Will China’s currency controls hurt Vegas?
September 19, 2017 3:00 AM
by The Analyst
Most Americans do not think in terms of being limited on the uses of their own money other than when we use cash above certain levels we may become subject to various currency reporting laws. For the vast majority of the rest of the world there are limitations on the amounts of money one can take or send out of their home county.
China for example limits the amount their citizens can send or take out of the country to $50,000 a year without governmental approval. Up until a few years ago the rules in China were not strictly enforced and great latitude for approval was left to either the individual’s banker or a fairly low level governmental official. With the change in China’s internal power structure a few years ago, things tightened up, causing huge decreases in Macau’s gaming revenues and huge problems for Macau’s junket operators.
Big money always has options though. Affluent Chinese individuals as well as certain companies, rather than sending all their money back to China, started keeping some of their income in foreign jurisdictions or taking payments in foreign branches of their companies so their money would not be fettered by annoying things like Chinese currency rules.
Those who do not have such options try and get around the restrictions by having associates, relatives and friends send money on their behalf out of the country. Many a house in Canada, California and even Las Vegas was purchased with an aggregation of wire transfers from a wide variety of friends and family members.
Casino gambling debts here in Las Vegas and Macau have also been paid in much the same way. The Chinese authorities though have gotten on to the various tricks, and as they have access/authority over Macau, have amped up reviews of both sides of money ins and outs.
And while the government has been clamping down on their currency flow, casinos in countries near China have been springing up. As some of those countries are less financially sophisticated and the Chinese government does not have easy access to keep an eye on things, their business has been booming. At the same time the anti-corruption arm of the Chinese government has continued to graduate class after class of investigators and prosecutors whose only purpose is to find and prosecute violators.
While the casinos in Korea, Cambodia, Laos, Philippines are doing well in spite of the crackdown and Macau seems to be bound for recovery, what about Las Vegas? Recent numbers have shown continued decreases in baccarat, mini-baccarat, and pai gow handle and win, all games preferred by the Chinese demographic.
It would be easy to presume the crackdown is the major reason but conversations with various marketing executives have suggested customers who would have normally made the trip are saving the travel time and going to casinos closer to home. A few also pointed out that the “whales” that were at first impacted by the crackdown have shifted assets around enough that they have no problems with funding their play without offending the Chinese authorities.
One very experienced marketing executive pointed out that, for the rich, money is not the problem, but there are so many places to go the problem is too many choices and what incentives to request. The consensus of those experts was they were not worried over the rich continuing to come to Las Vegas, but the middle income and lower premium customers coming and playing to levels they used to, not from access to money, but too many casino options closer to home.
One exec suggested that because of the restrictions more Chinese are keeping more and more money in the U.S. and he expects over the next few years there will be a big snap back in play as the money is here.
Kerkorian keeps giving!
Though Kirk Kerkorian passed away a little over two years ago, he continues to be champion charitable giver. Last week it was announced that as a part of MGM stock buy-back program Kerkorian’s investment holding company, Tracinda, will sell 10 million shares at a share price of $31.25, netting $312,500,000 to Tracinda, which such money is further destined for charity.
With that sale, Tracinda’s holdings will go down to a mere 47 million shares worth roughly $1.6 billion, depending on the stock market. When the dust settles, not counting what he gave during his life time, Kerkorian in death is on pace to give well over $2 billion to various worthwhile charities.
Kerkorian – an inspiration in both life and death.