Chinese Gov’t to Criminalize Offshore Gambling
The news this week in China was filled with the latest developments in the ongoing offshore gambling saga. Chinese officials are seeking to push through new laws and criminal definitions for offshore gambling. The new proposals would be aimed at reducing the appeal of these services and punishing Chinese citizens that choose to still engage with them.
The Chinese Standing Committee of the National People’s Congress will launch its second review into this issue. A novel crime has been put forward to be signed into law, it states that organizing and soliciting casinos abroad and establishing unlicensed gambling within the domestic territory of China would be illegal. The proposal does not outline what the penalties for breaches of these laws would be though.
On Tuesday this week, The Standing Committee of the 13th National People’s Congress began to review a series of laws that are affecting the economic security of China. The organization, which is the top legislature in China, is assessing multiple drafts and revisions to administrative penalty law, national flag law, and national emblem law. Together these sections of the legal code directly impact the offshore gambling predicament.
Outside of the gambling legality of offshore operators the committee also reviewed draft laws concerning a diverse range of matters including; biosecurity, the balance of payments, infrastructure investment, support for veterans, information security, and the coast guard. These matters will be discussed over a prolonged five-day session starting on the 12th of October.
Ultimately, the committee will level with the question of whether cross-border gambling is inherently a large capital outflow that severely tarnishes the economic security and global image of the company. The recommendations of the committee will go a long way to determining the future discourse of gambling in China.
Over $145bln Pouring Out of China Each Year
At the core of this issue is the velocity at which funds are leaving the Chinese economy and landing in the accounts of POGOs and other offshore operations around the Asian peninsula. In the eyes of the Chinese government, this is a problem that needs to be tackled at the source, through means of diplomatic influence and hawkish power plays China is exercising its authority over neighboring countries.
In September, the director of the Ministry of Public Security International Cooperation Department, Liao Jinrong, made it clear that Chinese citizens were spending in excess of $145bln each year on illegal gambling products hosted offshore. The argument put forward by Jinrong is that the outpouring of funds represents a major national security concern as the country’s economic prosperity is being exploited by foreign agents.
Major Political Mission of China
The cause has been taken up unilaterally across the Chinese public sector, the opinion is unanimous regarding the negative impact of unlicensed offshore gambling operators. The central bank and the top monetary policy authority also weighed in, stating that tackling cross-border offshore gambling organizations represented a primary political mission for the Chinese government.
In order to enforce the directive, China has put plans in motion with the objective of implementing travel bans on countries it views as offshore gambling hotspots. The blacklist includes locations in the Philippines, Vietnam, and Cambodia. The ban is still in the early stages of approval, and several hurdles are yet to be cleared before it becomes law.
The exact list of cities included on the list is yet to be confirmed, but given the body of evidence and the current hostile climate towards offshore gambling, several analysts have been able to deduce certain parts of it. Illegal gambling operations are often hosted in neighboring countries giving entrepreneurs the easiest possible access to the lucrative Chinese wagering pool.
Junket Operators Also Targeted
Another dimension of the offshore gambling capital outflow problem in China that is pivotal in understanding how this activity is facilitated is junket operators. These agencies provide a service to clients whereby they can transfer funds to foreign casinos in large amounts, circumventing the strict laws in China preventing payments to foreign entities.
Since August, China has launched a crackdown against junkets. The usual financing channels for VIP gamblers via junkets will be seriously threatened if this passes. The gaming sector in Macau could inadvertently become a victim of this policy, the whole industry is massively reliant on cash inflow from VIPs.
Due to COVID and the ongoing deliberations surrounding the legality of junket operators, the overall liquidity of the gaming sector in Macau has dropped by up to 82.5% compared to a similar period last year.