HONG KONG • China's move to stamp out online gambling to help contain capital outflows is hitting liquidity in Macau's VIP segment, at a time when the world's No. 1 gambling hub is hobbled by slowing economic growth, Sino-US tensions and coronavirus lockdowns.
In June, Beijing identified the cross-border flow of funds for gambling as a national security risk.
Since then, financing channels used by the online gambling sector and cryptocurrency lending platforms have been cut off, with tens of thousands of suspects arrested.
The authorities have frozen thousands of bank accounts and seized more than 229 billion yuan (S$45 billion), according to government statements, while illegal gambling rings across the country have been purged on a near-weekly basis.
Casino executives and junket operators in Macau, a special administrative region where casino gambling is legal, say the crackdown is hitting big-spending VIP customers due to worries over their financing channels via the junkets.
"It definitely impacts liquidity," said Mr Lam Kai Kuong, director of the Macau Junket Association, adding the VIP industry may never return to revenue levels hit two years ago unless China stops its suppression of VIP gambling.
Gambling is illegal on the mainland and junkets operate in a grey area, luring big spenders with luxury perks and lines of credit, often using underground banking networks and payment channels.
The VIP junket sector in the former Portuguese colony accounts for almost 50 per cent of overall revenues, which hit US$36.5 billion (S$50 billion) last year.
While many top junkets are not directly involved in online gambling, agents under them use these channels to settle debts and provide credit for high rollers.
"The junket sector in Macau has been living on borrowed time for years, and the end is drawing nearer," says Mr Anthony Lawrance, managing director of consultancy Greater Bay Insight.
"China clearly intends to cut out these middlemen and gain better control over the outflows of renminbi through Macau."
Macau junket executives said while China was not targeting the Macau casino industry itself, the focus on money laundering and illegal transactions put pressure on liquidity. It prompted some speculation that Asia's top junket operator, Suncity, had been targeted by the authorities last month.
The speculation saw around 900 players withdraw deposits from Suncity's VIP clubs across casinos in Macau between July 9 and July 11, according to an internal e-mail sent among operators.
Macau's police and gaming regulator was advised of the withdrawals, the notice said, while photographs on messaging app WeChat showed dozens of investors lining up outside Macau's luxury parlours to withdraw cash amid fears it would be seized by the authorities.
Following the withdrawals, Suncity chairman Alvin Chau spoke in rare detail about the company's financials in a seven-minute online video, denying the company had been targeted and saying it had enough cash to cover bad debts and deposits for its customers.
Macau's gaming regulator told Reuters last week it was paying close attention to the matter, although it had not seen any "irregularities" concerning Suncity.
Separately, in a notice to customers, AG Asia Entertainment, which targets Chinese gamblers via online operations in the Philippines, said it was ceasing operations and asked them to withdraw deposits before Aug 12.
The crackdown comes as casinos struggle with a dearth of travellers due to coronavirus restrictions.
China has announced the resumption of Macau tourist visas for nationals from Sept 23.
Mr Ben Lee, founder of Macau gaming consultancy IGamiX, said that even if there was demand from high rollers to go to Macau, the ability of the junkets to finance gaming activity remains severely constrained.
REUTERS
