MACAU Nov 4 The media scrum surrounding the
politically connected chairman of a Chinese financial services
company was interested in one particular unpaid loan.
The amount - $1.3 million - was nothing extraordinary. But
the story behind it was. Xie Xiaoqing, chairman of Rongzhong
Group, was sued in January for failing to repay the money to
Sands China Ltd, U.S. billionaire Sheldon Adelson's
Macau gambling unit.
Xie has said he wasn't gambling and the money was for a
friend. A spokesman for his company said Xie was not available
For many years, politically linked tycoons and government
officials were frequently spotted betting millions in the
southern Chinese city's lavish VIP rooms. But their numbers have
dwindled because of an anti-corruption campaign led by China's
new leader Xi Jinping.
Just a few years ago, that might have devastated Macau,
which typically generated 70 percent of its revenues from high
rollers including wealthy government officials. In the third
quarter those big whales accounted for just 65 percent,
according to government data, the lowest share since 2006.
Yet annual revenues are on a pace to rise 16 percent to $44
billion - seven times what Las Vegas took in last year - and
October's numbers smashed analysts' forecasts, jumping 32
percent to a record $4.6 billion.
Middle-class mass-market gamblers have taken up the slack at
just the right moment, and some of those government officials
are still finding their way in, albeit more quietly.
"It is much stricter with the leadership change," said Li, a
Macau junket operator who helps organise high rollers' travel
and hotel arrangements and asked to be identified only by his
surname. "They (officials) keep a low profile and stay in
service apartments arranged by other people" instead of opulent
casino suites, complete with massage rooms and karaoke parlours,
that they once preferred.
Interviews with more than a dozen casino executives,
government officials, junket operators and industry analysts
show Macau is learning to live with closer scrutiny from
Beijing. Most sources asked for anonymity or to be identified by
only one name because of the sensitive topic of corruption.
TOMORROW IS EVEN BETTER
Beijing is both subtly and openly making its presence known
in Macau, a tiny metropolis about one-third the size of
Manhattan, spread across a densely populated cluster of three
Across from Galaxy Entertainment Group Ltd's gold
turreted casino on Macau's Las Vegas-style Cotai strip stands a
gleaming new People's Liberation Army building. Billboards
hoisted next to the towering structure depict armed soldiers on
guard with the caption, "Macau tomorrow is even better".
Beijing is also deepening ties with casinos and the junket
operators that bring in the wealthy VIPs by helping to arrange
their gambling credit and collecting their debts.
New regulations put in place over the past year in Macau
require junkets and casinos to report suspicious transactions
and player lists each month, including details of when they
played and how much they won or lost. Macau is set to implement
a new money laundering law next year which may allow authorities
to freeze and seize assets.
This close scrutiny is a sharp change from just a decade
ago, when violent gangs controlled the VIP gaming rooms and
street crime was a regular occurrence.
"In the early days it was pretty much anything goes," said a
former executive at the Venetian Macau, a glamorous casino,
hotel and luxury shopping centre owned by Sands. "It really was
the Wild West. There really was very limited, if any control."
Government officials would typically visit Macau for leisure
or personal business, using fake passports or special permits
which gave them easy access, according to junket and casino
Since the corruption crackdown, officials have been finding
some creative ways to avoid detection. Macau casinos have some
of the most sophisticated surveillance technology yet spotting
officials gambling on the property can still be difficult, said
a senior executive at one of Macau's newly opened resorts.
"There are some low-ranking officials from state-owned
enterprises who still come but if they have fake identification
it is very difficult for us to spot," the executive said.
In one recent example, casino workers caught an official
whose passport had two different birth dates.
Some officials are getting their gambling fix without
setting foot in Macau, placing bets by calling someone sitting
at a baccarat table and giving verbal instructions, said a
junket operator who gave his English name as Mark.
The VIP segment isn't going away. Macau's 35 casinos still
rake in big bucks from these gamblers who drop 1 million yuan
($164,100) on a typical visit. But the high rollers are now more
likely to be wealthy private businessman rather than government
officials and politically connected tycoons.
Zhonglu Zeng, a professor at Macau's Polytechnic University
who co-authored a study on high rollers from mainland China,
said although the total number of high rollers are now bigger
than before, the proportion is now heavily skewed to private
business owners than officials.
Academics estimate that government officials now comprise
perhaps 3 percent of VIP room visitors, down from about 30
percent 3 years ago.
Gaming taxes generate 80 percent of Macau's government
revenues, and both Beijing and local authorities are keen to
diversify. Professor Gao Peiyong, director of the National
Academy of Economic Strategy told local media last week that the
proportion of gaming tax making up financial revenue "is too
large to be healthy."
Casinos have been under pressure by Macau authorities to
expand non-gaming amenities to attract families and a wider
traveller base. Upcoming tourist-friendly events include the
Grand Prix, a high-profile boxing match featuring Manny Pacquiao
and celebrity award shows.
Sands signed a deal with DreamWorks Animation in
April which allows the casino to use characters including Shrek
and Po from Kung Fu Panda. Costumed employees regularly roam the
lobby and shopping centres, interacting with customers.
Manuel Neves, head of Macau's gaming body the DICJ, said
the ultimate aim is to emulate Las Vegas's feat of generating as
much revenue from outside the casinos as inside.
"The transformation is big and fast. We still depend a lot
on gaming. With the gaming tax the government can do a lot of
things, one is to push the other activities," he said.