Overseas casinos clean up despite China's cash curbs

Imperial Pacific International Holdings

11/12/2016 01:00

By Farah Master 
    SAIPAN, Dec 11 (Reuters) - For evidence of the odds stacked 
against China's battle to stop the flight of cash battering its 
currency and draining its reserves, look no further than the 
tiny Pacific island of Saipan, which has hit the jackpot with a 
flood of Chinese money at its new casino. 
    Thousands of miles from the Chinese mainland, the 
U.S.-administered island of 50,000 people is festooned with 
signs written in Chinese and stuffed with Chinese supermarkets, 
restaurants and karaoke parlours serving the 200,000 Chinese 
visitors that arrived this year. 
    Private jets bring big spenders so free with their cash - 
and $100 million credit lines - that the modest Best Sunshine 
casino, owned by Hong-Kong listed Imperial Pacific  1076.HK , 
wildly outperforms the top casinos in Macau, the world's biggest 
gambling hub. 
    Best Sunshine's 16 VIP tables can turn over $3.9 billion a 
month, while the world's biggest, the Venetian Macao, manages 
about $2.5 billion per month on 102 VIP tables, and the MGM 
around $2.9 billion on 161. 
   "Never have I dealt with so much money in 36 years in 
casinos," said one executive working in the casino, who could 
not be named due to company policy. 
    Back in Beijing, policymakers are trying to keep that money 
on the mainland. 
    Capital outflows, both legal and illegal, have dragged the 
yuan to eight-year lows this year, prompting China to eat 
through more than a fifth of its foreign currency reserves since 
mid-2014 and impose a series of measures to stem the outflows. 
 urn:newsml:reuters.com:*:nL4N1DU2AZ 
    Such measures, plus an anti-corruption crackdown that began 
in early 2014, has dealt a blow to Macau, the self-governing 
Chinese territory linked by a thread to the mainland province of 
Guangdong. 
    Macau's gaming revenues have more than halved since then, as 
high rollers from the mainland gave it a wide berth. 
    But whacking the mole in Macau has made it pop up elsewhere, 
where China's writ doesn't run; in Saipan, the Philippines, 
Cambodia and Australia. 
    Manila's Solaire casino registered a 61 percent increase in 
VIP turnover in the third quarter, while the number of junket 
operators bringing in foreign high rollers has more than 
doubled. Half of its VIP gamblers come from China. 
    NagaCorp  3918.HK  in Phnom Penh has seen a 13 percent 
increase in Chinese visitors in the first half of 2016, with VIP 
turnover up 11 percent for the first nine months. 
     
    HOUSE WINS 
    China has fought to suppress the demand, detaining marketing 
employees from Australia's Crown Resorts  CWN.AX  in October for 
"gambling offences", and arresting South Korean casino managers 
last year for "enticing" Chinese to gamble overseas. 
    "We have always asked that Chinese citizens leaving the 
borders respect the laws and rules of relevant countries, and 
not get involved in gambling or gamble themselves," Chinese 
foreign ministry spokesman Lu Kang told a daily news briefing in 
Beijing. 
    But the casinos are getting ready for more. 
    NagaCorp is building additional facilities and a luxury 
retail complex, while Solaire, where VIPs play in opulent 
ocean-front rooms, is also unrolling new amenities to lure VIPs. 
    Imperial is spending $3 billion to build a 14-storey resort 
in Saipan after winning a 40-year exclusive monopoly licence. 
    Its towering bamboo scaffolding already dwarfs the low-rise 
local buildings. 
    The man behind Imperial's push into Saipan, Ji Xiaobo, a 
one-time middleman whose company brought players to Macau, is 
also in discussions with nearby Pacific island Palau to set up a 
small resort, according to a source familiar with the deal. 
    Ji, who casino executives said brings VIP players to Saipan 
on his private jet and accommodates them on his yacht or in 
opulent villas, declined to comment. 
    Saipan's government, desperate for revenues after the 
collapse of its garment industry and a decline in tourism, 
approved the casino in 2014, overturning longstanding 
opposition. 
    It makes it very attractive for the operator, with just 5 
percent gaming tax compared with Macau's 39 percent, said Mark 
Brown, Imperial's chief executive, who formerly worked for U.S. 
casino tycoons including president-elect Donald Trump, Steve 
Wynn and Sheldon Adelson. 
    Not everyone on the island thinks Saipan gets much benefit. 
    Casino revenues have surged, but the government budget 
remains less than a sixth of what the casino produces annually, 
said local resident Glen Hunter, who has fought against the 
development. 
    "You have created an entity out here with so much resources 
and power that I think we will no longer even have a proper 
functioning democracy," Hunter said. 
    The influx of money is already changing the nature of the 
place. 
    Chinese investment in Saipan has skyrocketed since the 
casino opened last year, with almost every available property 
bought in the last six months, say local residents. 
    "I've also had Chinese investors just knock on my door and 
offer to buy my house, in cash," said Harry Blalock, who runs 
dive company Axe Murderer Tours. 
 
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Graphic on Saipan casino industry    http://tmsnrt.rs/2gKw5Mn 
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 (Reporting by Farah Master; Additional reporting by Ben 
Blanchard in Beijing and Prak Chan Thul in Phnom Penh; Editing 
by Will Waterman) 
 ((farah.master@thomsonreuters.com; +852 28431631 , +852 9631 
8262; Reuters Messaging: 
farah.master.thomsonreuters@thomsonreuters.net)) 
 
Keywords: CHINA GAMBLING/SAIPAN