China Arrests Another Junket Operator Amidst Crackdown
The arrest of Macau Legend CEO, Chan Weng Lin signals the deepening crisis for the gambling industry in Macau. Junket operators have for a long while been granted preferential treatment when it came to the enforcement of China’s notoriously strict capital flight rules. But political sentiments have changed in the past year, and there has been a gradual increase in pressure applied to companies that make a business from transferring Chinese wealth into the casino coffers on the Macau strip.
Beijing is applying pressure on Macau to shift away from its over-reliance on the gambling industry; arresting junket operator executives, and offering vague guarantees to casinos on their license renewal chances. ©AndyLeungHK/Pixabay
All in all, Macau has been on the war path since late last year. Taking out SunCity in their first coup, they seem turned their attention to the other notable players in this space. Chan Weng Lin held multiple rules within the broader gambling industry, and besides his role of chief executive officer at Macau Legend a casino resort, was also the lead executive for a separate junket operator, the Tak Chun Group.
The charges brought against Chan Weng Lin include money laundering and illegal gambling. The arrest marks a dark moment for the entire sector as it faces an enormous increase in political wrangling, the lost revenue from the COVID-19 pandemic, and now a tightening of regulatory conditions that may wipe out even more of its cash flow potential. The sweeping restrictions being placed on the Macau casinos have in part already been discounted from the share price of the region’s biggest companies. Sharp downturns and low trending equity levels have left shareholders very much out of pocket over the past year.
The arrest of the Macau Legend CEO has struck fear into the elite tier managers and investors across the regional sector. Alvin Chau’s arrest last year was the beginning of a trend that has seen at least 15 shot-callers in this space lose their freedom. Chan and Chau’s respective companies have been taking the brunt of this action, with Macau Legend seeing a 19% drop in share price on Monday. Chau’s SunCity group was hit so hard that the 12,000 employee business went from prospering and profitable to ceasing all business operations, in just a matter of months.
Macau’s Image Remains at Odds with China’s Long-term Vision
The contrast between high rollers in the Macau casinos and the common prosperity of the people couldn’t be starker than it is right now. The Chinese Communist Party has wrestled for a long time against the obstinance of the rich gambling elite when weighing against its conservative ethos. Jet-fuelled luxury trips to Macau, lavish restaurants and fast cars directly contradict the message being communicated by Xi Jinping, that China is a nation of common prosperity.
As China’s wealth income gap increasingly becomes more lop-sided, the policy now seems to be to scrutinize the wealth of the richest 1%. With several decades of economic reform behind them, China has effectively created the wealthiest generation of business and political leaders in its history, this is played out against the backdrop of migrants struggling to make ends-meet in the big cities across the mainland.
Tax avoidance and money-laundering are the two legal frameworks that billionaires have managed to see their personal fortunes soar. China’s regulatory system has been exploited excessively throughout recent history, and the gambling sector of Macau has been a known actor in this system. With the changing public perception of these industries, it’s no surprise that the government have now taken the opportunity to apply pressure on Macau.
Beijing wants to diversify Macau away from its over-reliance on one industry, there is a plan to move the city’s economy closer to the leisure and mass-market tourism markets. This could be achieved through major investment in the city’s infrastructure, and further development of plans to turn Macau into a global hub for the big-health and pharmaceuticals industry.
