By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Spreadsheets with astonishing forecasts can only tell so much about China’s economic miracle. The sole path to believing, or at least comprehending, the scale of the country’s development is to see it. And so it is with any attempt to grasp Macau’s transformation from a Portuguese trading outpost to the Middle Kingdom’s gambling and entertainment hub.
Each year, this territory of about 30 square km a one-hour ferry ride from Hong Kong creates the equivalent of one new Las Vegas in gross gambling revenue. Millions of Chinese mainlanders aspire to visit - not just high-rollers but regular punters and even families. Macau will occupy an important role in China’s cultural and economic future. What’s questionable is whether investors will ever access Macau’s riches to the degree once deemed possible.
How can you be both bullish on Macau and bearish on its investment prospects? Simple: like all things China-related, the primary risk factor is the state, or more aptly China’s Communist Party. And when it comes to gambling, which is illegal in China, it is particularly hard to square Beijing’s goals with a business model where billions of dollars of wealth is transferred into the pockets of a few tycoons in the United States and Hong Kong.
This is not to diminish the scale of ambition and execution taking place on the spit of land first lent to the Portuguese in 1557, which was handed back to China in 1999. While Macau granted the first official gambling monopoly in 1962, it expanded the system to six licensees in 2002, including three American-led groups, Wynn Resorts, Las Vegas Sands and MGM Mirage; and three locals, Melco Crown Entertainment, SJM Holdings (the original monopoly) and Galaxy Entertainment. All have listed their Macau operations on the Hong Kong Stock Exchange.