The threat was clear enough. “Some foreign countries see our nation as an enormous market, and we have investigated a series of cases,” Hua Jingfeng, a deputy director at the Ministry of Public Security warned last year. “A fair number of neighbouring countries have casinos, and they have set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble. This will also be an area that we will crack down on.”
Hua’s remark, which was widely reported by state media, is a warning that not only gambling is illegal in China but casinos are also banned from advertising in the country.
However, foreign operators have been skirting the regulations by promoting the attractions of the resorts that house the gambling, rather than the activity itself.
The distinction is an important one for 18 of Crown Resort’s ‘VIP recruitment’ staff, who were arrested in late-night raids across Shanghai and other major cities, including Beijing, Guangzhou and Chengdu earlier this month. China’s foreign ministry confirmed that three Australians were among those detained on suspicion of “gambling crimes”.
Chinese gamblers are key customers for the Australian gaming firms. In its annual report, Crown mentions that more than a third of revenue generated by its Australian operations is from international visitors, “predominantly from mainland China”.
Crown bosses say it hasn’t been made clear which rules were broken in the current case, although the Australian press has been reporting speculation that attempts to collect a $15 million debt from a high-roller could have been behind the move.
Crown denies that any of its employees were collecting a debt. “We accept [China’s] jurisdiction and we respect their laws. However, at this time there have been no formal charges laid against our staff, the investigation continues and they are of course entitled to a presumption of innocence,” its chairman Robert Rankin told shareholders at last week’s annual general meeting.
Last year a larger group of South Korean casino executives were also detained on suspicion of trying to lure people from China to gamble abroad. Most of them have now been released, but the mood in Australia was uncertain enough for the boss of Star Entertainment Group, the country’s second-largest casino company, to cancel a trip to Hong Kong and Macau last week.
Some of Crown’s Chinese clients will also be having sleepless nights, following reports that the police seized computers, laptops and mobile phones likely to hold information on the provision of credit by the casino. “They’ll certainly have a local database of players that they service in China,” a former Crown employee tasked with attracting customers told Fairfax Media. “How often they visit, how often they lose each trip… the local [staff] will have those details.”
Shares in Crown slumped on news of the detentions and the stock prices of local rivals Star Entertainment Group and Sky City Entertainment have also suffered declines. All three try to attract Chinese tourists.
Crown’s major shareholder James Packer will also be sweating over plans for a huge new casino in Sydney that was granted the go-ahead on the proviso that it would generate most of its business from Chinese gamblers, and not the domestic mass market.
In Macau the reaction to the arrests has been more measured. The local gaming board issued a statement pointing out that “no local operators” had been involved.
Probably the casinos there won’t mind if rival firms in places like Australia, the Philippines and Korea run into bother. There’s even an argument that the clampdown could benefit the enclave’s VIP sector: Macau has less need to promote itself than its competitors, and its casinos are more reliant on junkets, who lend money to VIP visitors, to drum up business in mainland China.
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