China’s Currency Laws Negatively Impact MacauTia Winter | 28 February 2019
The Macau casino industry is waiting to fully realise the impact that China’s new currency laws may have on the island gambling Mecca. A large portion of Macau’s gambling revenue comes from high rollers from the mainland, and there are concerns that the new regulations may curb this revenue stream. However, experts have said that it is still too soon to tell what the full impact will be.
Potential Impact of the New Controls
According to analysts from the brokerage company Sanford C Bernstein and Co. the new currency rules are in fact the same as the old. The rules pertain to activities that are already illegal, such as capital pools, and simply serve to highlight these activities as illegal. However, where the new regulations do differ is that the authorities have far more power to enforce the regulations on the ground than before.
The ‘new’ regulations were distributed at the beginning of January through a judicial interpretation. If severely enforced, it will be the small junket operators that will be hit the hardest as they rely heavily on underground banks to complete transactions.
The full effects will come down to how stringently law enforcement enforces the rules. Should the regulations be strictly enforced the impact on junket operators and the casino industry as a whole would be detrimental. By further restricting the movement for currency, illegal betting would become more commonplace and casinos would lose this revenue.
The most likely outcome will be that small agents and junkets are absorbed into the larger operators, resulting in mega capital controlling entities. These will be near impossible to regulate, as so many channels for moving money creatively exist.
China’s Currency Regulations
China’s currency regulations limit the total that a person may withdraw outside of the country to the equivalent of $15000 per year. Exceeding this amount can lead to accounts and foreign transactions being blocked for as much as a year.
If we consider the value of Macau’s gambling industry and the average spend of a weekend high roller, that maximum doesn’t go far on a big weekend. As a result, several methods have been devised to circumvent the regulations. These include tampered with card machines, which register transactions on China’s mainland or the purchase of high-value goods, which are then immediately returned for cash refunds.
Labelled ‘a porous capital control environment’, specialists have warned that people will simply find more creative and potentially illegal ways to move their money.