Idea has been floated several times
Will China’s central government expand legal gambling beyond Macau? That’s apparently the plan for the southern provincial island of Hainan, but the ideas has been considered before, without much result.
Announcement of the proposal comes during the 40th anniversary of China’s embrace of foreign investment, Bloomberg News reports. It’s designed to increase development and boost tourism. Hainan, frequently referred to as “China’s Hawaii,” seems like an obvious choice.
The plan includes easing visa rules and developing new infrastructure, including a new airport to make the locale more desirable to investors. If casino gaming is added, Hainan would become the second place under Chinese control besides Macau where the pastime is allowed.
But right now, casinos are not part of the proposed lineup, and brokerage Sanford C. Bernstein advised against “reading too much into the headlines.” The proposal “seems to be focused on potential legalization of ‘online gaming, lottery or sports betting’ in Hainan,” the Bernstein note said. “Legalization of casinos in Hainan would not be a key driver for foreign tourism, in our view.”
Bernstein also said variations on the plan have been floated before—in 2010, 2013 and 2016. “While any casino legalization on Hainan would create problems for Macau, we do not see casino development in China as a real threat to Macau now or in the foreseeable future,” the team concluded.
Morgan Stanley analysts Praveen Choudhary and Jeremy An agree that the reports may be much ado about nothing. “Potential legalization of gambling in Hainan or China looks unlikely to us, plus the legalization process typically takes a long time. Hainan hotels had tried to run small gambling operations in 2012, but these were shut down quickly.”
In addition, the Bernstein team pointed out that some forms of sports betting, operated by the government’s China Sports Lottery, are already legal on Hainan, and a government-run lottery is available too. “It is not clear how Hainan would benefit from a lottery program,” the team said.
Even so, Asia Gaming Brief reported that Macau casino stocks fell on the news, with Sands China and MGM Holdings down 6 percent and Wynn Macau down 6.7 percent.
“I think investors were shocked—I’m a bit surprised,” said Sam Chi Yung, a Hong Kong-based strategist with South China Financial Holdings Ltd. “It’s difficult to say what the impact will be on their profits as it all depends on China’s policy and how they arrange the license. But what’s sure is that people going to Macau to gamble will drop.”
The Washington Post described Hainan as “roughly the size of Switzerland” with “beautiful beaches.” Sources close to the matter told Bloomberg the Chinese government has already agreed to build a new international airport in Dongfang City on Hainan’s west coast; the island already has three international airports, all on the eastern shore.
Shanghai analyst Wendy Liu said if the “model developed in Macau” is followed on Hainan, “tourism and entertainment industries may be boosted along with gambling. The province may attract more shopping malls and hotels, providing an opportunity for related developers.”
Today, Macau is the world’s top gaming destination by far, with some $33 billion in annual GGR.
