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China Announces a Blacklist System for Overseas Gambling Destinations
By Jeff Osienya Aug 30, 2020 IndustryChina’s Ministry of Tourism announces the implementation of a new cross-border blacklisting system to curtail outbound capital outflow from Chinese tourist gamblers.China has created a new blacklist system for cross-border gambling venues that target tourists from mainland China, to effectively ban Chinese citizens from traveling to the blacklisted destinations. The Ministry of Culture and Tourism in China, published a notice disclosing the creation of the blacklist in conjunction with several other government departments, to prevent the “endangering the personal and property safety” of its citizens.
In the announcement, the ministry indicated that;
Quote"There has been a rising number of Chinese outbound tourists in recent years as international travel becomes increasingly convenient. However, some overseas cities have attracted Chinese tourists for their gambling businesses, disrupting China’s outbound travel market and posing a threat to Chinese citizens"
Currently, almost all gambling verticals in the People’s Republic mainland are illegal under the law of the land, except for the state lottery. The only commercial casinos that are legal in the eyes of the government are those that are in Macau, an independent SAR (Special Administrative Region) of China.
Proxy Betting and Junket Groups on the Spotlight
The ministry wasn’t forthright about the casinos and regions that are part of the blacklist. The only information that was divulged is that the blacklist would also include gambling facilities that permit proxy betting, i.e. where an agent places wagers on behalf of an individual who sends instructions to direct the play remotely through a telephone or any other communication device.
On top of proxy betting casinos, VIP junket groups which organize high roller tourists from the mainland to gambling destinations, and lend them gambling cash, are also under a microscope by China’s central Government.Given that china restricts traveling citizens from carrying too much cash out of the country, junkets usually offer VIPs opportunities to spend as much money as they want on credit.
Analysts Reports Try to Shed Light on Potential Targets
While it’s not clear which gambling destinations are on the new blacklist system, Jeremy An, Derek Choi, and DS Kim, all analysts from investment bank JP Morgan joined the conversation speculating that casinos in the Southeastern parts of Asia such as Vietnam, Cambodia, and the Philippines could be the target. Other markets that could potentially be affected by this blacklist also include Malaysia, South Korea, Singapore, and maybe even Australia.
When it comes to how China’s new blacklist system will work, this is what the JP Morgan analysts had to say;
Quote“At this stage, it’s difficult to know exactly how the government will clampdown and what it means by ‘black-listing’, but we suspect capital flows through underground banks and agents, as well as junkets’ promotion of these overseas markets, will be heavily scrutinized.”
On the other hand, John DeCree an analyst from Union Gaming, an investment banking giant in the gaming industry, gave insight on how China could enforce this new directive. He gave the example of the travel restrictions that China imposed in South Korea back in 2017 because of geographical tensions. As a result of the restrictions, visitation from Chines citizens went down by 50% to 4 million, from an initial 8 million, which also significantly impacted the VIP revenue collected from foreigner-only casinos in South Korea
Is this Part of China’s Bid to Drive Traffic Back to Macau?
According to a report published by the South China Morning Post last Wednesday, gamblers in China spend about $145 billion annually on illegal gambling sites, with much of the handle going to the Philippines. The report also disclosed that online gambling has been a headache for the Chinese government, even though officials continue to clamp down on illegal gambling.
Last year in August, China asked the Philippines to outlaw online gambling but the latter pushed back and indicating that as a sovereign nation, they were not obliged to comply. President Rodrigo Duterte of the Philippines added that the tax revenue accrued from online gaming was too significant for its economy when he declined China’s requests in 2019.
The Philippines boasts of a flourishing online gambling industry with over 60 licensed operators popularly referred to as POGOs (Philippine Offshore Gaming Operators) that have been an attractive hub for Chinese gamers. Moreover, Manila is also home to four thriving integrated resorts; Resorts World, Solaire, City of Dreams, and Okada, all of which have been taking in travelers from China.
Cambodia on the flip side, recently announced that it was no longer offering permits to allow companies to offer online gambling services after intervention from China, but the region still has casinos that are readily accessible to Chinese tourists.
In view of China’s new declaration, the JP Morgan team also pointed out that the move is possibly a long-term plan for ‘ring-fencing’ the demand and flow of gambling within the country which in the end could boost the demand for Macau. Likewise, John Decree also stated that the directive could ultimately be a win for Macau, particularly since its VIP business has been on the downward trend partially because other Asian gaming destinations have been diverting the volume from the gambling Mecca.
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