China's President Xi Jinping visits Macau amid Unrest

China’s President Xi Jinping has just arrived in Macau to celebrate the 15th anniversary of the former Portuguese colony’s return to Chinese sovereignty. However, this seems like anything but a friendly visit to celebrate the special istrative region.

Macau’s gambling revenue has seen a major decline over the past few months. And while it still pulls in far more than its next closest global rivals, Las Vegas and Singapore, Macau is trying to take action before the freefall continues.

China blames the revenue drop on Macau’s over-reliance on gambling. It is only recently that the region has taken serious steps to diversify their economy and move away from focusing so much on casino gaming. And it’s believed that President Xi will push this issue during his two-day visit. Aaron Fischer, a Hong Kong-based financial analyst, explained more on what Xi will be discussing:

“The undertones will be he hopes Macau can develop more non-gaming tourism, which is where Macau is headed particularly with new [resort] developments that come on-stream – it will have a much heavier non-gaming component, the expansion of hotel rooms overall and shows, convention areas [that] have lacking in Macau in the past.”

Annual visitors to Macau have more than tripled since 2000, while casino revenue now brings in over $40 billion annually – seven times more than Vegas. However, there are definite signs of trouble ahead beyond just the diversification.

For starters, President Xi and his cabinet have been cracking down on Macau since it’s become a haven for money laundering and political corruption. In turn, this crackdown has affected Macau’s VIP business, which s for $30 billion annually. Many high rollers from China’s mainland enjoy going to the special istrative area of China. But because some high rollers are laundering money through the city’s lax financial transaction methods, China has been taking action. And even the high rollers who aren’t doing anything wrong are turned off by this anti-corruption campaign.

“We do think that China, when you look at the anti-corruption policy that China is pushing out – basically they are institutionalizing it. So for us that means there is going to be pressure,” explains Louise Cheung, another Hong Kong analyst. “Basically, people stay away because of concerns over that [policy] so they will probably never come back. So there’s a big uncertainty which would pressure high rollers.”

It’s believed that Macau’s revenue growth has peaked. So to at least maintain the incredible amount of money rolling into their region, the city will need to deal with both the anti-corruption campaign and fewer high rollers.