Global casino operators have targeted gamblers in Mainland China for a number of years as it is one of the most lucrative markets for casino operators. International casino operators have also relied heavily on attracting investments from Mainland China for their casino projects across the world. Chinese companies and wealthy individual investors have backed several international casino projects and have invested millions either directly or indirectly.
The Chinese government announced this week that it was rolling out a new law that would ban firms and individuals in Mainland China from investing into overseas casino projects. China has pushed hard during the last two years to limit and control cross border funding and capital outflow. Bloomberg reported that in 2016, more than $816 billion flowed out of China to international ventures.
Investments Into Foreign Casino Projects – Banned
The new laws concerning overseas investments have different categories that are applicable to different industries. The Chinese government has set in place three categories ‘banned’, ‘restricted’ and ‘encouraged’ to make it easy for investors from Mainland China to understand what they can and cannot invest in overseas. The industries that have been banned completely include gambling, military technology, the sex industry and any industry that threatens the country’s national security.
The overseas industries that will now have a restriction on investment include real estate, sports, movies, hotels, obsolete equipment and industries that compromise the environment. The government is encouraging overseas investment into industries such as agriculture, R&D, oil and mining exploration, fishing and Beijing’s pet project which is the ‘Belt & Road’ project.
International Casino Operators Need Clarity
The State Council made the announcement earlier this week and there is not a lot of clarity regarding the outright ban on the foreign casino investments. International casino operators will be concerned about the new law as a number of major casino projects across the world are relying heavily on Chinese investors.
Some of the current projects that are underway and have backing from Chinese investors include the controversial Baha Mar casino resort in the Bahamas where China State Engineering Corp is playing a major role; Landing International Development Ltd have invested heavily into casino projects in London, England and in Jeju Island, South Korea while Guangzhou R&F has partnered with U.S based Caesars Entertainment to develop a casino in Incheon, South Korea.
There is no clarity as of now as to whether the Chinese government will allow these companies to continue to invest into these projects and complete them. If the new law does prevent these Chinese companies from further investing into these projects, it could pose huge problems for all parties concerned.
Macau Casino Industry To Benefit From New Laws
Macau, the biggest gambling hub in the world has seen a rise in competition from neighboring countries during the last few years because a number of international casino operators have been able to develop major casino resorts which have been backed by wealthy Chinese investors and companies.
Countries like South Korea, the Philippines, Cambodia and Vietnam have seen an influx of multi-million dollar casino resorts. Japan has also recently lifted the ban on casino gambling and gaming analysts believe it could pose the biggest threat to Macau. Since the government has banned investments into foreign casinos, Macau is bound to witness a reduction in competition.
Gaming analysts have also pointed out that Macau has to renew the gaming permits of its six major casino operators in 2020 or 2022 and is expected to make a number of concessions including potentially approving a seventh casino license. If the ban views Macau as an overseas jurisdiction, then Macau will most likely reduce concessions to Chinese casino operators as they would not be able to make further investments.
However if Beijing decides to frame its laws and look at Macau as a local jurisdiction, then Chinese entities will still be able to invest into Macau’s casino industry and Chinese gaming companies will not be impacted during the licensing renewal process. The other interesting aspect is whether Chinese firms will be allowed to invest in overseas gaming companies that are publically listed. More questions regarding the do’s and don’ts concerning the new law will arise in the coming weeks and it will be up to Beijing to make those clarifications at the earliest.
 
 

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