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Chinese government opens up gambling tests outside of Macau

Published on October 25, 2014, 4:32 pm

by Jeff Grant Twitter account Jeff Grant LinkedIn account

The city of Macau, China is one of the hottest gambling spots in the world. Regarded by some as China's "sin city," Macau casinos cashed in on $38 billion in 2012 and have been scoring higher profits than Las Vegas since 2007. Interestingly, Macau is the only Chinese city in which gambling is legally allowed. Throughout the rest of the country, gambling for cash is illegal. The desperate state of the world's current economy, however, may soon have a hand in changing that.

The Excitement of Macau

Grand Lisboa Casino (Macau)
Grand Lisboa Casino (Macau)

Sometimes referred to as the "Monte Carlo of the Orient", Macau consists of 33 casinos and features westernized games like baccarat, roulette, and slot machines as well as the traditional Chinese gambling game, Fan Tan. Some notable casinos in Macau include Sands Casino, Casino Lisboa, and The Venetian Macau. The city attracts high rollers as well as average gamblers who wager money on casino games, horse racing, and greyhound racing.

Macau's casinos are spread over two major geographical areas within the territory, the Macau Peninsula and the island of Taipa. Because it is not part of the mainland, Macau is referred to as one of two Special Administrative Regions (SAR) of the People's Republic of China. The other region is Hong Kong.

A Paradox in China

The fact that gambling is legal in Macau, but illegal everywhere else, has created an interesting paradox in China. Difficult economical times have caused some Chinese businessmen and politicians to ponder this paradox and re-evaluate the country's moral stance on gambling. Some speculate that, in the not-so-distant future, the gambling oasis of Macau will be joined by a host of other Chinese cities eager to cash in on hot profits.

China's Traditional Stance on Gambling

For centuries, Chinese culture has taken a moral stance against gambling, looking down upon the activity as a sin and a weakness. In an attempt to control mainlanders' gambling activities, those who wish to escape to Macau for a little financial debauchery are permitted by the Chinese government to do so only once every three months.

Interestingly, two thirds of gamblers who visit Macau's facilities hail from mainland China. The fact that Macau raked in $38 billion last year suggests that these mainlanders are responsible for a hefty portion of that figure. In short, Chinese citizens who have historically detested gambling are shelling out exorbitant amounts of money to the very institution they are traditionally supposed to hate.

Illegal Chinese Gambling

It's no secret that the Chinese, like people from many other cultures, enjoy gambling. Although the activity has been illegal in the country for centuries, those who want to gamble illegally have found ways to do so outside of Macau. In 2010, approximately 1 trillion yuan were spent on illicit gambling activities. Much of this money was wagered on illegal websites and in underground casinos.

An underground casino could easily spring up anywhere: in someone's apartment, in the basement of a business, even on a street corner. Illegal soccer betting is a booming business in China as well. Chinese authorities admit to having difficulty policing the hundreds of thousands of illegal soccer bets that are made in the country yearly.

Cashless Casino in China: Jesters in Hainan Island

Although gambling for cash is illegal everywhere in China except Macau, the Chinese government is experimenting with a non-cash casino in a popular vacation spot called Mangrove Tree Resort in Hainan Island. The casino is called Jesters. Guests at the Mangrove Tree Resort hotel may gamble at any of Jesters' 50 tables, but the currency in which they deal is points, not cash.

Winning points may be traded in for coveted prizes including artwork and iPads, jewelry and hotel credits. As the Mangrove Tree Resort grows in size and popularity, luxury stores like Prada are vying for the chance to become part of this elaborate and exciting point system.

Only hotel guests may gamble at Jesters at this time, but as the Mangrove Tree Resort expands, it is expected that Jesters casino will open its doors to the gambling public as well. The cashless casino is the brainchild of businessman Zhang Baoquan, a well-known Chinese real estate mogul, and operates with a tentative blessing from the Chinese government. Many view the existence of Jesters as evidence of a subtle attitude shift in favor of gambling on the part of the Chinese government.

Zhang Baoquan in the Hainan Island Resort
Zhang Baoquan in the Hainan Island Resort

Big Casino Operators Are Salivating

Seeing China as a highly populated territory on the brink of change from an anti-gambling nation to a pro-gambling nation, casino kings like Caesars and MGM are keeping a trained eye on Mangrove Tree Resort, Hainan Island, and the Chinese government. China, they reason, would be a highly profitable location for future casinos if the government allows legalization to occur.

Macau in 2012: A Slight Dip in Profits

Concerned investors have noted that Macau's profits took a slight dip in 2012. Several explanations exist for this. Perhaps Jesters, conveniently located on mainland China in a luxurious hotel resort, has stolen Macau customers who don't mind winning merchandise instead of money. Perhaps the availability of casinos in other Asian territories like North Korea and Singapore has lured some customers away from Macau. It is even possible that the underground casinos of China and the widely popular act of soccer betting have drawn profits away from Macau.

Frank McFadden: Taking It All in Stride

Frank McFadden, president of one of Macau's largest casino developments, Sociedade de Jogos de Macau (SJM), is not concerned about Macau's recent profit loss. He is quick to point out that Macau, in recent years, has surpassed Las Vegas in profits, and calls the current slump a "natural adjustment." McFadden remains optimistic about the future of gambling in China. Specifically, he has high expectations for the casinos of Macau.


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