China’s 12th free-trade zone
Forward-thinking investors are salivating at the prospect of a boom on the Chinese island of Hainan.
Earlier this month, PRC President Xi Jinping raised hopes that the country’s smallest province will get a tourism boost—possibly as China’s first free trade port, and possibly in the form of legal gaming. Xi visited to commemorate 40 years since China’s economic opening under Deng Xiaoping.
According to Bloomberg News, gaming in Hainan has the potential to “divert the torrent of gambling-loving Chinese away” from rival markets like Vietnam and Australia, while also limiting capital outflow and ensuring gaming revenue stays home.
A party reform group headed by Xi is reportedly considering allowing online gaming and sports betting in Hainan, a first step to legal casinos. Xi said the Communist Party’s Central Committee believes Hainan will play a key role in China’s opening up to the world and advancing economic globalization.
“Hainan has extremely high hopes,” said Liu Feng, a researcher at Hainan Normal University’s Maritime Silk Road Research Institute. “Designating the island as a tax-free zone, or even just increasing the number of duty-free shopping locations, will inject vitality into Hainan’s tourism development.”
Stocks soared on the optimism that followed Xi’s visit. Among the big winners were lottery, travel and infrastructure stocks along with the real estate and hospitality sectors. Global casino operator MGM Resorts International already has a footprint in Hainan with its hotel, the MGM Grand Sanya, which opened in 2012. MGM plans at least two more hotels on the island with joint venture partner Diaoyutai State Guesthouse.
The 35,000-square-kilometer (13,500-square-mile) island will be China’s 12th free trade zone. Xi cited Hainan’s “special advantages” including its South China Sea location and “best ecological environment” as reasons to make it a pilot for further reform and opening up.
Despite its beautiful gold-sand beaches and coconut palms, Hainan has not become a popular international tourist destination like Macau or Bali, which attract far more visitors, according to Bloomberg. Only 1 million of the 67 million people who visited in 2017 were from overseas.
That should begin to change starting May 1, when passport holders from the United Kingdom, the United States, Canada and other European and Asian countries will be allowed to enter Hainan for stays of up to 30 days, according to an announcement by the State Immigration Authority.
According to the South China Morning Post, absent from the list are African countries, countries on the Indian subcontinent and the ASEAN countries of Vietnam, Laos and Cambodia.
Back in Macau, VIP revenue was again the fastest-growing segment in the first quarter of 2018, though data from the Gaming Inspection and Coordination Bureau show that mass market is picking up too. VIP GGR was up 21 percent year-on-year earlier and up 5.7 percent from the previous quarter. Mass table GGR grew 20 percent year-on-year and increased 5.8 percent from the previous quarter. Revenue from slots rose 17.9 percent. Total GGR for the quarter gained 20.5 percent.
“VIP growth remains strong, yet not sky-high,” said Union Gaming analyst Grant Govertsen. “And therefore it’s more sustainable from a business perspective while also being more politically acceptable, and the profit engine that is the mass market segment is more robust than many had given it credit for when the year began and remains robust as summer approaches.”
