གཟའ་མིག་དམར། ༢༠༢༤/༠༢/༢༧

China President Arrives in Macau as Anti-Corruption Campaign Hits Casinos

This Macau Government handout picture released on December 19, 2014 shows Chinese President Xi Jinping (R) meeting with Macau Chief Executive Fernando Chui at the San Chok Un Guesthouse in Macau, Dec. 19, 2014.
This Macau Government handout picture released on December 19, 2014 shows Chinese President Xi Jinping (R) meeting with Macau Chief Executive Fernando Chui at the San Chok Un Guesthouse in Macau, Dec. 19, 2014.

China's President Xi Jinping is in Macau Friday, marking the 15th Anniversary of the region's return to Chinese sovereignty and attending the swearing-in of principal officials of the region’s government. The celebrations come as Macau’s gambling industry faces a slide in revenues, which analysts say is due in part to President Xi’s policy of cracking down on corruption.

President Xi Jinping’s two-day visit to Macau for ceremonies to mark the 1999 handover by Portugal to China, comes at a time when Macau is trying to diversify an economy heavily dependent on the gambling industry.

Since 2002, when Macau ended a monopoly on gambling, the economy has been transformed by earnings from casinos, now more than $40 billion annually. That’s some seven times greater than revenues in the U.S. gambling capital Las Vegas.

Aaron Fischer, a Hong Kong-based analyst with finance house, CLSA, says President Xi may press for further development of non-gambling segments of Macau’s economy at a time when the island’s hotels and resorts are planning to add more than 2,000 rooms in the next three years to appeal to new visitors.

“The undertones will be he hopes Macau can develop more non-gaming tourism, which is where Macau is headed particularly with new [resort] developments that come on-stream - it will have a much heavier non-gaming component, the expansion of hotel rooms overall and shows, convention areas [that] have lacking in Macau in the past,” Fischer states.

The rapid growth of Macau’s gambling industry has largely mirrored China’s economic rise, often posting double digit growth during the past decade.

Fischer says the gambling market’s growth raced ahead of early expectations with premium high roller segment, known as the VIP sector, alone accounting for $30 billion annually.

Overall visitors in Macau have climbed from just 9.1 million 2000 to almost 30 million in 2013, most of whom are from China.

But President Xi’s anti-corruption campaign, launched soon after he took on China’s leadership, has left its mark, especially on the VIP gamblers from the mainland.

The combination of the campaign with a slowing China economy and rising personal debt, has led Macau’s monthly gross gaming revenue to fall by as much as 20 per cent, to $3 billion in November, the lowest level since 2012.

Hong Kong-based Nomura Securities analyst, Louise Cheung, says the big spending gamblers are now taking a lower profile because of the mainland’s the anti-corruption policy.

“We do think that China, when you look at the anti-corruption policy that China is pushing out - basically they are institutionalizing it. So for us that means there is going to be pressure," she explains. "Basically, people stay away because of concerns over that [policy] so they will probably never come back. So there’s a big uncertainty which would pressure high rollers.”

Academic studies by Diane Francis, professor at Toronto’s Ryerson University Ted Rogers School of Management estimated that between 2002 and 2011 $1.08 trillion has been transferred out of China, despite currency controls, with Macau and ‘compliant banks’ in Hong Kong playing key roles.

Marie Helena de Senna-Fernandes, director of Macau’s Government Tourism authority says campaigns are under way to reduce dependence on the gaming industry although it’s leading role in the economy will be maintained for some time. “I guess although obviously the gaming industry will continue a very strong industry for years to come - it has contributed quite a lot to Macau -- we tend to see right now that people are coming to Macau for purposes other than gaming," she notes. "Which we believe is a healthy development.”

Analysts say Macau’s fast growth as the world’s leading gambling center has reached a plateau, set against an uncertain outlook for China’s economy and anti-corruption by the country’s leadership. But, they say, the sector is forecast to resume growth in the second half of 2015.