Why Asian Gaming Hub Macao Is Getting Tougher on its Big Casinos

SAN FRANCISCO — 

For many serious patrons of casinos, Chinese-ruled Macao has been the mecca of gaming, with high-end shopping and even higher-stakes tables. One of the world’s biggest gambling centers before the COVID-19 closures, Macao is now experiencing tougher scrutiny on its casino scene as part of what analysts describe as an effort to control crime and capital outflows that rippled into the mainland China economy.

A draft gaming bill now pending in the Macao Legislative Assembly would stop casino operators from issuing junket licenses, which are for larger organized tours, and from sharing revenue with any gambler-to-casino intermediaries. It would limit the number of newly licensed casinos to six, with terms of 10 years, half the current time, while specifying maximum numbers of gaming tables and gaming machines.

Efforts to redo gaming in the former Portuguese colony that has long thrived on casino income fall in line with Chinese President Xi Jinping’s ideals for a less corrupt, more controlled China, some analysts believe.

Mainland Chinese tourists, the top source of casino revenue, had taken so much cash to the offshore territory by 2013 that China began tightening rules to curb money laundering. The Chinese Communist Party increasingly resented outflows of mainland Chinese money into Macao bank accounts and has tried for years to slow that process, said Dexter Roberts, U.S.-based author of The Myth of Chinese Capitalism.

“I think that in many ways, in the eyes of Xi Jinping, Macao is ugly and objectionable,” Roberts said. “I think he would sort of plug his nose and put up with it, knowing that the last thing they want to do is destroy the economy of Macao, but I think that Xi Jinping actually has an attitude where he looks down on excessive wealth (and) looks down on vice to a degree.”

Controlled return of tourism

The COVID-19 pandemic has sealed Macao’s borders, even to nearby Hong Kong, since early 2020, handing casinos a “devastating shock,” said Rajiv Biswas, Asia-Pacific chief economist with IHS Markit in Singapore.

Mainland Chinese tourists began coming back in August 2020 as COVID-19 was brought under control, a tourism office spokesperson said. They’re allowed to visit today in limited numbers.

“With the COVID-19 pandemic situation relatively stable in Macao and mainland China, tourism flows have started to resume between the two places in a phased manner since mid-August 2020, placing the city’s tourism on track for a gradual recovery,” the spokesperson said.

Arrivals totaling 7.7 million in 2021 were up 30% over 2020 but were 80% below pre-pandemic levels, according to Macao Government Tourism Office data. About 91% of the visitors came from mainland China, up 48% from the previous year, the data show.

Macao, like Hong Kong, is a special administrative region of China with its own currency and immigration controls.

Straitjacketed gaming

Macao, pre-COVID, served mostly groups of mainland Chinese or Hong Kong day-trippers. In the open-to-all casino areas, the visitors would play baccarat and poker alongside handfuls of tourists from other parts of the world, usually elsewhere in Asia.

Different from their counterparts in the U.S. gambling hub of Las Vegas, the giant casinos of Macao eschew cheap meals and children’s playrooms and instead feature swank shopping malls with name-brand clothing, jewelry and watches.

Among the clientele are junket gamblers. Junkets are formed when outside operators paid a commission by the casinos contact wealthy gamblers with offers of luxury travel. Some junket intermediaries lend money to players and collect debts.

In a sign of China’s aim to stop the practice, Macao police arrested junket organizer Alvin Chau in November on suspicion of criminal association, illegal gambling exploitation and money laundering.

High-end shopping for tourists is likely to loom larger over time. Macao could eventually morph into a venue expressly for wealthy Chinese who shop lavishly, said Stuart Orr, School of Business head at Melbourne Institute of Technology.

Chinese officials will feel pressured to reopen again in pre-COVID fashion, he said.

“I think that’s a challenge,” Orr said. “The economic consequences of staying closed are that the economy starts to wind down, and I think a lot of countries are facing that.”

Casinos that stay in the game will find that the draft bill removes “the considerable uncertainty” about how far new regulations will eventually go in Macao, said Rajiv Biswas, chief Asia Pacific economist with market research firm IHS Markit.

“As these [COVID-19] restrictions are gradually eased, this should allow a strong rebound for the Macao gaming industry over the medium term,” Biswas said. “Nevertheless, Macao’s gaming industry will need to adapt to operating in an environment of greater regulatory scrutiny.”

Wynn Macau, one of the largest casinos in the territory, did not answer questions for this report about its future operations.

China’s economic crackdowns are hardly limited to Macau. Regulators have tightened grips in the past year over private education, internet technology and listings of Chinese companies on offshore stock exchanges.

China last year paired Macao with neighboring Guangdong province of China in a special economic zone with special tax and other policies aimed at diversifying Macao’s economy away from gambling into finance, high-tech, traditional Chinese medicine, tourism, exhibition and trade.

But Chinese domestic arrivals remain a priority for now, the tourism office says. “While at this stage, due to the travel restrictions in place, the focus remains on attracting visitors from mainland China, with a synergy of online-offline promotions and events in the city, this office has similar plans on hold to be launched in other destinations in the region and internationally, once safe travel links with Macao resume,” the spokesperson said.

Chinese officials realize that gambling and tourism run Macao’s economy, Roberts said, so they will avoid any crackdown so strong that it hurts those core businesses.

Macao Measures Seen as Attempt to Head Off Hong Kong-Like Crisis

HONG KONG — 

Planned election and national security measures in Macao, including revision of its national security law, are aimed at preventing any political crisis like that in nearby Hong Kong from taking root in the semi-autonomous Chinese city, experts say.

The Macao government said it “will step up effort to improve governance, and optimize the city’s legal provisions regarding national security and their respective implementation,” in a Dec. 16 statement on the publication of its 2021-25 five-year plan.

Authorities seek to “complete” the national security law, push forward enactment of terrorism and communications interception laws, strengthen enforcement of entry restrictions, and “improve” the election system, according to the official plan document.. The “improvement” of the election system aims to ensure Macao’s governance “is safe and sound in the hands of patriots,” the document said.

Under the plan, Macao, designated a “special administrative region” by Beijing, will “formulate positive and negative lists of swearing allegiance to the SAR and relevant qualification examination mechanisms to regulate the way legislators perform their duties,” the official China Daily said.

September’s “patriots-only” election saw Macao disqualifying three dozen pro-democracy candidates for the first time, including two incumbent lawmakers, for not upholding the Basic Law or not pledging allegiance to the city.

The election changes are an official step to eliminate any possibility that the pro-establishment camp will lose control of Macao, according to Michael Cunningham, visiting fellow at the Heritage Foundation’s Asian Studies Center specializing in Chinese politics.

“The existing system is already very much stacked in favor of the pro-Beijing establishment,” Cunningham told VOA. “The government wants to make sure it stays this way, regardless of how public opinion or political dynamics may shift in the coming years and decades.”

The change skewing the election law toward the pro-establishment camp follows numerous steps in recent years, according to Jason Buhi, assistant professor at the Barry University Law School and the author of The Constitutional History of Macau.

“The latest five-year plan recommits Macau to its recent project of ensuring the political loyalty of every single deputy [lawmaker], but the two goals it promotes for achieving have already been in development for the past five years,” Buhi told VOA.

Macao

He said the first goal is to “blacklist” candidates based on oaths of allegiance, and the second is to establish more formal mechanisms to supervise the qualifications of candidates. To determine whom to oust and keep, Buhi said the current five-member election committee, which approves who can run as a candidate, and is directly appointed by Macao’s chief executive, has made sure to screen out any opposition voices.

“Through this agency, Macau’s chief executive has the power to shape the entire composition of the local Legislative Assembly,” he said.

To tighten its grip in the city, authorities also plan to boost national security by legislation, education, training of civil servants, and general promotion.

Macao Chief Executive Ho Iat-seng, told a November press conference that the amendment of the 2009 national security law will mainly involve “clarifying the definition of the articles in the current law.” Work on the amendment is underway but details have not been announced.

The law now criminalizes treason, secession, sedition, subversion, and theft of state secrets, as well as activities by foreign political bodies in the city and their establishment of ties with local entities. Offenders are subject to up to 25 years’ imprisonment.

The communications interception bill, which would allow judges and police to intercept calls and gain access to people’s electronic devices, stirred debate, with critics slamming the bill for giving the police too much power and violating privacy. The journalists’ union in the city also expressed press freedom concerns.

Buhi warned that the proposal could be a new form of government surveillance.

“Who can say precisely where issues touching ‘national security’ begin and end to the authorities? … The new [proposed] communications interception law imposes significant criminal and administrative liability on telecommunications operators and network communication service providers who fail to collaborate with official requests. This will likely have an impact on the communications platforms available in the region, including encrypted services.”

The five-year plan also says the city will aim to further enforce the law for entry control to “prevent and suppress infiltration and disturbance of foreign power,” without specifying what the foreign power is or what the enhancement will look like.

The purpose of strengthening Macao’s national security is for Beijing to exert its power in Macau further, according to Eilo Yu Wing-yat, associate professor at the University of Macau’s Department of Government and Public Administration.

“The legislation against terrorism and any amendment for national security seem to be a product of fractional struggle among mainland authorities. The further infiltration of national security branch personnel in the MSAR may curb the political significance of the Liaison Office as well as the local authorities and elite,” she said.

“It is hard to say what will be included in the legal reform for national security. I believe the national security branch has been trying, through legal reform, to extend its executive arm in the MSAR formally, she said.

Macao’s national security legal provisions are more preventive measures than tools for crushing dissent, like those in Hong Kong, Cunningham added.

“The amendment will probably bring Macao’s law more in line with those of China and Hong Kong. But one important difference is that Macao’s national security law was passed by Macao’s legislature, and the same will be true of the amendment. It’s not being imposed top-down by Beijing like what happened to Hong Kong,” he said.

Cunningham said Macao has barely enforced its national security law.

“Macao has never actually used its national security law [on dissent], and I expect that, short of an actual security threat or the kind of unrest we saw in Hong Kong a couple years ago, they will continue to apply the law rarely,” he predicted in an email.

“Over half of Macao’s population was born in mainland China, and the people are generally more obedient to the government authority and much less politically minded than their Hong Kong counterparts. …. But in the unlikely event that Macao experiences unrest, they won’t hesitate to use it.”

“Ultimately,” Buhi said, “Beijing seeks to maintain a veneer of democracy in Macau, while obscuring the realities of its tightly-held system through Byzantine administrative procedures capable of challenging the comprehension of trained political scientists.”