Withdrawals from casino junkets threaten Macau's economy

While gambling is illegal on the Chinese mainland, it is allowed in casinos in Macau. But fears that Beijing could broaden a crackdown on offshore gambling have sparked a rush to withdraw billions of dollars from casino junkets. PHOTO: REUTERS
While gambling is illegal on the Chinese mainland, it is allowed in casinos in Macau. But fears that Beijing could broaden a crackdown on offshore gambling have sparked a rush to withdraw billions of dollars from casino junkets. PHOTO: REUTERS

HONG KONG • Fears that China is broadening a crackdown on offshore gambling have sparked a rush to withdraw billions of dollars from the world's biggest casino hub, Macau, threatening a recovery in the coronavirus-stricken economy, executives say.

An unprecedented stampede to withdraw money from junkets - organised by companies that lure high rollers to gamble - started in July after Beijing identified the cross-border flow of funds for gambling as a national security risk.

Worryingly, the customer withdrawals have spilled into the broader casino industry, leading to a cash crunch in Macau's VIP sector at a time when the Chinese territory is struggling to recover from Covid-19 restrictions that have sent tourist numbers and gambling revenues plummeting.

"This is not millions we are talking about being taken out here, but billions," said a casino executive who was not authorised to speak to the media. "We have cash in the bank, but with everyone withdrawing, it's a problem."

Several other executives also told Reuters cash was being taken out in the billions of Hong Kong dollars.

While Macau casinos have ample reserves to ride out several months of zero revenues, the rising cash withdrawals point to a major loss of confidence in the crucial VIP junket sector, in a further blow to the economy, analysts said.

The sector accounts for about 50 per cent of overall gambling revenues, which hit US$36.5 billion (S$49.8 billion) last year. The pandemic has already ravaged the economy, with gambling revenues down about 96 per cent in the second quarter year on year.

The withdrawals began when hundreds of customers tried to pull deposits from top junket operator Suncity's VIP clubs across Macau, over fears it was being targeted by the Chinese authorities. Suncity denied the allegations.

The group then began restricting withdrawals, sparking a rush by customers seeking to pull their money from all junkets, executives said.

Suncity said it was acting in compliance with new casino policies, but declined to elaborate.

Junket operators in the former Portuguese colony are licensed to provide customers with chip deposits and withdrawal services on behalf of casinos Sands China, Wynn Macau, MGM China, Galaxy Entertainment, SJM Holdings and Melco Resorts. All the casinos declined Reuters' requests for comment.

As customers started pulling out money amid fears of a broader crackdown by Beijing, junket agents in turn have begun taking back deposits from the casinos.

Casinos have reacted by putting limits on cash chip withdrawals, executives said.

"The crackdown on the cross-border transactions has finally rammed home the inconvenient fact that Macau has always been dependent on outflow of funds from the mainland," said Mr Ben Lee, founder of Macau gaming consultancy IGamiX.

Gambling is illegal on the mainland, but is allowed in casinos in Macau. In some casinos, customers can now withdraw only HK$1 million (S$176,000), compared with HK$5 million in recent months, and only the account holder can make a withdrawal, say executives.

Any transaction over HK$200,000 is now flagged, leading to people carrying around HK$5 million in chips in multiple sets of HK$10,000 to avoid detection.

With thousands cashing out chips, some cash machines and exchange desks around Macau have briefly shown limited or no availability in recent weeks.

Macau's monetary authority told Reuters the supply of Hong Kong dollars is currently stable and that it has taken measures to ensure the adequate supply of currency.

The withdrawals come as China fully resumed Macau tourist visas from yesterday, and executives warn that more arrivals could mean more cash being pulled out.

Some Suncity customers, angry at not being able to get their funds, have started an online group called Suncity Victims and were planning a protest yesterday at VIP rooms across Macau.

REUTERS

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A version of this article appeared in the print edition of The Straits Times on September 24, 2020, with the headline Withdrawals from casino junkets threaten Macau's economy. Subscribe