Could China’s leadership change impact Macau?

Since China’s government eased visa restrictions for its citizens to enter Macau back in 2009, gaming in the former Portuguese enclave has gone from strength-to-strength. Following the ‘once-a-decade’ leadership change in China that will take place in March, industry observers question the longevity of gaming in Macau.
A new generation of leaders has taken over the ruling Communist Party of China (CPC), as the country faces a new range of opportunities and challenges, both domestic and international. Under the CPC’s reign, China has been a global success story, with its rapid growth leading the country to a dominating economic force.
The 18th party congress elected Xi Jinping as the new general secretary of the CPC and a group of younger officials to takeover the leadership. The new leaders might be uneasy about the regulations that have enabled Chinese citizens to spend vast sums of money in Macau’s casinos, generating huge profits for both local and US operators.
Macau’s government tourist office projected that more than 30 million people, the majority from mainland China, entered the semiautonomous Chinese region in 2012. Gross gaming revenue in Macau increased 15 percent year-on-year during the period.
To continue supporting domestic growth in China, policy makers will rely on money being funded back into the local economy, rather than being leaked elsewhere. A report published in October 2012 by the US-based organisation Global Financial Integrity, estimated that $472 billion left China in 2011 and the country lost $3.79 trillion over the last decade.
Policies aimed at clamping down on the country’s extensive corruption, a principal threat to the CPC, could stem the flow of gamblers and money to Macau. “Corruption” inferred Xi in his first speech as party leader last November, could “cause the collapse of the party and the fall of the state.”
Chinese law currently prevents citizens from taking more than $50,000 out of the country each year, but it has been easy to get around the restrictions. Largely aided by junket operators, wealthy Chinese gamblers visit Macau to play high-stakes games and it is not uncommon to see chips up to the value of $10,000 on the tables. Debts and facilitation fees demanded by junkets operators are often repaid in China.
Steve Vickers, CEO of business intelligence firm SVA said that Macau is an obvious first target for the Chinese government. “The primary risks to the gaming sector comes from the Chinese side,” said Vickers, “It will come from the end of acquiescence to this vast capital control abuse and crackdown on corruption.”
Techniques used to move money from China to Macau could be quickly made difficult to continue. It is commonly known that credit cards are used to buy expensive gifts at the many luxury boutiques in Macau and then players immediately obtain a refund in untraceable cash from the retailer. Other methods include using companies to issue inflated invoices to pay for cross-border transactions.
“Everybody knows the bulk of Macau gamblers are high rollers, and they’re all from mainland China,” proclaimed Liu Bolong, a Professor at Macao University, “The new leadership, I’m sure, will begin the process of anticorruption activities and this will affect Macau in a very substantial way because many of these high rollers, their money is coming from illegal practices.”
Hoffman Ma, CEO of Macau casino Ponte 16, said the Chinese government took hold of Macau when it tightened visa restrictions, hurting the gaming industry. “Visa restrictions years ago showed the power of the Chinese government to control Macau’s gambling