HAIKOU • China is drafting a proposal to allow gambling on Hainan Island, people familiar with the talks said, in what would be an unprecedented move that could reshape gaming in China's territories and transform the economy of a strategic southern province.
Government agencies under a party reform group headed by President Xi Jinping are considering allowing online gaming, a lottery or sports betting in Hainan, said the people, who asked not to be identified because the discussions are not public. The proposal, which is still at an early stage, could open the door to physical casinos over the long term, two of the people said. China currently bans gambling and casinos on the mainland.
The proposal is part of a wider plan that includes relaxing visa rules and building a new airport to draw more foreign tourists to Hainan, two of the people said. That comes as the province faces a fiscal deficit and contends with the debt woes of HNA Group, its biggest conglomerate, which is facing pressure from creditors after a global acquisition spree.
An index of Macau casino stocks tumbled on the news. Sands China and MGM China Holdings dropped as much as 6 per cent, and Wynn Macau fell as much as 6.7 per cent.
"I think investors were shocked - I'm a bit surprised," said Mr Sam Chi Yung, a Hong Kong-based strategist with South China Financial Holdings.
"It's difficult to say what the impact will be on their profits as it all depends on China's policy and how they arrange the licence. But what's sure is that people going to Macau to gamble will drop."
Hainan, roughly the size of Switzerland, is often referred to as China's Hawaii for its beautiful beaches. It also serves as a jumping-off point for Chinese naval and air force patrols in the South China Sea.
The Hainan plan would mark a dramatic shift in China's approach to gambling and could directly threaten the US$33 billion (S$43.6 billion) casino industry in Macau - the world's largest gaming hub with revenues five times larger than Las Vegas. Macau has been shifting to attract Chinese tourists and families to the territory, which is the same market that Hainan currently draws.
China's leaders have agreed to build a new international airport in the area of Dongfang city on Hainan's western coast, according to the people familiar with the situation, who did not share more specifics on plans to ease visa requirements. The island now has three international airports, all located on the eastern coast.
China bans gambling everywhere except Macau, a former Portuguese colony, and Hong Kong, which was once ruled by Britain. Currently, it is against the law to open casinos, organise gambling, profit from gambling, set up online betting websites and market overseas casinos to Chinese citizens. It is also illegal to sell lottery tickets without approval from the Chinese government.
Allowing gaming on the mainland would be one way for the Chinese authorities to limit capital outflows and ensure gaming revenue benefits the provincial economy.
Mr Xi's corruption crackdown in 2014 sent Macau gaming revenue into a slump for more than two years, prompting it to become a more family-friendly destination to target leisure gamblers and tourists. About 70 per cent of Macau visitors are from mainland China.
The Chinese authorities have also cracked down on gambling-related activities. More than 10 employees of Australia-based Crown Resorts were arrested in 2016 and sentenced to months in jail for illegally promoting gaming.
WASHINGTON POST
