China’s proposed new extraterritorial gambling punishments spell further trouble for Asia’s junket operators, whose business was already on the decline.
This week, China’s state-run media reported plans by the Chinese Standing Committee of the National People’s Congress to amend the nation’s gambling laws to criminalize the “organizing and soliciting by casinos abroad,” with as-yet-unspecified punishments for individuals or entities that attempt to lure mainland gamblers.
While the consensus is that this amendment wouldn’t apply to casinos in Macau, a special administrative region of China, it would undoubtedly apply to casino or online gambling operators based in the Philippines, South Korea, Vietnam, Australia and other regional gaming hotbeds.
That would put further pressure on the region’s junket operators, many of which spent the past few years redirecting their VIP gambling customers to casinos outside Macau that offered more favorable gaming tax rates, which meant greater commissions for junkets.
Macau’s government recently revealed that it collected around MOP299m (US$50m) in taxes on commissions paid to junkets by local casino operators last year, down nearly one-quarter from 2018. The sum also represented only around 83% of the government’s original junket tax target for 2019.
The number of Macau-licensed junkets has been declining for six straight years, with just 95 operators still on the books at the end of last year. In addition to a quest for more lucrative markets, junkets are leery of Macau’s plans for increased junket oversight to ensure tighter control over the local VIP gambling market.
On Wednesday, Sanford C. Bernstein analysts called China’s proposed amendment an extension of efforts to “limit gambling in foreign countries and reducing associated money outflows to other countries.” Many of these countries’ casino markets rely heavily on junket-based activity, but the analysts suggested Macau’s market would likely see a shift to more premium mass and ‘direct’ VIP business rather than a junket surge.
On Wednesday, GGRAsia quoted junket investor Luiz Lam Kai Kuong saying China’s plans were “definitely not good news” for Macau’s junkets. Lam said some mainland VIPs had been “warned by Chinese authorities about their gambling activities,” while junkets who dealt with these VIPs had faced “punitive” actions by Chinese authorities. Lam also forecast Macau’s number of junkets could drop to just 80 by the end of 2020.