Political Risks in China May Affect Foreign Gaming Operators

Political risks in China are increasingly impacting Macau, raising concerns for foreign investors, Steve Vickers and Associates (SVA) said in a report yesterday.

The election of Sam Hou Fai as Macau’s Chief Executive in October 2024 reflects “a growing emphasis on tighter state control and reduced flexibility for business in China as a whole,” SVA added.

Sam, a former judge and member of the trusted “Thirteen Taibao,” is the first mainland-born individual to govern Macau. His leadership is expected to bring heightened oversight, with a mandate to reduce the city’s reliance on gaming—a move aligned with Beijing’s “common prosperity” agenda and its push for “dual circulation.”

This policy shift intensifies “rising political risks for business in Macau,” as new regulatory measures will likely target foreign-owned casinos and restrict capital movement. Macau’s casino industry, which has traditionally facilitated the flow of money out of mainland China, now faces mounting pressures, the report says.

Recent crackdowns on junket operators, illegal foreign exchange, and underground banks underscore Beijing’s efforts to curb capital outflows. In 2023 alone, Macau saw around 11,000 arrests tied to these activities.

Under Sam’s administration, significant investments are expected in non-gaming sectors such as tourism, entertainment, and conferences, with casino operators mandated to support this diversification.

According to Vickers, this shift “presents both challenges and opportunities, impacting growth prospects for foreign investors while aligning Macau more closely with China’s broader economic policies.”

As these developments unfold, investors in China, Hong Kong, and Macau must reevaluate strategies to mitigate risks and adapt to regulatory shifts, SVA advises.