By Ben Blaschke
The days of China propping up the world’s casinos are over, but Macau is safe given its status as China’s “lap dog” according to industry expert Dr Sudhir Kale.
Speaking to Inside Asian Gaming at this week’s Gaming, Racing & Wagering Australia conference in Sydney, Dr Kale – the founder and CEO of GamePlan Consultants and a former advisor to Sands China Ltd – said the latest actions by the Chinese government to control capital flow and the jailing of 16 Crown Resorts employees for promoting gambling were a clear sign that China is taking a stand.
And that’s bad news for Macau, with Dr Kale predicting another downturn is just around the corner.
“The Chinese dream is over,” he told IAG at the event.
“We can already see tightening of money out of China – mostly with regards to gaming. There are all kinds of restrictions now such as facial recognition, reporting of transactions over RMB1,000 (US$147), coordination with other countries in regards to money laundering, the junkets being investigated with a much tighter grip on their operations, controls on Union Pay cards – there are much tougher regulations and there is also the slowing economy. Essentially I don’t see the market growing at the same rate as some operators are leading us to believe.”
Analysts noted after Macau notched its 12th consecutive month of GGR growth in July that there had seemingly been no material impact felt by new restrictions, which include facial recognition and KYC technology on Macau’s ATMs and new money declaration procedures at Macau’s borders. The People’s Bank of China also announced this week that all third party payment providers including Union Pay and WeChat Pay would have to conduct transactions through a central unified platform from 2018.
Dr Kale said that the impact of these actions would inevitably be felt by the end of the year.
“At this stage there hasn’t been any impact in Macau but then as you’ve seen internationally with Crown, their international business has suffered remarkably and the same is true with The Star,” he said.
“We saw a similar pattern in 2014 when China tightened its grip. Initially there was no impact, then suddenly for 26 months in a row the market went down. That’s the thing with China – when they want to do something they do it quickly. And yes, there is always a lag time before the impact is felt.
“But I think there is already some impact there because the mass market has not been growing as quickly as people expected it to grow. Macau’s recovery has instead been led by VIP but with tighter regulation of the junkets we’re going to see that slow too.”
The good news, according to Dr Kale, is that while China is looking to wield its financial muscle on the world’s gaming companies once again, it’s not Macau it has in its sights.
“Crown of course they made a big example out of that one and before that the Koreans, but not a single company foreign from Macau has been in trouble,” he said.
“Reading between the lines, they are more worried about the money leaving China – because Macau is still China – than they are the money going to Macau. And China has control over Macau. It’s not like Hong Kong – there are no mass protests, no demands for democracy. Macau is totally compliant like a lap dog.
“So I don’t think in the foreseeable future that Crown or anyone else is going to brave the wrath of the Chinese.”
Gaming, Racing & Wagering Australia is being held alongside the Australasian Gaming Expo in Sydney’s Darling Harbour.
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