High rollers scurried away from the baccarat tables in Macau on Friday following reports that authorities in the eastern Chinese city of Wenzhou had issued an arrest warrant for Alvin Chau, boss of the biggest operator of VIP “junket” tours to the gambling hub’s casinos.
Macau police detained Chau for questioning on Saturday. On Sunday, they announced that they had arrested a 47-year-old Macau businessman surnamed Chau and 10 others on charges of money-laundering and using Macau as a base to set up a cross-border “live web betting platform” in the Philippines that lured customers from China’s mainland where gambling is strictly forbidden.
On Monday, stock of Suncity Group Holdings, of which Chau is CEO, was suspended on the Hong Kong Stock Exchange; shares of Macau casino operators—including MGM China, Sands China, and Wynn Macau—tanked. This morning, when shares of Suncity’s listed arm, which doesn’t include its junket operation, resumed trading in Hong Kong, they plunged 40%. Chau hasn’t been seen in public since his arrest; the company said in a filing that he intends to resign.
Chau’s arrest has renewed fears that, after a year of rolling crackdowns that have devastated sectors including e-commerce, ride-hailing, online tutoring, and online gaming, China’s rulers are coming after Macau’s casinos next.
Macau’s casino’s “high-rolling days are over,” declared Monday’s Wall Street Journal. “Macau’s go-go years do seem over,” agreed risk management consultant Steve Vickers in Hong Kong’s South China Morning Post. “Investors in the casino businesses should manage expectations accordingly.”
Chau’s arrest is not the first sign Beijing has Macau’s casinos in its regulatory cross-hairs. In September, the former Portuguese colony, at Beijing’s behest, unveiled a plan to increase regulatory oversight of the sector. Announcement of the new rules wiped out $17 billion in Macau casino stocks’ market capitalization in a single day.
Macau’s gambling industry contributes over half the city’s GDP, about 80% of its tax revenue, and employs 17% of its residents. Chinese leaders have long said they want to reduce the city’s reliance on the industry, but it remains unclear how they’ll achieve that goal.
In 2019, Macau’s 41 casinos generated about $36 billion in revenue, six times the take of 144 casinos in Las Vegas. But Macau has been pummeled by the pandemic.
The Journal reports that Macau’s gambling revenue in the first 10 months of 2021 was barely a third of pre-pandemic levels. The city has benefited from the gradual return of mainland visitors. According to the Financial Times, gambling revenues from Las Vegas, where there are few COVID restrictions, are starting to catch up with those of Macau.
Authorities in Wenzhou allege Chau ran a crime syndicate that included nearly 200 shareholders and 12,000 middle men who built up a network of more than 80,000 Chinese gamblers. They claim the group created asset management firms to help gamblers with cross-border transfers and recover unsettled debts. Charges by mainland authorities are separate from those brought against Chau by police in Macau, which has a nominally independent judiciary system. But on Saturday, the Macau government stressed its determination to cooperate with mainland authorities. “The Macau Special Administrative Region reiterates that all employees of the gambling industry must strictly abide by national and Macau’s related laws.”
The FT quotes an upbeat senior executive at a U.S. casino group who expresses confidence that Beijing will ultimately see Macau’s gambling industry as a “necessary evil.” But, in an era when mainland leaders strictly regulate how many hours children can play video games, it is perhaps more remarkable that Macau’s baccarat tables have been allowed to flourish for so long.
More Eastworld news below.
This edition of Eastworld was curated and produced by Yvonne Lau. Reach her at email@example.com
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Markets and Movers
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