China clampdown on capital flows is causing liquidity problems for the Macau’s casinos which struggle to recover after Covid-19.
China’s crusade to control capital outflows may inadvertedly complicate Macau’s struggle to recover from the financial impact of the Covid-19 pandemic and the consequent travel restrictions.
Reuters reports that since China identified the cross-border flow of funds for gambling as a national security risk in June, channels usually used by VIPs at Macau’s casinos have been cut off.
The news agency said thousands of bank accounts that used those channels to enter money into casino accounts have been frozen, and more than 229 billion yuan (US$32.95 billion) has been seized.
China has also set up online whistle blowing platforms and raided illegal gambling rings across the country in recent months.
Casino executives and junket operators in Macau told Reuters the measures were hitting big spending VIP customers who are concerned about their financing channels. The VIP junket sector in Macau accounts for almost 50 per cent of revenue, which reached US$36.5 billion last year.
Lam Kai Kuong, director of the Macau Junket Association, said “it definitely impacts liquidity,” adding that unless China stops its persecution of VIP gambling, spending in the segment may never recover to pre-pandemic levels.
Anthony Lawrance, managing director of Greater Bay Insight, told Reuters: “The junket sector in Macau has been living on borrowed time for years, and the end is drawing nearer.
“China clearly intends to cut out these middlemen and gain better control over the outflows of renminbi (yuan) through Macau.”
Ben Lee, founder of Macau gaming consultancy IGamiX, said that even if there was demand from high rollers to come back to Macau, the ability of the junkets to finance gaming activity remains severely constrained and would put further onus on casino operators.
He said: “the only way for the VIP segment to recover is for the casinos to expand their lines of credit without corresponding cash collateral (from the junkets) which has been a prerequisite for them in the past.”