billion a month. Now, it’s between $500 million and $1 billion a month.
These are hard times for a once-booming city. Macao’s growth rate between 1999 and 2016 averaged an astonishing 12 percent. Over the same period, the number of mainland visitors went from 800,000 to 17 million a year. But even pre-COVID-19, the city was in a recession, and in 2020, the economy crashed, dropping in size by 56.3 percent. That was countered by rapid recovery at the start of 2021. There was optimism that tourism and gambling would make a comeback this year, but new regulations and the spread of the delta and omicron variants are likely to kibosh those hopes.
Apart from COVID-19, Macao has also suffered from the loss of Stanley Ho, the legendary Hong Kong-born casino entrepreneur who created the modern gambling economy and died last year at age 98. While Ho’s daughter, Pansy Ho, has taken over some of the empire, she is not as skillful a political operator as her father despite her attempts to display loyalty to Beijing. She also still faces contention from her 13 siblings, including Lawrence Ho, the CEO of Hong Kong-based Asia gambling giant Melco. Stanley Ho and his four wives (polygamy was legal in Hong Kong until 1971) enjoyed close ties to the Chinese Communist Party (CCP), which effectively took over power in Macao after organizing riots in 1966, long before the official handover in 1999.
The Macao casino industry is also deeply intertwined with organized crime. Hong Kong and Macao’s triads attempted to move onto the Chinese mainland in the 1980s, when China started to open up, but were rebuffed, according to criminology research, by the power of CCP officials already involved in organized criminal activities, such as protection rackets. They began instead to act as cross-border enforcers, ensuring debts were run up by mainland gamblers who skipped the island before collections were repaid, with a cut going to triads and mainland gangsters and officials.
CCP leaders evidently have no moral problem with organized crime abroad; the party has strong relationships with both the Hong Kong triads and with similar groups in Taiwan, using them as proxies to attack democratic leaders. In Australia, a 2019 investigation found ties among organized crime, Chinese intelligence, and local casinos.
But gambling’s spread on the mainland is a long-term concern, especially given online gambling’s ease, which prompted a crackdown in April. Gambling addiction was a major problem in China historically, and as with prostitution, the CCP made shutting down gambling an important pillar of its rule, including targeting everyday games like mahjong and poker. Illegal gambling recovered in the 1980s while gambling addiction remained a serious issue, especially in southern China.
Beyond the social worries are political concerns. Gambling in Macao was often used as a vehicle for money laundering by the Chinese elite, with more than $200 billion a year allegedly passing through the city from the mainland. Chinese President Xi Jinping’s era has seen a severe clampdown on money laundering, which has become increasingly difficult and expensive; cutting off Macao routes is part of that effort. Macao’s high-rollers, sex work, and massive banquets also fit poorly into renewed austerity and old-school communist puritanism on the mainland.
The long-term winner may be the Australian gambling industry, which has suffered badly from a loss of foreign high-rollers during COVID-19 (despite growth in domestic and online gambling). Australia has traditionally done well in catering to mainland and Chinese diaspora gamblers and could pick up some of Macao’s losses once borders reopen, especially since the dire state of relations between Beijing and Canberra will make investigations of the kind that snared Chau difficult, if not impossible.
What We’re Following
WTA acts on Peng Shuai. This afternoon, the Women’s Tennis Association (WTA) suspended all tournaments in China, including Hong Kong, after chairman Steve Simon said he had still not been able to communicate freely with Peng Shuai, whose allegations of sexual abuse by former Chinese senior official Zhang Gaoli were deleted from the internet shortly after she posted them on Nov. 2.
This is by far the biggest move ever taken by a sporting institution—indeed, by any large private body—against China, and it stands in stark contrast to the International Olympic Committee’s (IOC) insistence that Peng is fine after IOC member Dick Pound spoke with her (and Chinese officials) on a group call. It’s likely to cause a serious long-term rift between China and the WTA as well as leading to pressure on Chinese tennis players to not participate in any WTA events. It may also lead to bans on screening tennis on Chinese television. China will be very determined to ensure no other sporting body shows the same solidarity and courage the WTA has displayed.
Peng’s story is part of a pattern of widespread sexual abuse within Chinese sports and other national institutions, such as the military entertainment system. The country has not seen anything like the reckoning other nations have had with institutional abuse in the last two decades as it is unable to do so in a heavily censored media environment.
China-Africa summit. The Forum on China-Africa Cooperation, an annual summit of Chinese and African leaders, just concluded. It was held largely virtually in Senegal, and saw Xi—who has still not left China since COVID-19 started—pledging another billion vaccine doses for African countries as well as a $10 billion line of credit.
Chinese coverage focused on infrastructure projects’ success, but embarrassing stories broke over or just before the summit; Chinese firms played a key role in former Congolese leader Joseph Kabila’s looting of the Democratic Republic of the Congo, including funneling $55 million in bribes to Kabila’s entourage through a shell company established by state-owned giants China Railway Group and Sinohydro. That speaks to one of the key fears I’ve heard from citizens in countries with heavy Chinese investment, mostly in Central Asia but also Africa: that mega-projects would be a way for their own elites to steal and launder money with Chinese aid.
The other fear is debt traps, sometimes said to be overblown. A Ugandan parliamentary probe into an airport deal concluded that provisions in a contract with China’s Export-Import Bank, which remains non-public, were unfair and discriminatory and could be used by China to seize the airport. China denied the claims, but some local media turned this into a claim that China had already seized the airport.
Sinister vegetarian forces. After actresses Zhang Jingchu and Tao Hong posted a pro-vegetarianism video, they were attacked online for “blind worship” of the West and criticized in state media for being “deluded by some heresy,” with the video depicted as an attempt to force a Western environmental agenda. This is an extremely minor kerfuffle, but it’s also a useful demonstration of how today’s China politicizes online cultural disputes. There’s the inevitable accusation that the side you don’t like is working for foreign powers or imitating the West, despite China’s long tradition of religious vegetarianism. And there’s the hunt for personal details to prove that “anti-China forces” are behind everything. That escalates into state media comments or even regulatory action as well as making the target more fearful of veering even an inch from the mainstream in the future.
Tech and Business
Omicron fears. The omicron variant’s arrival has killed hopes of recovery for the Chinese airline and international travel industry, with already strict COVID-19 rules likely to tighten even further to keep what seems to be a highly transmissible variant out. As other nations close borders, China’s zero-COVID-19 policy seems amply justified, even as the country faces more lockdowns as existing outbreaks flare briefly. A Peking University paper recently found that, given the current efficacy of vaccines and even with a vaccination rate now more than 70 percent, even a largely vaccinated China could face hundreds of thousands of deaths if COVID-19 gets a grip on the country.
EU launches its own Belt and Road. The European Union has just launched a $340 billion global investment project, “Global Gateway,” intended—if not explicitly stated—to be a counter to China’s Belt and Road Initiative (BRI). The United States’ Build Back Better World has the same purpose.
But all this feels both outdated and unnecessary. The heyday of BRI hype, even in China, was at least three years ago; coverage has increasingly focused on the white elephant nature of projects and the relative lack of deliverables for China, whose global reputation has—for largely unrelated reasons like COVID-19 and aggressive diplomacy—rarely been lower. As BRI expert Andreea Brinza points out, these projects create their own sets of problems that smaller, more targeted investment avoids.
Space communications race. China’s BeiDou (“North Star”) navigation system, which has successfully established itself as a rival to the GPS system after it began operations a decade ago, has conducted a successful experiment in laser communication that could see it moving ahead of its competitor. The new system allows far more data to be sent quickly and could improve accuracy by six to 40 times, according to Chinese scientists, though that’s still some distance off. GPS and Galileo, the EU’s system, are likely to move rapidly in the field to stay competitive. Russia, meanwhile, is attempting to integrate its GLONASS system with BeiDou.
James Palmer is a deputy editor at Foreign Policy. Twitter: @BeijingPalmer
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