Macau: Bigger than Vegas

By: Michael Moran

In 2006, Macau eclipsed Las Vegas as “the biggest gaming city in the world,” and has not looked back since.[1] Macau is an island roughly half the size of Manhattan off of the southern coast of China.[2] The Portuguese established Macau in 1557 as one of the first European colonies in Asia.[3] The colony served as an important international trade hub and outpost for western missionaries.[4] After centuries of de facto Portuguese rule, Portugal and China agreed in 1987 to return Macau to China by 1999.[5] The island is now a special administrative region of the People’s Republic of China.[6] As a special administrative region, Macau is governed in a similar semi-autonomous fashion as its neighbor to the east, Hong Kong.[7]

Macau has experienced explosive growth in large part to its fostering of its booming casino and tourist industry in recent decades. Mao Zedong banned organized gambling in China shortly after his rise to power in 1949.[8] Due to Macau’s unique semi-autonomous former colonial status, however, it has had a virtual monopoly over casino gambling in China.[9] Gambling revenue is essential to the island—the gaming industry “accounts for 80% of the government’s total revenue and supports … $1,000 annual handouts for its residents.”[10] It has transformed the island into the “second-richest territory in terms of per capita economic output, after Luxembourg, according to data compiled by the World Bank.”[11] It has attracted considerable investment from American Las Vegas casino magnates like Steven Wynn and Sheldon Adelson. Adelson believes that “Macau [will] someday allow him to overtake Bill Gates and Warren Buffet in wealth.”[12] One staggering statistic puts the level of wealth generated on the island in perspective: “[i]n 2010, high rollers in Macau wagered about six hundred billion dollars, roughly the amount of cash withdrawn from all the ATMs in America in a year.”[13]

Much like Las Vegas in the United States during the twentieth century, Macau offers China’s newly minted middle- and upper-classes an opportunity to indulge.[14] In particular, Macau casinos are “extremely reliant on the VIP high-roller sector, which accounts for more than 70 percent of revenue.”[15] Predominately serving VIP Chinese gamblers presents a problem for casinos, though. Chinese law prohibits Macau casinos from collecting on gambling debts on the mainland.[16]  “Junket” companies have offered a profitable solution to this problem. Junkets are Chinese companies that serve as a legal bypass where operators recruit and comp wealthy mainland customers and issue them credit that the company can later collect on.[17] There are currently more than “190 licensed junkets in Macau with the top 40 accounting for 80 of total VIP revenue.”[18] Junket companies have also been closely scrutinized for their role in money laundering and other corrupt business practices, however.[19]

Macau’s gaming industry presents an interesting contrast to China’s other special administrative region, Hong Kong. The two territories “share the Cantonese language, a common past as European trading outposts and a similar promise of autonomy from Beijing.”[20] An important difference between the two is that Macau has not expressed the same level of protest to the Chinese government that Hong Kong has.[21] Macau has instead adopted favorable measures like passing a “Beijing-mandated national security law a decade ago.”[22] A recent visit by Chinese President Xi Jinping has reinforced the argument that “Macau has long provided Chinese leaders with a glimmering showcase for the virtues of obeying Beijing… work with us and get rich.”[23] Despite experiencing a recent slump due to the 2020 COVID-19 pandemic,[24] Macau shows no signs of slowing down any time soon.

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[1] David Devoss, Macau Hits the Jackpot, Smithsonian Magazine (Sept. 2008), https://www.smithsonianmag.com/travel/macau-hits-the-jackpot-7698117/.

[2] Macau, Encyclopedia Britannica (Feb. 26, 2020), https://www.britannica.com/place/Macau-administrative-region-China.

[3] Id.

[4] A Brief History of Macau, Fodor’s Travel, (last accessed Apr. 8, 2020) https://www.fodors.com/world/asia/china/macau/experiences/a-brief-history-of-macau-265629550.

[5] Macau, supra note 2.

[6] Id.

[7] Id.

[8] Isaac Stone Fish, China’s Gambling Addition Could Prove Tempting to Beijing, Sydney Morning Herald (Sept. 10, 2013) https://www.smh.com.au/world/chinas-gambling-addiction-could-prove-tempting-to-beijing-20130910-2thh1.html.

[9] Jinshan Hong and Iain Marlow, Macau Choosing China’s Riches Over Democracy Efforts, Unlike Hong Kong, Time (Dec. 18, 2019), https://time.com/5752042/macau-china-colony-gambling/.

[10] Id.

[11] Id.

[12] Osnos, Evan Osnos, Age of Ambition 92 (2014)

[13] Id. at 98.

[14]  Id. at 94.

[15] Farah Master, Factbox: How Macau’s Casino Junket System Works, Reuters (Oct. 21, 2011), https://www.reuters.com/article/us-macau-junkets-factbox/factbox-how-macaus-casino-junket-system-works-idUSTRE79K2DS20111021.

[16] Osnos, supra note 12.

[17] Id.

[18] Master, supra note 11.

[19] Id.

[20] Jinshan Hong and Iain Marlow, Macau Choosing China’s Riches Over Democracy Efforts, Unlike Hong Kong, Time (Dec. 18, 2019), https://time.com/5752042/macau-china-colony-gambling/.

[21] See, e.g., The Hong Kong Protests Explained in 100 and 500 Words, BBC News (Nov. 28, 2019), https://www.bbc.com/news/world-asia-china-49317695.

[22] Hong, supra note 16.

[23] Id.

[24] Zacks Equity Research, Gambling Stock Roundup: Macau Gaming Revenues Decline, Coronavirus to Hurt PENN & CZR, Yahoo Finance (Apr. 6, 2020), https://finance.yahoo.com/news/gambling-stock-roundup-macau-gaming-113211204.html.