Macau VIP casino industry out of luck as China cracks down on capital flows
18 Aug 2020

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.

By Farah Master, Reuters, 17 August 2020

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