As cash flees Macau junkets, gambling hub faces long odds of quick recovery

FILE PHOTO: A general view shows the Venetian Macao casino and hotel, following the coronavirus outbreak in Macau, China February 5, 2020. REUTERS/Tyrone Siu/File Photo

HONG KONG — Fears China is broadening a crackdown on offshore gambling has sparked a rush to withdraw billions of dollars from the world’s biggest gambling hub Macau, threatening a recovery in the coronavirus-stricken economy, executives say.

An unprecedented stampede to withdraw money from junkets – companies which lure high rollers to gamble – started in July after Beijing identified the cross-border flow of funds for gambling as a national security risk.

Worryingly, the customer withdrawals have spilled into the broader casino industry, leading to a cash crunch in Macau’s VIP sector at a time the Chinese territory is struggling to recover from COVID-19 restrictions which has sent tourist numbers and gambling revenues plummeting.

“This is not millions we are talking about being taken out here, but billions,” said a casino executive who was not authorised to speak to the media.

“We have cash in the bank but with everyone withdrawing, it’s a problem.”

Several other executives also told Reuters that cash was being taken out in the billions of Hong Kong dollars.

While Macau casinos have ample reserves to ride out several months of zero revenues, the rising cash withdrawals point to a major loss of confidence in the crucial VIP junket sector in a further blow to the economy, analysts said.

The sector accounts for around 50% of overall gambling revenues, which hit $36.5 billion last year. The pandemic has already ravaged the economy with gambling revenues down around 96% in the second quarter year-on-year.

The withdrawals began when hundreds of customers tried to pull deposits from top junket Suncity, at its VIP clubs across Macau, over fears it was being targeted by Chinese authorities. Suncity denied the allegations.

The group then began restricting withdrawals, sparking a panic rush by customers seeking to pull their money from all junkets, executives said.

Suncity said it was acting in compliance with new casino policies, but declined to elaborate.

Junkets in the former Portuguese colony are licensed to provide customers with chip deposits and withdrawal services on behalf of casinos Sands China, Wynn Macau, MGM China, Galaxy Entertainment, SJM Holdings, and Melco Resorts. All casinos declined Reuters requests to comment.

As customers started pulling out money amid fears of a broader crackdown by Beijing, junket agents in turn have begun taking back deposits from the casinos.

Chipping Away

Casinos have reacted by putting limits on the amount of cash chips that can be withdrawn, executives said.

“The crackdown on the cross border transactions have finally rammed home the inconvenient fact that Macau has always been dependent on outflow of funds from the mainland,” said Ben Lee, founder of Macau gaming consultancy IGamiX.

Gambling is illegal on the mainland, but is allowed in casinos in Macau.

In some casinos, customers can now only withdraw HK$1 million ($129,039) compared with HK$5 million in recent months and only the account holder can withdraw, say executives.

Any transaction over HK$200,000 is now flagged, leading to people carrying around HK$5 million in chips in multiple sets of $10,000 to avoid detection.

With thousands cashing out chips, some cash machines and exchange desks around Macau have briefly showed limited or no availability in recent weeks.

Macau’s monetary authority told Reuters the supply of Hong Kong dollars is “currently” stable and that it has taken measures to ensure the adequate supply of currency.

The withdrawals come as China fully resumes Macau tourist visas from Sept. 23, and executives warn that more arrivals could mean more cash being pulled out.

Some Suncity customers, angry at not being able to get their funds, have started an online group called Suncity victims’ and are planning a protest on Sept. 23 at VIP rooms across Macau.