Macau used to be China’s ‘good kid’, but as Beijing turns on its gambling industry, everything might change – ABC News

Unlike Hong Kong, Macau has long been nicknamed"the good kid"by Beijing.

It was a playground for high rollers from the mainland, who turned this semi-autonomous port city into the world's richest gambling hub.

Macaulived under the same "one country,two systems"political model asHong Kong, just 62 kilometres away,allowing itto also operate a capitalist system in socialist China.

But the two cities were worlds apart.

While pro-democracy protests raged in Hong Kong in 2019, Macau was praised by Beijing authorities for its "patriotism".

But the arrest of one man signals everything might be about to change for this glittering hub of wealth and chance.

Last November, Macau police detained Alvin Chau, the city's so-called Junket King,aftermainland Chinese police ordered thearrest of the 47-year-old casino tycoon.

He was arrested by local authorities overallegations from China that he ran online gambling operations that involved more than 80,000 mainland gamblers.

The billionaire previously made huge investments in Australiancasinos until he was denied a travel visa to Australia in 2019 over money-laundering allegations.

The crackdown on Mr Chau has decimated Macau's gambling industry, which lost nearly $US5 billion ($6.94 billion) in Hong Kong stocks the day after his arrest.

His arrest also drew international attention to Macau's proposal toreformitscasino system, with all six casino operators to see their licences expirein June.

The proposal, released last Friday, aims atincreasinglocal ownership in casino firmswhile giving a maximum of six licences and banning licence transfers between casinos.

It hasalso sent a strong political message to the sector that, for years,dedicated itsloyalty to Beijing, according to Valarie Tan, a China studies analyst at the Mercator Institute for China Studies.

"The irony is that China is cracking down on the very industry which has been fundamental to sustain support in Macau for Beijing's rules,"she told ABC News.

"The arrest of Alvin Chau is a very, very strong signal to all the casino operators."

Mr Chau established his gambling empire by controlling the majority of VIP rooms in all Macau casinos.

His casino empire also extends to Japan and South-East Asia.

Mr Chau became known as the Junket King by providingVIP roomservices for high rollers, many of them government officials.

In 2013, almost 70 per cent of Macau's gambling revenues came from VIP room services, according to a report by investment consultancy Goldman Sachs.

But the gambling activities among officials concerned Chinese PresidentXi Jinping, who worried the capital outflow could interfere with his political goal ofcommon prosperity, according to Ms Tan.

"This idea of capital outflow has been defined by Beijing asan avenue for corrupt officials to export, save, cover and protect their illegal income,"said Ms Tan.

"This has been clearly defined in Xi Jinping's common prosperity, that he is coming down hard on officials' great income, illegal income, excessive income."

The General Association of Administrators and Promoters for Macau Gambling Industry has declined interview requests from ABC News.

But the association's president,Tony Kwok Chi-chung, told aHong Kong outlet that the arrest of Mr Chau would have "significant impacts"on the city's gambling industry, describing itsVIP services as "the leading sector".

Jasper Lio, sociologist and co-founder of Macaology, said Beijings crackdown on Mr Chau showed that like Hong Kong, Macau is now on a shorter leash.

"Since Xi Jinping took over, Beijing has placed national security at a higher place, and both Macau and Hong Kong are included in this consideration,"he said.

Macau depends on gambling for its survival.

In the first quarter of 2021, despite the impact of COVID-19, gambling contributed to 41.8 per cent of Macau's GDP, with every one in sevenresidents working in the sector, according to the Monetary Authority of Macau.

"We have a saying that there are only two types of jobs available to young people in Macau: Either work for the government or casinos,"Sunny Au Kam San, a veteran localpolitician, told ABC News.

The history of gambling can be traced back to the 19th centurywhen the colonial Portuguese rulers made it legal so that theycould collect taxes from casinos.

Mr Au said the lack of resources in Macau made gambling the city's primary source of income.

"When Macauwas handed over, Beijing also understood the reality and therefore allowed Macauto continue operating casinos."

Beijing also initially saw Macau's casinosas an opportunity to demonstrate its democratic system, according to Jasper Lio.

The core value of 'one country, two systems'is to remain within the existing system of the two cities,"said Mr Lio.

"In the case of Macao, it means the gambling sector will not only be maintainedbut also get better under Beijing's watch."

One way Beijing builds its connection to casinos is to open up the massive Chinese tourist market to them by making Macaothe only city where it islegal to gamble.

Today, like Australia, Macau's tourism heavily relies on the mainland Chinese market, with around 70 per cent of its 27.9 million visitors coming from the mainland in 2019.

When other countries shut their borders during the pandemic, mainland Chinese visitors consisted of 92 per cent of Macaus tourism market, according to Glenn McCartney, associate professor in integrated resorts and tourism management at the University of Macau.

"If you look at the numbers of half a million visitors per month, it's all from China,"saidMcCartney.

The heavy reliance on tourism specifically, gambling has put Macau into crisis during the pandemic, with its GDP dropping 56.3 per cent in 2020.

But for Beijing, the push forMacauto reduce its reliance on gambling is inevitable.

In 2021,Beijinglaunched a plan to diversify Macau's economy by asking both Macau and nearby Guangdongto invest in Hengqin, an area right between the two governance zones.

As Macau's reform on the casino system is on the way, that means new players may enter the market, and the three US resort companies and three Chinese-owned operators could lose their seats at the table.

Despite nerves within the industry, Dr McCartney said he was positive toward the potential reform of the casino licensing system.

"It will bring stability,"he said.

"One of the issues we've seen and also from Beijing authorities is that stability is very important in Macau."

As well as reigning in its economic reliance on a handful of high rollers,Beijing also undertook a political crackdown in Macau.

Last year, it banned the city'svigil assembly for the Tiananmen Massacre. It also forbid 21 pro-democracy candidates from running the legislative council election in September.

This coincided with China's implementation of a controversialnational security law in Hong Kong.

Sunny Au Kam San, the co-organiser of Macaus Tiananmen vigil and former council legislator, said that for years, Macau's pro-democracy group was so small that it posed little threat to the pro-Beijing camp.

"Allowing the pro-democracy group to run for elections at least could be symbolic and shows that Macau is undertaking 'one country, two systems',"said Mr Au.

"This move just makes people feel that even in Macau, the 'One Country, Two Systems'is fake."

Thearrest of Alvin Chau could just be the beginning for Macau, according to analyst Valarie Tan.

She said in the case of Hong Kong, Beijing overrantraditional pillars that heldup Hong Kong society, including press freedom and independent judiciary.

She said a similar crackdown could be implemented on the other side of the Pearl River mouth.

"We should pay attention to Macau to see how this will play out," she said.

"Macau has always been pro-Beijing and has always been a good boy. But will this trigger something else?"

See the original post:

Macau used to be China's 'good kid', but as Beijing turns on its gambling industry, everything might change - ABC News