By Farah Master
HONG KONG, Aug 18 (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 ($32.95 billion), 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.”
JUNKET RUN
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.”
($1 = 6.9501 Chinese yuan renminbi)