Hard graft on cards for Macau; If some people in Hong Kong have been left reeling by the threat of a possible 20-percent cut in the number of mainlanders that throng its malls, Macau is now going through a similar phase

Hard graft on cards for Macau
Mary Ma
Thursday, June 12, 2014
If some people in Hong Kong have been left reeling by the threat of a possible 20-percent cut in the number of mainlanders that throng its malls, Macau is now going through a similar phase.

But its gripe is not about the number of mainlanders.

For the Macau Monetary Authority has set July 1 as the deadline for jewelry stores and pawnshops operating on casino floors to remove all their China UnionPay card terminals.

Intriguingly, the first losers of the move were casino stocks – not retail.

Those unfamiliar with the Macau situation may be asking why casinos feeling the heat more than the jewelers and the pawnshops?

But that’s how the system works in Macau.

With Beijing maintaining strict currency controls, mainlanders can enter Macau each time with only 20,000 yuan. While they may also withdraw up to 10,000 yuan a day at the UnionPay terminals, that would still be only a fraction of the huge bets they like to place.

According to a recent Bloomberg report, VIP gamblers – many of them from the mainland – usually wager at least HK$5 million per trip that collectively see them contributing more than 60 percent to casino revenues.

While they may rely on junket operators to arrange credit for them, the UnionPay system also provides a convenient alternative for many mainlanders to bypass the currency controls, giving cardholders instant access to cash that’s not permitted otherwise.

In numerous instances, they make purchases at jewelry stores and hock hem at pawnshops for instant cash. It’s such a common practice that they have been an unofficial but favored source of cash.

The authority had earlier stopped UnionPay from using card-swiping devices. It’s now extending the ban to the terminals.

But does this mean the tussle is over?

While the move plugs a loophole, gambling rackets are bound to spare no efforts in cracking their heads until another loophole is found.

Macau’s casino turnover increased 20 percent in the first quarter to US$12.9 billion. That’s eight times what the Las Vegas Strip takes in.

Thus, if talk of a 20 percent cut in mainland visitors can send a shockwave through Hong Kong, what is happening in Macau would seismic.

The deadline may have been ordered by the Macau Monetary Authority, but it’s unlikely to have been issued on its own initiative.

The clampdown is a natural extension of President Xi Jinping’s crackdown on corruption.

If Xi is asking party cadres to observe high moral standards at home, how will it be possible for him to turn a blind eye to mainlanders pouring into Macau tons of money of ambiguous origins?

So it’s no wonder that gaming stocks have come under pressure in recent weeks.

While it is too early to say if the withdrawal of the UnionPay terminals will usher in more restrictions in Macau, who can say for sure the SAR isn’t on Beijing’s anti-corruption radar?