|Chinese officials gamble, and their luck runs out|
By Mark McDonald
Thursday, January 15, 2009
MACAO: As mayor of a small city in the Chinese hinterland, Li Weimin started out innocently enough, playing the slots in nearby Macao, games with names like Five Dragons, Chinese Kitchen and Super Happy Fortune Cat.
But he soon began to try his hand at other games, and for higher stakes, financing his increasingly frequent trips to glitzy casinos by dipping into the municipal budget and several real estate firms under his control.
"It was easy for me to borrow or divert money from those places," the 43- year-old Li said at his trial, according to a state-run newspaper, China Daily. Eventually he lost $12 million and was sentenced to 20 years in prison.
Li is one of an increasing number of Communist Party bosses and government officials who, government prosecutors say, pillaged state funds, company accounts and municipal treasuries to try their luck in Macao, which sits just across the border from Guandong Province.
Many of the biggest losers have been sent to prison and at least 15 have been executed. Some have committed suicide. The scandals have become a source of deep embarrassment for the Chinese government, which has now begun cracking down on travel visas for Macao.
While gambling remains illegal in mainland China, it is pure oxygen for Macao, which Portugal handed back to China in December 1999. The tiny territory, which has been enjoying a gambling-tourist-building boom since 2004, relies on gambling for 75 percent of its tax base.
Now the biggest gambling market in the world, Macao has annual gambling revenues higher than the Las Vegas Strip and Atlantic City combined. Among its 31 casinos is the world's largest, the Venetian Macao.
Much of that prosperity is now threatened, experts here say, not only by the global economic crisis but also by the crackdown on gambling by the government in Beijing. The issue is so sensitive in China that more than a dozen interview requests over the past month were refused by government and party leaders.
A Chongqing official, the head of the local Communist Party's propaganda department, was accused of embezzling a total of $24 million. Along with a co-worker, he blew at least half the money at the Casino Lisboa here, according to Xinhua, the official Chinese news agency.
The Chinese officials who gamble here lose mostly at baccarat, the game of choice in Macao, but they also lose at blackjack, poker and a dice game called Fish-Prawn-Crab. And even though many of them are neophyte gamblers, they often bet thousands of dollars on a single hand.
A 2008 study of 99 high rollers from mainland China showed that 59 had some sort of state affiliation: 33 were government officials, 19 were senior managers at state-owned enterprises and 7 were cashiers at state businesses. They were typically men, between 30 and 49 years old, and lived in mainland areas close to Macao.
The government officials reported losing an average of $2.7 million each, according to the study, which was conducted by Zeng Zhonglu, a professor at Macao Polytechnic Institute. State managers lost $1.9 million each, on average, and cashiers dropped an average of $500,000. Most said their gambling careers lasted less than four years before they were found out.
Their losses at the tables bankrupted at least 10 companies. An editorial in the Beijing Youth Daily said gambling by public officials "threatens the safety of the national treasury," though it is unclear just how much public money has been gambled away.
"I doubt even the Chinese government knows," said Desmond Lam, an expert on Macao and Chinese gambling who is currently a senior research fellow at the University of South Australia. "Still, the figure is likely to be very substantial, at least in the hundreds of millions so far.
"And if you include the undetected money, it must be higher."
China had tried repeatedly to clamp down on gambling by public officials but had never had much success until hitting on the idea of limiting visas. The new visa regulations, which went into effect last summer, limit mainland officials to just one trip every three months, and for no more than seven days, and have been highly effective, gambling analysts and scholars say.
"It has been a very, very serious problem, but it's better now," said Zeng, the author of the study on high rollers. "The mainland government has strict controls over officials coming to Macao."
But along the way, the restrictions have helped turn Macao's boom into something of a bust, a connection that was underscored on Monday, when the stocks of Macao casino companies plunged by a fifth after Beijing announced that it would retain the visa controls. Share prices of the companies are down more than 80 percent on average from their highs a year ago.
Casino bosses, tour operators, shop owners, restaurateurs and hoteliers say they are feeling the pain from what Samuel Yeung, the manager of the landmark Hotel Lisboa, calls "the tightening control of mainland China."
Gambling revenues are plunging and luxury shops are empty. Soaring hotel and apartment towers stand half-finished. Thousands of construction and casino workers have been fired. Last month at the Venetian, half the singing gondoliers on its indoor "Grand Canal" were abruptly fired.
"The government is saying Macao is going too fast and we need to cool it down," said Davis Fong, a business professor and director of the Institute for the Study of Commercial Gaming at the University of Macao. He cited a freeze on new projects and tighter regulations on the territory's casinos.
It is as if the gold is running out in the Klondike.
"It's not so much the global downturn that's having an effect on Macao; it's the visa restrictions that are having the most impact," said Anil Daswani, an analyst in Hong Kong who follows the gambling industry for Citigroup. "Clearly there was way too much capital coming into Macao, and the mainland is trying to cool the economy.
"But it's definitely worrying. Volumes are down materially."