I’m Betting on Gaming; Gaming is Betting on Asia

Last year gaming revenues in Macau surpassed both Atlantic City and Las Vegas combined, pretty much taking apart the argument that the world is oversaturated with gaming venues. America’s Wynn Resorts, MGM Mirage and Las Vegas Sands have bet billions on the peninsula and despite the global economic slowdown, the mathematics behind the world’s fastest growing gaming market are inarguable. In the long run, it’s a very safe bet.

What makes the economy of mainland China so relevant to the gaming markets in Asia? The current population of China consists of 1,330,044,544 citizens, many of which make up the new and growing Chinese middle class. This could make for a very impressive consumer base, which we all know is a key ingredient for a successful casino market.

Although Macau’s sovereignty was transferred from Portugal to China in 1999, since that time the economy of Macau has remained one of the most open in the world. Apparel and gaming tourism are mainstays of the economy. Since Macau has few natural resources, it depends on mainland China for most of its food, fresh water and energy. And while Macau was hit hard by the Asian financial crisis of the late ‘90s and the global downturn of 2001, its economy grew approximately 13 percent annually between 2001 and 2006 and generated a stunning 30 percent growth in GDP during the first three quarters of 2007. This was due in large part to a rapid rise in the number of mainland visitors that grew exponentially after China eased travel restrictions, increased public works expenditures and significantly increased investment inflows associated with the liberalization of Macau’s gaming industry, all which helped drive the five-year recovery. The budget also returned to surplus since 2002 because of the surge in visitors from China and a hike in taxes on gambling profits, which generated about 70 percent of government revenue.

The economy of the People’s Republic of China is the second largest in the world after the United States with a gross domestic product of $7.8 trillion. It has been the fastest-growing economy in the world for the last 25 years with an average annual GDP growth rate above 10 percent. Its per capita income has grown at an average annual rate of more than 8 percent for the last 30 years. Even while Chinese citizens have low incomes by worldwide standards, they have a distinct advantage over the rest of the world when it comes to wealth potential. The growing middle class will undoubtedly number in the hundreds of billions in the years ahead.

Unfortunately, some governments and corporations don’t consider China as an economic super power, but that point of view sorely lacks information. China’s government began implementing very significant economic reforms in the early 1980s, which, since their passage, has lifted hundreds of millions of Chinese citizens out of poverty and created a growing middle class that will continue to grow in affluence. China now participates extensively in world markets and has private-sector companies that play a major role in the Chinese economy with small- and medium-sized enterprises playing a dominant role. But, foreign-owned companies hold noteworthy investments as well.

Recently China tightened travel restrictions, limiting travel visas from the mainland to Macau to just four per year. This is likely a way to slow the skyrocketing growth enough to allow China to manage and regulate it properly.

Admittedly, I paint a rosy picture of Asia’s growing gaming industry. Success isn’t without strings, however. Undoubtedly, all of Asia is affected by the world’s most severe global economic crisis in decades. As the largest holder of U.S. debt, hyperinflation and out of control deficit spending is of serious concern to the Chinese government. These are all valid concerns, but one fact that reigns supreme is the economies of the U.S. and China are interdependent. Both players in the relationship aren’t likely to venture too far in any direction if it could cause serious damage. The real irony is that the U.S. just might have to learn a free market lesson from its communist cousin.

Leave a Comment