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Macau analysts pour cold water on reports of legalized gambling in China

Saturday, 03 February 2018 09:59
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A proposal to allow certain forms of gambling on China’s Hainan Island is unlikely to proceed and would have little to no impact on Macau’s booming casino industry.

So say analysts commenting on the news, first reported by Bloomberg on Friday and said to be part of a broader plan by the Chinese Government to find ways of attracting more foreign tourists to the popular Chinese holiday spot. According to Bloomberg, a party reform group headed by President Xi Jinping is considering allowing online gambling, lotteries or sports betting in Hainan as a key initiative to attract more visitation. It has also been suggested that such a move could be a first step towards allowing casinos on the island.

But analysts have been quick to pour cold water on the proposal, insisting that it is both highly unlikely occur and just as unlikely to achieve stated goals should it actually proceed.

“Potential legalization of gambling in Hainan or China looks unlikely to us, plus the legalization process typically takes a long time,” said Morgan Stanley’s Praveen Choudhary and Jeremy An.

“Hainan hotels had tried to run small gambling operations in 2012 but these were shut down quickly.”

Bernstein’s Vitaly Umansky, Cathy Huang and Zhen Gong noted that some forms of sports betting are already legal and operated by the government’s China Sports Lottery while a government-run lottery system is already widespread across the country.

“It is not clear how Hainan would benefit from a lottery program,” they said.

“Online gaming is not allowed in China; however access to online gambling sites from various off-shore jurisdictions is prevalent in China. If online gambling were to be legalized in China, it is our view that legalization would be nationwide (however, one province may be used as a test case first). However, the negative consequences stemming from online gaming, in our view, make legalization in China unlikely at this stage.”

Bernstein added that casino gaming remains even more unlikely in Hainan, with numerous attempts having been made in recent years to open similar discussions. They included a 2010 report on possible casino legislation by Chinese media that quickly dissipated, a 2013 push to launch casinos in Sanya that was quickly shut down and a similar scenario in Hainan in early 2016 that again failed to gain any momentum.

Hainan also “fueled further reports when a framework agreement to promote sports and related industries was signed, which pledged to support exploration of developing sports betting.

“This was followed by a feverish attempt to register online and related gaming companies in Hainan – something the government quickly suspended,” Bernstein said.

“While any casino legalization on Hainan would create problems for Macau, we do not see casino development in China as a real threat to Macau now or in the foreseeable future.”

According to Morgan Stanley, assuming casinos don’t form part of Hainan’s future there is little for Macau to worry about, even if the government does decide to allow other forms of gambling.

“We think the impact on Macau should be minimal,” the financial services firm said.

“First of all, the article says online gaming, a lottery or sports betting. These activities do not directly compete with Macau's gaming industry. For example, Hong Kong Jockey Club had turnover of US$15 billion in 2017 and China lottery sales came to US$57 billion in 2016. However, these did not impact Macau gaming revenue of US$33 billion in 2017.”

It has also been reported that the Chinese government will relax visa rules in Hainan and build a new airport.





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