Featured in this article:
  • Prominent junket operator arrested in Macau.
  • His arrest singles another crackdown on gambling in the Chinese Special Administrative Region.
  • Chinese officials may be trying to end American influence in Macau's gambling industry.

4 Minute Read

Suncity Group CEO Alvin Chau poses on the red carpet of the Hong Kong Film Awards in Hong Kong, April 15, 2018 . Macao police have detained Chau, the head of Macao's biggest casino junket organizer, and others after Chinese authorities issued an arrest warrant for them over accusations that they ran an illegal cross-border gambling syndicate. (AP Photo/Vincent Yu)

The arrest of a prominent junket operator, Alvin Chau, on Sunday, renewed worries over gambling’s future in Macau. The Special Administrative Region (SAR) of China has long been considered the Las Vegas of Asia.

Now, it appears that Chinese officials are further cracking down on gambling, even in the former Portuguese colony. Chau’s arrest sent shockwaves through casino stocks.

Who Is Alvin Chau?

A 47-year-old Macau resident, Chau is the CEO of Suncity Group Holdings. Suncity is a junket operator that facilitates trips to Macau casinos for high rollers. With a focus on the Chinese market, by some measures Suncity junkets account for 25% of Macau’s entire gambling market.

macau cityscape

The skyline of Macau.

Suncity not only arranges for the players to visit Macau, but it also operates its own VIP gaming rooms. Reports Tuesday suggested Suncity will immediately shutter its high-roller operations and cease salary payments to up to one-third of its staff.

The allegations against Chau include operating an illegal live betting platform out of the Philippines and directing Suncity customers to use the service. Macau arrested Chau along with 10 others over the Philippine gaming accusations.

However, officials in Mainland China also announced an investigation into Chau’s activities. Authorities in Wenzhou accused Chau and Suncity of facilitating illegal cross-border money transfers as part of a gambling ring.

All forms of gambling are technically illegal in China.

Why Does Chau’s Arrest Matter?

Even since Portugal transferred control of Macau to China in 1999, analysts have wondered how Chinese authorities and the Chinese Communist Party (CCP) would interact with gambling interests. However, under the ‘One Country, Two Systems’ principle, the CCP has mainly allowed uninhibited growth as Macau became a global casino-resort destination.

Along with its sister Special Administrative Region across the Pearl River Delta, Hong Kong, the CCP has been asserting itself more forcefully into local Macau affairs. Because all gambling is banned in Mainland China, visitors to Macau are exposed to entirely new industries.

As news spread of the dual investigations into Alvin Chau over the weekend, Chinese residents were seen fleeing the casino floors. And three of the major United States casino brands have massive operations in Macau.

Wynn Macau casino

In this April 22, 2010 photo, Music fountain performs at the Wynn Macau. (AP Photo/Kin Cheung)

The three casino heavyweights — MGM, Wynn, and Sands — all separately list shares in their Macau operations on the Hong Kong stock exchange. Chau’s arrest sent the stocks tumbling by between 9% and 15% on Monday. These losses are on the heels of a September announcement that China would seek to overhaul gambling in Macau, wiping $20 billion in shareholder value off of the books.

As for shares of Suncity, trading was suspended on Monday before the stock fell 48% on Tuesday.

What’s Next for Macau?

Mainland Chinese officials fear that Macau functions outside its currency control system. In a plan to both prop up the economy and exert control over its citizens, the CCP only allows Chinese nationals to remove approximately $50,000 in foreign currency from the country each year.

Because many Chinese residents seek to transfer assets overseas, high rollers in Macau casinos can help shuttle funds from the mainland to foreign banks. And because Suncity helps facilitate (or even aides) this evasion of state currency controls, Alvin Chau and his associates are now in hot water.

Another issue for Chinese officials is the presence of American ownership in the Macau casinos. The repeated crackdown on gambling in the SAR may be intended to force companies like Sands and MGM to reduce or sell their stakes in the Macau market.

Without foreign and American interference, the CCP would be better positioned to not only control who gambles but tap into the profits from the casinos. Right now, because Macau’s tables mainly see money from Chinese nationals, the CCP is watching profits flow from its citizens to American companies.

It is unlikely China shuts down gambling in Macau entirely. Instead, officials will continue to make doing business in the SAR more and more difficult. What was once an international gambling destination may end up being a place no high roller will want to visit.

Dave Consolazio

Dave Consolazio has been passionate about writing and sports journalism since his high school years. He has a degree in Broadcast Journalism from USC where he worked with the school's radio and television stations. His work has been featured in SportsbookReview, Sports Illustrated and SB Nation. Dave's experience ranges across multiple fields in the gambling industry. You can find his sports, casino, and poker articles in GambleOnline.co.

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