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China to tighten rules for US casinos in Macau

China to tighten rules for US casinos in Macau

Macau has released a new bill that would halve the duration of new casino licenses and require operations to be in line with China’s national security needs, but not reduce the number of licenses in the lucrative gambling hub.

Details of the bill were unveiled Friday by Macau’s cabinet and will be submitted to the local legislature for deliberation. The draft followed an earlier series of proposals in September that: fear of crackdown caused among investors as Beijing seeks to increase regulatory oversight of what was a cash cow for Western casino operators.

Ben Lee, managing partner and founder of Macau-based consultancy IGamiX, ​​said the bill was much more lenient than what people expected.

The bill would not reduce the current number of casino licenses, and it dropped a previous provision to place government representatives in casinos to more closely monitor their activities

“It’s a positive development in that it gives us a little more clarity going forward,” said Mr. Lee.

The US-listed shares of major casino operators that have companies in Macau jumped into trading Friday morning.

Las Vegas Sands Corp.

LVS 14.21%

achieved more than 15%, and

Wynn Resorts Ltd.

WYNN 8.10%

up 9%. Shares of both companies had fallen sharply last year, while

MGM Resorts International

– which is less exposed to Macau – performed better.

China’s gambling enclave has been hit by setbacks as the pandemic largely prevented mainland tourists from visiting the city and wiped out billions of dollars in gambling revenue, a lifeline of Macau’s economy. Also the arrest of one of the gambling industry’s most flying figures in Macau late last year gave the industry shivers, especially the junket operators who served many high rollers.

Under the new draft, Macau would grant up to six casino licenses for a period of 10 years, which can be extended for a further three years in exceptional circumstances. Casino operators currently have three concessions and three sub-concessions with 20-year terms meaning there could theoretically be enough new licenses for all of them. The licenses, owned by US companies and local rivals, expire in June.

The proposal stated that the authorities would strengthen supervision of companies and people involved in games of chance.

Casino operations must also be consistent with national security and Macau’s security, the bill said. Last month, Chinese state media reported that Beijing’s top envoy in Macau would be appointed as the local government’s national security adviser. The clause could expose US operators to the fallout from political tensions between the US and China, Lee said.

To increase the share of local ownership, the government draft requires 15% of a casino company’s share capital to be owned by a director who is a Macau citizen, up from 10% in the earlier rules. Companies must increase their capital amount to the equivalent of $624 million to ensure they have adequate financial resources.

The authorities have also introduced a limit on the public trading of shares in the licensee. Ku Mei Leng, head of Macau’s Office of the Secretary for Economy and Finance, said in a news conference Friday that if the share of publicly traded stock is too large, it could affect government oversight of a company’s shareholders and finances.

The implications of the new provision were not immediately apparent. The aim is to ensure the healthy development of the gambling industry and not to limit market freedom, Ms Ku said.

write to Elaine Yu at [email protected]

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