IAG JANUARY 2015 - page 4

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Fear andLoathing
nvestors who’ve bought heavily into the Macau boom story can’t be too happy right
now with the extent of our collective ignorance about China and its complexities. About
US$75 billion of share value has gone up in smoke in the space of a year, and it could
get worse, as it appears that what President and Communist Party General Secretary Xi
Jinping has unleashedwith his anti-corruption campaign is of a dimension far beyondwhat its
supporters from theoutside thought theywere cheeringon.
Operators and analysts blame Mr Xi’s crackdown for the dramatic decline in high-roller
play that plungedMacau into negative revenue territory in 2014 for the first time in the post-
monopoly era and sent theHongKong-listed sharesof the six casino concessions into a freefall
fromwhich they’ve yet to recover.
Speakingof this, StandardCharteredanalyst PhilipTulkwasmoved recently todeclare: “The
VIPheyday is over.”
If he’s right, then investorsmust bewonderinghow itwent south soquickly.Macaugaming
as a stockmarket play is not even a decade old. The heyday hadhardly begun. And if he’s right,
and he’s far from the only onewho believes themarket has hit awall, then the bigger question
is:Howmuchdon’t we know about China still?
Inofficialmediaon themainland they talk about the “ShanxiGang,” the “YunnanFiefdom,”
the “Jiangxi Gang” and in Guangdong of the “Wan Qingliang Clique”—collective tarrings
reminiscent of the excesses of theCultural Revolution—and these appear tobe suggestive also
of amassive leakage of power over the years into the clutches of party satraps at the provincial
and municipal levels. Mr Xi looks determined to break the back of this latter-day warlord-
ism, and revitalizing the party as moral standard-bearer for the nation in the best (or worst)
Maoist tradition appears to be integral to the campaign. Reports inWesternmedia have it that
academics, journalists, artists and writers are under greater pressure to toe the line than they
have been in years.
In an interviewwith
, JamesMcGregor, former headof theAmericanChamber of
Commerce in China, said of Mr Xi, “He’s using the tools of Mao to become a Deng Xiaoping
2.0. He’s taking on a gangster-type system, and to do that you’ve got to use the tools at your
disposal.He’s trying to change behavior.He sees this as a survival thing for theparty.”
That’s one view. Long-time China-watcher Anne Stevenson-Yang, a director of J Capital
Research, which advises foreign investors, sees the crackdown differently, describing it for
as an “an old-style party purge reminiscent of the 1950s and 1960s with quota-driven
arrests, summary trials,mysterious disappearances and suicides”.
As for the tools, the most feared among party members is the Central Commission for
Discipline Inspection. BoXilaiwasmerely thefirst to layhisheadbeneath itsax. A trainof others
has followed, and it’s getting longer as it reaches higher into the political and economic life of
thecountry. Just tobenamedon theCCDI’sWebsite, asupwardsof 700cadreshavebeen, trials
or convictions notwithstanding, is death to a career. Denunciations are reported to be rife. The
South ChinaMorning Post
saysmore than 75,000 partymembers have been investigated since
Mr Xi assumed power in 2012. On average, 10,000 amonth are being “disciplined,” according
to statenews agency
The fear factor is such that
Caixin – China Economics & Finance
, amagazine published by a
prominent Beijingmedia group, says local administration in some areas is grinding to ahalt.
“Nobody is sleeping well now,” said Bo Zhiyue, a veteran sinologist with the National
University of Singapore. Echoing Ms Stevenson-Yang, he told the
, “There is a lot of
uncertainty and therearenoclear rulesas towhogets investigated.…Thesearenot solely cases
of corruption, they’repolitical judgment calls.”
Investors wondering what the immediate future holds will want to be aware of how close
their money has resided to one of the epicenters of the campaign. The aforementioned Wan
Qingliang, disgracedparty secretaryofGuangzhou, the capital ofMacau’sneighboringprovince
of Guangdong, and Guangzhou Vice-Mayor Cao Jianliao are two of the biggest names to be
takendown.Guangdong isChina’smostpopulousprovinceand itswealthiestbygrossdomestic
product. It isMacau’s largest andmost significant feeder market. Guangzhou is its economic
heart, thehubof themainland’s largestmetropolitanarea. At least 65 senior,middle- and lower-
ranking officials have come under CCDI investigation in Guangdong, far more than anywhere
else in the country.
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