Chinese Government Could End Macau’s Gambling Monopoly, Mulls Legal Gaming Options on Hainan Island

The Chinese government is mulling the legalization of certain forms of gambling on the Hainan Island, Bloomberg reported citing sources familiar with the ongoing discussions.

The move would strip Macau of its status as the only Chinese territory where gambling is legal. It is also hoped to improve the ailing economy of a strategic southern region.

According to the sources, a specially formed group headed by Chinese President Xi Jinping is discussing the possibility for the legalization of online gambling, lottery sales, and sports betting on the Hainan Island. If approved, the proposed gambling legalization could also evolve into the addition of land-based casinos in the Southern China province.

Gambling and the promotion of gambling services are currently banned on the Mainland. What is more, the Chinese government has long been openly and strongly opposed to activities of this type. However, at a time when Hainan needs a serious economic boost, it is believed that certain forms of gambling could be of great help.

Here it is also important to note that the gaming-focused proposal is part of a bigger rescue plan that also involves relaxing of current visa regulations and construction of an airport in Western Hainan. Currently, there are three operational airports on the island, and they are all located in its eastern portion.

Reports about the proposal emerged at a time when the province is struggling with a serious financial deficit. In addition, its largest conglomerate – HNA Group, which operates two of its airports, is facing its own financial demons. The island, known for its beaches, is also looking for ways to bring international tourists back.

Macau Could Lose Its Gambling Monopoly

While the gambling proposal is part of a rescue plan for Hainan’s economy, its potential realization could and probably would hit Macau’s economy. With annual gross gambling revenue five times bigger than that of Las Vegas, the special administrative region is currently the world’s largest gambling hub.

It recently emerged from two-and-a-half-year pattern of monthly revenue drops, following President Xi Jinping’s anti-graft campaign from 2014. The crackdown scared prominent high rollers away from Macau’s casinos, which hit the city’s economy in quite a negative manner, and forced local casinos direct their focus to recreational casino patrons and non-gambling customers.

That shift in focus proved a right move as Macau posted in 2017 its first full year of revenue growth, following the corruption clampdown in 2014. However, if gambling is legalized in Hainan, this would instantly turn the island into a direct competitor to Macau, as both territories will practically be targeting the same group of tourists.

The gambling plan has already begun taking its toll on the casino hub, as shares in its casino concessionaires fell shortly after the Hainan news spread. MGM China Holdings and Sands China saw a 6% drop in share price, while Wynn Macau decreased 6.7%.

While too early to predict the exact impact on Macau, analysts are positive that the city will be affected in some very negative way, if forms of gambling are legalized on the Hainan Island.

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