Chinese casino

Chinese nationals are the single biggest market segment for most casinos in Asia, constituting a “very large” proportion of their gaming revenue, says an industry consultant.

SINGAPORE: The cards are stacked against China in deterring its citizens from gambling abroad even as fresh pressure is exerted through regional warnings, primarily because there is no clear legislation punishing Chinese nationals for placing bets overseas, legal experts say.

The notice by three Chinese embassies in Asia that embassies and consulates may not be able to provide consular protection for violations is also problematic, as it goes against regulations which recently came into force, according to a legal academic CNA spoke to.

“This threat to withhold consular protection is probably a violation of Chinese law itself,” said Chinese law professor Bing Ling at the University of Sydney.

But the warning will likely still be a general deterrent in the near term as Chinese punters look to lie low amid heightened scrutiny, analysts believe. The drawing of attention towards a years-old online government platform for Chinese nationals to report their compatriots for gambling by passing on clues and suspected activity could also spook gamblers.

Chinese nationals staying off the gambling floors could potentially have a material impact on casinos in the region, industry watchers told CNA.

“Put it this way - (Chinese nationals) are the single biggest market segment for most casinos in Asia. It constitutes a very large proportion of their gaming revenue, particularly their VIP gaming revenue,” said Mr Ben Lee, managing partner of Macao-based casino consultancy IGamiX.

WHAT DOES THE LAW SAY?

The issue gained international attention on Monday (Mar 18) following statements issued by the Chinese embassy in Singapore, reminding Chinese nationals to stay away from gambling in the Republic. Singapore is home to two casinos.

The embassy asserted that gambling overseas violates Chinese laws. “Even if overseas casinos are legally opened, cross-border gambling by Chinese citizens is suspected of violating the laws of our country”, the embassy added. Before this, similar statements were issued by the Chinese embassies in Sri Lanka and South Korea.

CNA has contacted the Chinese embassy in Singapore asking why it issued the warning, how it tracks Chinese citizens who gamble in Singapore and what action can be taken against them, but has not received a response.

“The embassy’s post misstates the effect of Chinese law,” said Prof Ling. He pointed out that while gambling has been outlawed in mainland China for decades now, no rule in Chinese law explicitly forbids gambling in a foreign country.

In , China amended its criminal code to take aim at cross-border punting amid a wider crackdown on illegal and online gambling as cases crept up during the COVID pandemic.

The revised legislation stipulates punishment “where citizens of the PRC (People’s Republic of China) are organised to participate in overseas gambling with huge amounts or other serious circumstances”.

Also maintained - penalties for those who, for the purpose of profit, gather people to gamble, or gamble for a living. Anyone who opens a casino will also be punished.

“The criminal law amendment only punishes the organisation of gambling in a foreign country. It doesn’t apply to an individual tourist doing gambling for their own entertainment.” Prof Ling told CNA.

“There may also be rules forbidding civil servants or (Chinese Communist) Party members from gambling overseas … but as far as ordinary citizens are concerned, (gambling abroad) is not a crime under Chinese law.”

Law scholars said a possible legal basis for the embassies’ assertion could be a provision in Chinese criminal law, known as Article 7, that states the criminal code applies to Chinese citizens wherever they are.

While acknowledging this, Prof Ling pointed out that Article 7 also states that the offence may be left unpursued if the crime involved has a maximum penalty of three years or less. 

He highlighted how gambling as a crime in Chinese law has a maximum penalty of three years, essentially falling within this threshold.

“The provision in Chinese law about extraterritorial application would not apply to a relatively minor offence, and gambling is a relatively minor offence,” he explained.

Prof Ling, a Chinese law specialist, also took aim at the embassies’ warning that they may not be able to provide consular protection in relation to unlawful conduct, saying that it “has no basis”. He referred to a regulation covering consular protection that took effect in September last year.

“Under that regulation, Chinese diplomats and consular officials … have the legal obligation to provide consular help and protection for Chinese citizens in need,” Prof Ling told CNA.

“It is precisely when (there are) Chinese citizens who engage in illegal conduct and are in trouble, that they would require consular protection.

“Maybe they are exaggerating the legal perils in order to deter citizens from doing what they consider to be undesirable conduct.”

REGIONAL REPERCUSSIONS

While the public warnings by the Chinese embassies might not have legal teeth, observers say the heightened industry scrutiny amid extensive media coverage will lead to some Chinese punters laying low - at least for now.

They add that another contributing factor is how the embassies drew attention to the Chinese government’s gambling reporting platform, launched in by the Ministry of Public Security.

Mr Lee from IGamiX said it basically sends a message: “Yes, we can’t watch every one of you, but your fellow Chinese standing next to you can. “So I think that’s where their threat could have some real teeth.”

Should Chinese gamblers hold off on their wagers overseas, casinos in Asia would be significantly hit as this group constitutes a “very large proportion” of their gaming revenue, particularly their VIP segment, said Mr Lee.

A South China Morning Post (SCMP) article described destinations in the Philippines, Myanmar, Malaysia and Vietnam as “hotspots for Chinese gamblers”. Singapore is also known to be a popular pick, particularly for high rollers.

While Mr Lee acknowledged that “nobody has been able to put a figure” on the exact amount of gaming revenue generated by Chinese punters, mainland statistics offer a clue.

In , a senior official at the Ministry of Public Security said that an estimated one trillion yuan (US$ billion) flows out of China every year for overseas gambling. China has repeatedly warned that capital outflows and illegal gambling are a threat to its economic security and social stability.

Analysts have noted that China’s crackdown on cross-border gambling is partly aimed at stemming the outflow of money as the world’s second-largest economy confronts a host of domestic and external challenges. Beijing formally has a US$50, limit on annual foreign currency purchases per person.

RESHUFFLING THE REGIONAL HAND

As Beijing turns up the heat, industry consultants say one place that will all but benefit is gambling haven Macao. The Chinese territory is the only place in the country where casino gambling is legal.

“Macao is not looked on as an overseas market (by China), they don’t mind them going to gamble and lose in Macao, because essentially the funds flow back to China,” said IGamiX’s Mr Lee.

Macao is the leading gambling capital of the world, dwarfing other international gaming hubs. While takings were decimated by the COVID pandemic - which saw unprecedented closures of all the city’s casinos - revenue has been on the mend since China abruptly dismantled its zero-Covid policy in early

Macao’s gaming take last year exceeded MOP$ billion (US$ billion), which was 62 per cent of pre-pandemic levels. In comparison, gambling revenue in the same period for Nevada - home of Las Vegas - surpassed US$15 billion, a record high for the US state.

At the same time, China’s ongoing bid to curb its people from gambling entirely, coupled with its recent crackdown on junkets in Macao, could spook Chinese high rollers, say observers. 

Against this backdrop, this could be an added impetus for casinos in Asia to reshuffle their operating model, they add.

“The Asian VIP segment has always been bread and butter - you get a sufficient number of junkets, who in turn bring in the VIPs to cover the operating costs. And if they get the mass (average punters), that’s cream,” noted industry consultant Mr Lee.

“With all of these latest developments, I think we can effectively write off the VIP segment as a major source of revenue for a lot of the Asian casinos.

“They will have to re-focus their gaming operations, and more importantly, they will have to seek incremental revenue from the non-gaming side.”

Mr Lee pointed to Singapore as a “very good” model in this regard.

Singapore has two casinos: Marina Bay Sands, operated by Las Vegas Sands, and Resorts World Sentosa, operated by Genting Singapore. Aside from the casinos, these so-called integrated resorts also provide a range of amenities including hotels, entertainment shows, luxu​ry retail and fine dining.

“(Singapore) was very hands-on in selecting the entertainment features they wanted to see from the casino operators. For Marina Bay it was retail and MICE (meetings, incentives, conferences, and exhibitions), for Resorts World it was theme parks, and now other amenities like aquariums etc,” Mr Lee noted.

The casino entry levy on locals as well as a size cap on the gaming area were other features highlighted by Mr Lee that are aimed at combating problem gambling while also curbing overreliance on punters.

“(These are) probably going to be imitated by Japan, by Vietnam and other potential jurisdictions,” he added. Japan greenlighted plans to build its first casino in Osaka last year, while Vietnam has three integrated resorts.

That being said, Mr Lee believes casinos in the region won’t have it easy if they opt to rebalance their hands and up non-gaming revenue.

“(They’re) in Asia. Asians will spend more money gaming than anything else," he quipped.