Less sin, more Shrek in Macau as China takes aim in corruption fight

Reuters

By Farah Master

MACAU, Nov 4 (Reuters) - The media scrum surrounding thepolitically connected chairman of a Chinese financial servicescompany was interested in one particular unpaid loan.

The amount - $1.3 million - was nothing extraordinary. Butthe story behind it was. Xie Xiaoqing, chairman of RongzhongGroup, was sued in January for failing to repay the money toSands China Ltd, U.S. billionaire Sheldon Adelson'sMacau gambling unit.

Xie has said he wasn't gambling and the money was for afriend. A spokesman for his company said Xie was not availableto comment.

For many years, politically linked tycoons and governmentofficials were frequently spotted betting millions in thesouthern Chinese city's lavish VIP rooms. But their numbers havedwindled because of an anti-corruption campaign led by China'snew leader Xi Jinping.

Just a few years ago, that might have devastated Macau,which typically generated 70 percent of its revenues from highrollers including wealthy government officials. In the thirdquarter those big whales accounted for just 65 percent,according to government data, the lowest share since 2006.

Yet annual revenues are on a pace to rise 16 percent to $44billion - seven times what Las Vegas took in last year - andOctober's numbers smashed analysts' forecasts, jumping 32percent to a record $4.6 billion.

Middle-class mass-market gamblers have taken up the slack atjust the right moment, and some of those government officialsare still finding their way in, albeit more quietly.

"It is much stricter with the leadership change," said Li, aMacau junket operator who helps organise high rollers' traveland hotel arrangements and asked to be identified only by hissurname. "They (officials) keep a low profile and stay inservice apartments arranged by other people" instead of opulentcasino suites, complete with massage rooms and karaoke parlours,that they once preferred.

Interviews with more than a dozen casino executives,government officials, junket operators and industry analystsshow Macau is learning to live with closer scrutiny fromBeijing. Most sources asked for anonymity or to be identified byonly one name because of the sensitive topic of corruption.

TOMORROW IS EVEN BETTER

Beijing is both subtly and openly making its presence knownin Macau, a tiny metropolis about one-third the size ofManhattan, spread across a densely populated cluster of threeland masses.

Across from Galaxy Entertainment Group Ltd's goldturreted casino on Macau's Las Vegas-style Cotai strip stands agleaming new People's Liberation Army building. Billboardshoisted next to the towering structure depict armed soldiers onguard with the caption, "Macau tomorrow is even better".

Beijing is also deepening ties with casinos and the junketoperators that bring in the wealthy VIPs by helping to arrangetheir gambling credit and collecting their debts.

New regulations put in place over the past year in Macaurequire junkets and casinos to report suspicious transactionsand player lists each month, including details of when theyplayed and how much they won or lost. Macau is set to implementa new money laundering law next year which may allow authoritiesto freeze and seize assets.

This close scrutiny is a sharp change from just a decadeago, when violent gangs controlled the VIP gaming rooms andstreet crime was a regular occurrence.

"In the early days it was pretty much anything goes," said aformer executive at the Venetian Macau, a glamorous casino,hotel and luxury shopping centre owned by Sands. "It really wasthe Wild West. There really was very limited, if any control."

Government officials would typically visit Macau for leisureor personal business, using fake passports or special permitswhich gave them easy access, according to junket and casinoexecutives.

Since the corruption crackdown, officials have been findingsome creative ways to avoid detection. Macau casinos have someof the most sophisticated surveillance technology yet spottingofficials gambling on the property can still be difficult, saida senior executive at one of Macau's newly opened resorts.

"There are some low-ranking officials from state-ownedenterprises who still come but if they have fake identificationit is very difficult for us to spot," the executive said.

In one recent example, casino workers caught an officialwhose passport had two different birth dates.

Some officials are getting their gambling fix withoutsetting foot in Macau, placing bets by calling someone sittingat a baccarat table and giving verbal instructions, said ajunket operator who gave his English name as Mark.

The VIP segment isn't going away. Macau's 35 casinos stillrake in big bucks from these gamblers who drop 1 million yuan($164,100) on a typical visit. But the high rollers are now morelikely to be wealthy private businessman rather than governmentofficials and politically connected tycoons.

Zhonglu Zeng, a professor at Macau's Polytechnic Universitywho co-authored a study on high rollers from mainland China, said although the total number of high rollers are now biggerthan before, the proportion is now heavily skewed to privatebusiness owners than officials.

Academics estimate that government officials now compriseperhaps 3 percent of VIP room visitors, down from about 30percent 3 years ago.

FAMILY-FRIENDLY MACAU

Gaming taxes generate 80 percent of Macau's governmentrevenues, and both Beijing and local authorities are keen todiversify. Professor Gao Peiyong, director of the NationalAcademy of Economic Strategy told local media last week that theproportion of gaming tax making up financial revenue "is toolarge to be healthy."

Casinos have been under pressure by Macau authorities toexpand non-gaming amenities to attract families and a widertraveller base. Upcoming tourist-friendly events include theGrand Prix, a high-profile boxing match featuring Manny Pacquiaoand celebrity award shows.

Sands signed a deal with DreamWorks Animation inApril which allows the casino to use characters including Shrekand Po from Kung Fu Panda. Costumed employees regularly roam thelobby and shopping centres, interacting with customers.

Manuel Neves, head of Macau's gaming body the DICJ, said the ultimate aim is to emulate Las Vegas's feat of generating asmuch revenue from outside the casinos as inside.

"The transformation is big and fast. We still depend a loton gaming. With the gaming tax the government can do a lot ofthings, one is to push the other activities," he said.

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