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Oct / Nov 2013
Behind the Baize

WRITER: Patrick Collinson / the interview people

The scale of what’s happening in Macau is testament to the rising purchasing power of the Chinese. A decade ago, there was just one casino. Now there are dozens. To some this city is the new Sodom and Gomorrah but to millions of Mainlanders it’s serious business.


You won’t find the Paiza Mansions on TripAdvisor. You can’t even book the world’s plushest hotel – it chooses you. The 600-square-metre suites are reached by private lift and come with two butlers and a masseur. Yet it costs nothing to stay there. The surprisingly tasteful suites with their large end-of-bathtub TVs are completely free. There’s just the small matter of the almost 1.5 million USD that invitation-only guests are required to spend downstairs at the casino.

The Paiza Club and Mansions are part of the Macau Venetian, the world’s largest casino and currently the fifth biggest building on the planet. Chinese punters bet more than 100 billion USD on Macau’s baize tables (they prefer Baccarat) last August alone. This year, total bets could reach 1.5 trillion USD, an almost unimaginably colossal sum. Las Vegas is puny in comparison.

Macau’s casinos – the Venetian, MGM Grand, Wynn, Sands, Lisboa and many, many more – skim around 2.5 per cent from punters. They’re raking in so much that they’re already five times bigger than Vegas. And there’s plenty more to come. Eleven hotels are currently under construction according to the Lands, Public Works and Transport Bureau, and another 27 hotel projects are pending approval from the government.

“Macau is not the Las Vegas of the East, Las Vegas is the Macau of the West,” says veteran casino expert Justin Casey, of consultants APG. It’s hard to believe that nine years ago, there was only one casino on the peninsula.

It’s lunchtime on a Tuesday in February and the skies above the former Portuguese colony are a smoggy grey. The sea is a dirty brown, carrying effluent from the thousands of factories further up the Pearl River, the world’s greatest concentration of industry. But already the Venetian is half-full with visitors streaming over the border from China. The casino, three times the size of its sister complex in Vegas, cost 3 billion USD to build and as we walk through acres of Baccarat tables, the hospitality manager (he looks after 3,000 bedrooms) tells me the floor-space could accommodate 100 jumbo jets. By the end of the day – a quiet one for the complex – more than 65,000 punters have come through the doors.

When Deng Xiaoping began the post-Mao economic reforms in China, he didn’t anticipate this. The country’s industrial revolution has spawned literally millions of millionaires. While the factory workers are bussed into the smoke-filled Lisboa, the factory owners are helicoptered into the VIP suites - 70 per cent of the money wagered on Macau’s tables comes from the wallets of the Chinese super-rich.

Chinese law forbids its citizens from taking more than 20,000 Renminbi (a little over 3,000 USD) over the border so Macau’s billions rest on a very Chinese solution to capital controls.

On the mainland, wealthy punters deposit their money in what are called ‘junkets’, organisations widely believed to be controlled by the Triads. Once in Macau, the junkets disburse the money back to individuals and extend credit, often two to three times the amount originally deposited. They bring the VIPs to the casinos and are paid huge commissions. Once back on the Mainland, punters who fail to pay up face menacing debt collectors.

In each major casino, the junkets operate lavish gaming rooms on private floors reserved solely for VIPs prepared to buy a minimum of 30,000 USD in gaming chips.

Other gamblers aren’t simply roped off; few would even know the private rooms existed. A small army of security guards keeps the public far from view and hundreds of CCTV cameras observe every move. We obtained access to several of the rooms. In the first – and this was a Tuesday afternoon – were around 20 VIPs, mostly male. Every single bet was for a minimum of 2,500 USD. In the evening it would rise to 5,000 USD. The second room was empty. The third junket room had around 40 players, again playing at 2,500 USD a hand. The thickly carpeted corridor, the width of a big SUV, stretched hundreds of feet, leading to scores more rooms.

Back on the smoke-filled “mass market” floors, the minimum bets are typically 30 USD – significantly higher than Las Vegas and there are no free cocktails or slot machines. There aren’t even smiling faces. Gambling here is a serious business.

Why China’s industrious workers - the world’s greatest savers - will squander it all on Baccarat remains a mystery even to experts. “The Chinese believe in luck. They are willing to gamble a big fraction of their net worth,” says gaming analyst, Huei Suen Ng of Credit Lyonnais Securities Asia. But she acknowledges that this doesn’t quite explain what’s going on. “Maybe it’s just our culture,” she says. “Maybe it’s in our genes.”

The other rather less acknowledged factor may be money laundering. The junkets take in Chinese Renminbi (which cannot be converted on the world’s money exchanges), while the casinos can pay out in dollars. Some critics believe Macau is a gigantic operation for secreting money away from the eyes of the Chinese state. Suitcase-loads of dollars make the short hop from Macau to Hong Kong, much of it pouring into the city’s white-hot property market. Even bigger sums are believed to head into offshore tax havens.

The authorities, for now, turn a blind eye. The casinos are a huge cash cow for the Chinese state too, which levies tax at 39 per cent. If Macau gets out of hand, Beijing can turn it into a desert overnight by refusing internal visas to Mainland Chinese. Casino operators think that unlikely, as the gambling might switch instead to Singapore (and away from Chinese control), where the city-state’s two new mega-casinos are already close to matching Las Vegas in takings.

Visitors from America or Europe probably won’t be flocking to Macau’s polluted shores and average room rates would likely deter them. Vegas-style entertainment is thin on the ground. Swimming pools are unused, and nightclubs rare. It’s a uniquely Chinese place, with hangar-like casinos encircled by Gucci and Louis Vuitton shops. The average visitor spends 1.6 days in Macau and uses the time to gamble nonstop. Prostitution is legal, though pimping is not. The daily parade of sex workers in a mall below the Lisboa dubbed “The Race Track” draws organised tour groups with cameras, rather than actual customers.

Those who don’t fancy a flutter can make money from the tables of Macau without going anywhere near China. Shares in casino operators are among the most popular investments in many emerging market investment funds – though ethical investors may wish to steer clear of what a fellow journalist called the new ‘Sodom and Gomorrah’.

Back in the Paiza – the name is derived from the Chinese word ‘paizi’, which was a symbol of authority in the Mongol Empire – the suites are strangely quiet despite the hotel’s insistence that occupancy rates are 90 per cent or more. Insiders explain why; VIPs check into the multimillion-dollar suites then head straight to the private tables. “Over 48 hours, they will gamble for as much as 46 hours,” one tells me. “The suites are used just as washrooms, really.”

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