BEIJING — Why did gambling boom in Macau in 2012, even as China’s economy slowed? A Hong Kong online magazine that follows the scene closely has a smart take: emigration.
First, the facts. Last year, Macau earned $38 billion from gaming, a 13.5 percent increase from the $33.5 billion in 2011.
“Let’s put some perspective on the record $38 billion in gaming revenues collected by Macau’s casino industry in 2012,” wrote the Las Vegas Review-Journal on Jan. 2.
Macau has long outstripped Las Vegas in terms of revenue, and the 2012 figure “is higher than the $35.64 billion collected by the entire U.S. commercial casino industry in 2011,” the Review-Journal wrote.
“During December, Macau’s 35 casinos collected a single-month record of $3.5 billion in gaming revenues, more than half of what the Strip’s casinos collected in all of 2011,” it wrote.
Pretty astonishing stuff, especially in a year when the growth of the Chinese economy actually fell to a three-year low of 7.4 percent in the third quarter.
Excluding some kind of inverse psychological relationship between growth and gambling, where people might actually enjoy risking their money in a falling economy, the surge in gambling revenue didn’t seem to make sense.
Week in China, a Hong Kong online news magazine, suggests something quite different and fascinating: with so many rich Chinese using the casinos to wash money to finance their emigration to other countries, the gambling take is actually a bellwether of confidence among rich Chinese in their country, the magazine says. In this scenario, the higher the take, the lower the confidence.
As my colleague, Ian Johnson, wrote recently, rich Chinese are emigrating in ever higher numbers
“In 2010, the last year for which complete statistics are available, 508,000 Chinese left for the 34 developed countries that make up the Organization for Economic Cooperation and Development,” Ian wrote. “That is a 45 percent increase over 2000.”
“Individual countries report the trend continuing. In 2011, the United States received 87,000 permanent residents from China, up from 70,000 the year before,” Ian wrote.
Hence the higher spending in Macau, as people move their money from China to overseas, even though the government has forecast something of a recovery and 7.5 percent growth for 2013.
Reasons for emigration vary, but a key one cited by many is that they feel their money isn’t safe in China where the rule of law is weak and where, as one aspiring emigre put it to the immigration lawyer Mikael Charette, “You can be a tiger, but there is always a hunter somewhere,” as I reported in a Letter from China back in 2010.
It all “makes more sense when you realize Macau offers an escape route for ‘smart money’ to leave the country,” Week in China wrote.
“Once this cash reaches the casinos – helped by some financial engineering from the junket operators – it becomes Hong Kong dollars. Much is gambled but plenty also flows into banks offshore,” Week in China wrote.
Junkets?
These are the middlemen who locate wealthy Chinese on the mainland who want to gamble, or, some say, move their money overseas. Aided by a financial commission, they get the money to Macau where the wealthy hit the casinos and, in this scenario, move the rest out in convertible foreign currency.
As Week in China wrote in early 2012: “So if gaming revenues continue to surge this year … it’s a safe bet that corrupt officials and savvy businesspeople are feeling fearful about the future and are getting their money out.”
Surge they did.
Of course, China’s economy is still growing fast and that means quite a lot of people just have more money to play with. But by any standards, Macau’s gambling take in 2012 was extremely high, and came in a year with considerable political uncertainty as China experienced a once-in-a-decade leadership changeover, a major political scandal in the shape of the fall of Bo Xilai, and warnings against corruption by the new leader, Xi Jinping. Sign of a growing economy, or, as Week in China says, a growing loss of confidence?
IHT Rendezvous: Macau's Gaming Take: Sign of Chinese Emigration?
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IHT Rendezvous: Macau's Gaming Take: Sign of Chinese Emigration?
