US-China tensions a heightening threat to foreign firms in Macau

The steep deterioration in US-China tensions, coupled with the coronavirus outbreak poses serious threats to foreign firms involved in the Macau gaming industry, according to international risk advisory, Steve Vickers and Associates.

In particular, the six gaming concessionaires in Macau will be most vulnerable at the end of their current gaming concessions in 2022.

“Frictions between the US and China over trade, the pandemic, Hong Kong and the South China Sea pose an additional threat to the industry, not least by overshadowing plans to tender for new gaming concessions.”

Furthermore, U.S. casino companies, who were first brought into Macau due to their expertise in opening and operating casinos, would not have the same sway as they did in the past.

“The commercial argument for US involvement – that Chinese companies needed American expertise – is derelict. Macau is now of age; and its casinos and junket promoters can often provide services better geared to the Chinese market than those offered by American companies.”

Vickers said that Macau’s new chief executive, Ho Iat Seng, has hinted through cryptic comments that the number of concessions will not increase, and could even fall.

The firm also doubts that large junket promoters will be able to secure a concession on their own merits.

“…The authorities may gear the tendering process so as to ensure the loyalty of those operating in Macau, perhaps by favoring local champions, or by scaling down the role of foreign concessionaires. Such an approach would be in line with Chinese industrial policy in other areas.”

“Moreover, should relations deteriorate further, the Chinese and Macau authorities have a wider range of options to hand, ranging from squeezing out foreign interests to punitive action against US concessionaires.”

Between the protests in Hong Kong, and heightening U.S.-China tensions, Vickers expects regulatory risks facing the casino sector to rise.

Steve Vickers is CEO of Steve Vickers and Associates (or SVA). SVA is a specialist in Political & Corporate Risk Consultancy.