It has not been a great year for the poker scene in Macau. The Vegas of the East has taken a one-two hit from COVID-19 and failing US-CCP relations. And now it faces the financial impact of a Chinese crackdown on junkets.
Online gambling is illegal in China. But it’s also popular.
This is one reason that sites like Natural8 market themselves as being “Asian” market sites rather than “Chinese,” while also advertising how easy it is to get a game in Chinese yuan.
But now, in an attempt to curb currency smuggling on the border with Macau, China is cracking down on online gambling in a roundabout way. The crackdown could break their underground but burgeoning poker community.
To see how this works, you need an understanding of two related — and distinctly Macanese — aspects of the gambling industry. These are Chinese monetary policy and the junket trade.
A digression on the forex
Although Macau is independent of China, its gambling-based economy (seven times the size of Vegas) is completely dependent on the back and forth of people and money from the mainland.
The Chinese government exerts an extraordinary amount of control over the yuan (also called the renminbi). No one may take more than CNY10,000 across the borders and Chinese bank accounts have strict limits on overseas ATM withdrawals.
High stakes players, however, skirt this issue in Macau by going through one of the many junket operations that operate between Macau and the mainland.
The Macanese junket trade offers credit to players in Macanese patacas or Hong Kong dollars. These currencies are stable against each other and both are used regularly in Macau.
Then the junket has the losing players settle their debts in yuan when they return to China.
At the end of the Pearly River
In this way, players move as much money as the junket can scrape together at the Macau end. The junkets then have the task of moving the dosh back to Macau from China. For this task, they often use online gambling sites.
In June this year, however, China announced it considered the export of currency a “security risk.” This applied a high contrast filter to the financial grey areas and came with a crackdown on online gambling and the junkets themselves.
A recent Reuters report describes how Chinese “authorities have frozen thousands of bank accounts and seized more than 229 billion yuan ($32.95 billion) [since June], according to government statements, while illegal gambling rings across the country have been purged on a near-weekly basis.”
This makes having money in online poker sites or with a junket operator a less certain proposition. For example, Suncity, a junket operator, saw 900 customers withdraw their funds in a matter of weeks.
Macanese casino owners are rightfully worried about the loss of liquidity. Junkets and their underground railroads make up half the gambling revenue of Macau. Junkets put cash on the poker tables where Ivey and Dwan shear their sheep at short-deck.
The Chinese government is returning to issuing visas to Macau in September. But without the junkets, visitors might find themselves returning to empty poker rooms and silent slot machines.