Chinese President Visit to Macau Could Mean More Trouble for US Gaming Companies

Chinese President Xi Jinping was in Macau last week to celebrate the city’s 15th year as a special administrative region of China. During his time there, the top Chinese leader called for the city leaders of Macau to diversify its economy, while referring to the “deep-seated problems” which had been revealed with the gaming economy this past year. The visit of China’s top official is not a good sign for Las Vegas gaming companies heavily invested in Macau.

The statements were not encouraging for the Chinese and American gaming executives who have staked so much on the Macau casino industry. The city has only six gaming companies operating at present, but Macau is the largest gaming destination in the world. In 2013, the former Portuguese colony generated 7 times the revenue of Las Vegas. Even in a year which saw the casinos of Macao lose 30% of its revenues, the city is likely to generate between 5 and 6 times the revenues of Las Vegas.

American Gaming Companies in China

Three of those six gaming companies are American: The Las Vegas Sands Corporation, Wynn Resorts, and MGM Resorts. All three are Las Vegas-based casino development companies which have invested billions of dollars in China. Those investments, which began in 2001, have paid off handsomely for those corporations. But after more than 10 years of historic growth, actions by the Beijing government in 2013 and 2014 have driven away the Chinese high rollers who once flocked to the gaming destination.

Xi Jinping began an anti-corruption campaign in 2013. That campaign began as a purge of corrupt Chinese communist party officials. Because those officials had long been corrupt and insolent, their fall met with approval from average Chinese citizens. Xi Jinping’s popularity soared.

Anti-Corruption Investigations in Macau

In 2014, the anti-corruption investigations began to target Chinese business leaders, too. The massive economic growth over the past 20 years has created a new class of mega-wealthy Chinese financiers, executives, and industrialists. These men were known for their conspicuous consumption around the globe, but nowhere more so than in Macau.

Macau is a casino capital. In many places through the generations, casinos have been perfect spots to launder money. And when the anti-corruption purges began, many Chinese officials and business leaders afraid they might have to flee the country began sending their wealth out of China. Many used Macau’s casinos to launder money, so they could do just that. It was only a matter of time before the anti-corruption investigations came to Macau–and that time was the summer of 2014.

Since the middle of 2014, Macau’s casinos have seen a decline in revenues at an average of 30%. Las Vegas Sands Corporation’s revenues in Macau declined 40%. All three American companies have seen their stock plummet in the 30% range over the course of 2014. They’ve looked for signals that trend would change, by Xi Jinping’s visit to Macau seemed to signal even more scrutiny–certainly not an environment for growth.

One-China Principle

In an ominous note, Xi Jinping told the people of Macau they need to embrace the “One-China principle“. When Hong Kong was transferred from British rule to Beijing’s governance in 1997, the Chinese government promised the people of Hong Kong there would be “One China, Two Systems”. That is why the government of Mainland China designated Hong Kong as a special administrative region, because it was allowed to maintain local autonomy in its politics.

When the Portuguese enclave of Macau reverted to Chinese two years later in 1999, the one-country, two-system principle was applied to the newest the gaming destination, too. Macau was designated as a second special administrative region. Over the years, though, local autonomy has been rolled back somewhat.

To be told to embrace the “One-China principle” is a therefore a provocative statement, because it directly invokes the previous policy, while dropping the longtime rejoinder “Two Systems”. Xi Jinping was implying that, eventually, only one system would apply. That system is going to be the one-party state, with strict controls by the central government back in Beijing. At least, that was the implication. Macau and Hong Kong are about to enter a pivotal phases in their histories.

Umbrella Controversy

Highlighting the heavy-handed approach of the visiting Beijing delegation, those who welcomed Xi Jinping to Macau were forbidden to open umbrellas as the president got off the plane at the airport, despite heavy rainfall. Instead, local dignitaries were issues raincoats by the government officials.

Hong Kong’s people have been more confrontational than Macau’s people in protecting their democratic principles.

For the past three months, proponents of democracy in Hong Kong had protested the lack of choice given to voters for local elections. In Hong Kong, the other special administrative region (besides Macau), the Occupy Central protestors used umbrellas as a silent protest against anti-democratic moves. Therefore, umbrellas would have offended the visiting premier.

Official Excuses

One Hong Kong reporter said the officials would not give the real reason for the umbrella ban. Instead, the reporter said they provided a half-hearted excuse: “They said you couldn’t open umbrellas at the airport because it would affect the flights.

Dozens of elementary schoolchildren were allowed to visit the airport. They braved the cold and rain in order to waive Chinese and Macau flags when the Chinese president arrived. None were allowed to carry umbrellas, though.

About Cliff Spiller

Cliff Spiller has been an online writer for 14 years. He worked for Small World Marketing for a decade, where he covered topics like gaming, sports, movies, and how-to guides. Since 2014, he has blogged about US and international gambling news on BestOnlineCasinos.com, USPokerSites.com, and LegalUSPokerSites.com

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