Through its turbulent history as a Portuguese holding and transfer back to China in 1999, Macau has made a name for itself as a fabulous resort playground for the wealthy in the South China Sea.
But all is not well in paradise. Recent years have brought a storm of economic difficulties down on this Special Administrative Region of China and the vast gaming empire that Macau has built.
At first glance, it may seem that Lady Luck packed her bags and left town but digging a bit deeper it appears that a multitude of issues has brought about their twin troubles: economic recession and casino gaming decline.
Crackdown on corruption
A crackdown on corruption started to show cracks in the foundation, however, when from 2014-2015 Macau’s economy went from one of the fastest growing to one of the slowest. In a bid to end rampant corruption, orchestrated by President Xi Jinping, the appetite for high-stakes gambling was seriously diminished, truly exposing the city’s reliance on high-roller gamblers for large portions of its revenue.
A recent political mission is now targeted at the cross border flow of gambling-related money that has been crisscrossing back and forth between China and the SAR. In a recent notice Fang Yifei, the deputy governor of the People’s Bank of China, outlined plans to “strengthen and reinforce the governance of cross-border gambling financial chain regulations.”
Macau has withstood a lot of adversity in the 21st century. Despite the 2003 SARS outbreak, the 2008 financial crisis, and the 2015 recession, its economy has continued growing until the 2015 recession hit. The most recent worldwide disaster, the COVID-19 pandemic, however, has finally started to take a toll on the “Las Vegas of Asia”.
Macau’s number one visitor market has always been mainland China. With a gambling industry 7 times larger than Las Vegas and the legal wiggle room that comes with being a Special Administrative Region, Macau has long been a welcome escape from the strict laws of the PRC for Chinese citizens looking for a good time.
Although the outbreak of COVID-19 has slowed and generally been contained on mainland China and the special regions of Macau and Hong Kong, visa and border restrictions and a widespread lack of travel from foreign visitors have really hit the gaming industry hard. Analysts estimate that Macau casinos are seeing a loss of $1 million per day as the gaming tables sit empty during months of lockdown.
Lack of economic diversification
Perhaps the virus and decreased tourism are not entirely to blame. The downturn actually began back in 2015 and has continued to the present day.
A 0.8% fall in gaming services exports helped to shove Macau into a technical recession in the second quarter of 2019 after a 1.8% decline in GDP by June of that year. It didn’t help that there was a 30% drop in construction investment and a 24% fall in the value of Macau’s exports either.
If you’ve been paying attention at all for the last two years, you’ll already know why Macau’s exports have taken a nose-dive. The ongoing trade war between the US and China has trapped Macau in the middle as a bargaining chip between the two superpowers.
But exports aren’t the only sector to feel the heat. In the ongoing battle of worsening trade tensions, American casino licenses were revoked after President Donald Trump “ordered” U.S. companies to leave China and return home in August 2019.
Many of these long and short term losses can be attributed to the pandemic, trade war, and political protests, but looking at the trends over time, May 2020 actually marks the eighth straight month of declining revenue for the SAR.
So despite the significant hit its economy has taken from lack of tourism recently, it appears that this recession has been in the works for some time. Likely due to a highly-specialized economy rather than fiscal diversification, Macau may need to look to new industries to increase its ability to bounce back in similar situations going forward.
Time to go online?
Online casinos offer players a convenient, travel-free way to play their favorite games with bonuses like free spins, awesome multipliers, and free money to get started. How can you say no to free money and real winnings without having to pay for expensive flights and hotel accommodations?
If Macau chooses not to pivot to a new revenue stream or industry, it looks like their best bet is moving their casinos online. Online gaming is one of the fastest-growing industries, projected to be worth more than US$90 billion by 2024.
Only time will tell what direction Macau will take but in the current travel-less world we’re in, there’s no doubt that the internet offers a wealth of opportunities to bulwark a flagging economy based almost entirely on tourism.