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Macau’s Economy Blows Up
Macau’s Economy Blows Up
China’s crackdown on corruption, or at least the ostentatious display of the spoils of corruption, and its selective hunt for corrupt officials, which to some observers resembles a political purge, may or may not tamp down on actual corruption, which is what greases the wheels in the Chinese economy. But it’s certainly doing a number on Macau.
Macau is the only place in China where Chinese can legally gamble away their wealth without having to resort to the stock market or other schemes. It’s also a convenient place where they can circumvent China’s currency controls to siphon money out of China and send it to “safe havens,” such as over-priced homes in the most expensive trophy cities in the US near the peak of US Housing Bubble 2.
Until February 2014, Macau was on an awesome ride that had kicked off in 2001, when it permitted foreign casino operators to build gambling palaces. In 2002, Macau became the number one gambling destination in the world. Even during the Financial-Crisis, Macau’s gaming revenues rose nearly 10%. These endlessly soaring revenues were a thermometer into China’s economic boom.
So in its crackdown on corruption, China is hitting Macau in both departments: scaring high-rollers away and monkey-wrenching its capital-controls evasion machinery. And this year, Macau has taken a third blow: the deteriorating economy in mainland China.
As a result, Macau’s real GDP plunged 24.5% in the first quarter year-over-year and then went ahead and plunged an even more terrible 26.4% in the second quarter, to 77.5 billion Macau patacas ($9.7 billion), the lowest level since early 2011.
The Statistics and Census Service (DSEC) in its report today blamed “exports of gaming services,” as it calls gambling revenues that had plunged 40.5% year over year, and “exports of other tourism services,” which had plunged 21.5%. “Total exports of services” crashed by 35.9%.
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What Macau Just Said About China’s Economy | Wolf Street.
What Macau Just Said About China’s Economy | Wolf Street.
Few economic phenomena compare to the soaring gambling revenues in Macau since it opened up to foreign casino operators in 2001. In 2002, Macau blew past Las Vegas. It’s the only place in China where the Chinese can go and legally gamble away their money, and it’s one of the key places where they can go to siphon their wealth – however they’d obtained it – out of Mainland China and beyond the reach of the muscular arm of the government. Even during the financial-crisis years 2008 and 2009, Macau gaming revenues grew, despite a horrendous seven-month plunge. 2009 was the worst year on the books, with revenue growth of only 9.6%. The rest of the years, double-digit growth was the norm.
During the first five months of 2014, revenues soared 15.8%. Nothing could stop Macau, or so it seemed. But in June, Macau’s world changed with the first year-over-year revenue decline since the financial crisis. The soccer World Cup was blamed. VIP revenues, which used to account for 66% of total revenues, dropped an estimated 20%, a hole that increased marketing to regular folks couldn’t fill.
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