China’s southern province of Hainan may give Macau a run for its money in the future as the government drafts a proposal that will pave the way for legal gambling on the island.
Bloomberg reported that the Chinese government is considering allowing online gaming, lottery, and sports betting, as well as opening the door to brick-and-mortar casinos in a bid to draw more foreign tourists to the island.
China has prohibited gambling on the mainland—even selling lottery tickets must have the approval of the Chinese government.
In 2014, Chinese President Xi Jingping launched a corruption crackdown that resulted in a two-year revenue rut for Asia’s premier gambling hub. The Chinese government also imposed new rules last year that prohibit investments in the gambling industry.
This is the reason why the Hainan report came as a surprise to many financial analysts tracking Chinese economy. The news sent the shares of Sands China Ltd. and MGM China Holdings Ltd. tumbling as much as 6 percent during the last trading day of the week. Stocks of Wynn Macau Ltd. fell by as much as 6.7 percent.
“I think investors were shocked—I’m a bit surprised,” Sam Chi Yung, a Hong Kong based strategist with South China Financial Holdings Ltd., said, according to the news outlet. “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 license. But what’s sure is that people going to Macau to gamble will drop.”
The Chinese government wanted to relax gambling in Hainan in order to shore up the revenues of the debt-ridden province, according to the news outlet, citing two anonymous sources.
The Chinese government has already ramped up infrastructure projects on the island dubbed “China’s Hawaii.” A new international airport will soon rise in the city of Dongfang, which is located on Hainan’s western coast. China is also constructing new highways and high-speed railways as the government anticipates the influx of tourists to the island.