China has a long history with gambling. In the 1930’s Chiang Kai-Shek realized the threat it posed to his army’s morale and tried, unsuccessfully, to stamp it out. When Mao Zedong came to power, he too attempted to eliminate the vice. But gambling has remained a thorn in China’s side. A rise in disposable incomes and new gambling options to match have only exacerbated China’s gambling addiction in recent years. Outlawed in 1949, gambling simply went underground in China. Each year, an estimated one trillion yuan is illegally wagered in clandestine mahjong games, makeshift casinos, secretive betting websites and unsanctioned lotteries. The Chinese government has further complicated the problem by presenting legal obstacles to problem gamblers trying to access treatment. As China’s economic and political influence in Asia continues to grow, what effect will gambling have on the country’s ascent?
China’s Las Vegas
For those Chinese who can afford to gamble offshore, there are many options. The semi-autonomous former colony of Macau sits at the mouth of the Pearl River Delta in southern China and has quickly become the region’s gambling Mecca. Each year it draws millions of gaming tourists from the nearby mega-cities of Hong Kong and Guangzhou, and from further afield in the Chinese mainland. Macau’s visitors are 90% Chinese, and in 2012 the tiny island’s gambling revenues totalled more than $38 billion. In fact, Macau’s infamy has earned it the title of “Asia’s Las Vegas”, but in truth, Las Vegas, with revenues of just $6 billion in 2012, is more accurately described as “America’s Macau”.
US casino barons Steve Wynn and Sheldon Adelson led the push into Macau, after the Chinese government awarded licenses to the two men who had done more to clean up Las Vegas’ image than anyone else. In 2004, Adelson opened his first casino in the former colony, a small boutique operation called ‘Sands Macao’. This early investment in the Macau market gave Adelson a two-year head start on his competitors and provided him with a new source of revenue that would later help him manage the unstable debt that his Nevada holdings were accumulating as the US economy soured.
Encircled
The action is not only in Macau. Bill Weidner, a former employee of Adelson, has struck out on his own and plans to build a rival strip on Matsu, a small Taiwanese island that lies just a few miles off the coast of mainland China. Matsu is significantly closer to the population centers of Shanghai and Beijing than Macau, but it is also largely undeveloped, and unknown. The biggest challenge facing Matsu as a future gambling destination though is its precarious geopolitical status. Though cross-strait relations have improved markedly in recent years, there are still significant bureaucratic obstacles for Mainland Chinese hoping to visit Taiwanese territory, which would serve as a serious deterrent to gaming tourism.
Taiwanese legislators for their part recently passed a law giving outlying islands the chance to decide through referendum if they want to allow casinos to operate. Weidner’s confidence in Matsu’s location knows few limits, and the casino owner recently promised to spend $2.5 billion to bring the tiny island world-class amenities, including new roads, a golf course, a university campus, and improvements to the airport and ferry terminals. That is not all. Almost unbelievably, Weidner promises that if the casino opens and reaches its targets, he will pay each of the islands residents a monthly dividend, or stipend, that will start at $609 a month, and balloon to a monthly payment of $2,670 after five years.
Casinos near the Chinese border have sprung up in Vietnam and Laos as well, albeit without some of the glamor and amenities that Macau provides. Nearby Singapore, which has only two casinos, boasts annual gambling revenues greater than those of the entire Las Vegas strip combined. Even in Kazakhstan, Almaty casinos have begun catering to Chinese looking to gamble. Plans for future casinos in Vladivostok and the Philippines are underway as well. In fact, China increasingly finds itself encircled by a ring of gambling hotspots designed to attract Chinese gamblers. The potential billions in untaxed gambling revenues have not gone unnoticed by the Chinese government, but authorities fear that legalizing gambling at home would invite destabilizing social ills, including organized crime, drug abuse, bankruptcies and the break-up of families. However, tapping the revenues of domestic gambling could help the central government compensate for the Chinese economy’s slowing growth in recent years.
In a twist of irony, Beijing’s uncertain relationship with gambling has become a multi-billion dollar gamble for future investors betting on the continued success of China’s offshore casinos. If legalized, domestic gambling would quickly put many of the current offshore casinos out of business for good. But China’s reluctance to legalize the vice is understandable, and many fear that problem gambling may hinder the growth and productivity of China’s burgeoning economy. One thing is certain- China’s troubled relationship with gambling can no longer be ignored. The Chinese government must address this issue head on, but with sensitivity and pragmatism.
