China economy

Casinos in Hainan? Don’t bet on it, says industry guild, with cruise-based lotteries more likely  

Development of Sanya as a major cruise port could be key to lotteries related to sports with ‘Hainan characteristics’ 

PUBLISHED : Friday, 18 May, 2018, 7:32pm
UPDATED : Saturday, 19 May, 2018, 4:12pm

Casino industry veterans said this week that it was unlikely Beijing would allow the construction of casinos in Hainan, the island known as “China’s Hawaii”. But international waters off the Hainan coast could see the launch of new kinds of sports lotteries, they said.  

Beijing announced in April it would allow horse racing and new types of sports lotteries on the southern island as part of plans to turn the province into the mainland’s biggest pilot free-trade port, leading to gains by stock in companies linked to Hainan.

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But casinos were “against the overall ideology and the rules and laws of China”, Su Guojing, founder of the China Lottery Industry Salon and an industry veteran, told the South China Morning Post on the sidelines of the Global Gaming Expo Asia 2018 in Macau this week.

“It’s almost impossible for Beijing to allow the building of physical casinos. This is a separate issue compared with its opening up of lotteries,” said Su.

Also, instead of focusing on horse racing, which could take a very long time to develop, attention should be paid to Beijing’s support for turning Sanya, the province’s core tourism offering, into an international home port for cruises, said Su.

“There is room for setting up sports-related lotteries that are different from the current categories China has, which mainly focus on soccer games, on the boats,” said Su. “Such as lotteries related to horse racing, beach sports and golf - sports that have ‘Hainan characteristics’.” These lotteries could also be launched on the island itself, he added.

It’s almost impossible for Beijing to allow the building of physical casinos. This is a separate issue compared with its opening up of lotteries
Su Guojing, founder, China Lottery Industry Salon

While Beijing bans all forms of gambling, it officially allows two types of lotteries: one where players predict the outcomes of international soccer matches; and some horse racing, although betting is banned and the central government has not promoted the sport.

A line in the directive about “relaxing control on developing cruise tourism” received little attention, which could suggest that some gaming operations that face restrictions on land could be allowed on boats. 

Sanya attracts the most tourists in Hainan province. It recorded 18 million visitor arrivals in 2017, according to online travel booking agency Ctrip. The city currently has about 14 cruise routes travelling to countries such as the Philippines and Vietnam, while it is also a stopping point for major cruise operators, which could provide a good foundation for the city to become an international cruise destination.

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Su also pointed out that it would make no sense for Hainan to have casinos, as this would pit it against Macau and Hong Kong. “Why would Beijing want to hurt Macau that way? Both places are its own territories,” he said.

Lawrence Ho, the chairman and chief executive of Melco Resorts, one of Macau’s six major casino operators, echoed Su’s views. 

“I don’t think there will be a land-based casino industry set up in Hainan, at least not in the foreseeable future,” said the 42-year-old billionaire. “President Xi Jinping talked more about developing lotteries. There was nothing mentioned about betting.”

Sophie Lin, an analyst from rating agency Standard & Poor, also holds a similar view. She said: “I think it’s unlikely for China to allow casino operations outside Macau, at least for the next five years.” 

She said Hainan should not pose a huge threat to Macau in the short term. It is the city’s other rivals, such as Japan, which has legalised gaming and is set to issue gaming licences to casino operators this year, that will pose a bigger threat to Macau.

Plans to transform Hainan into China’s largest free-trade zone put it back on developers’ investment radar

In a directive issued in April, which listed measures to transform the island into an international free-trade zone, Beijing said it would allow horse racing and new types of sports lotteries on the southernmost island, which excited the country’s stock markets and saw shares a number of Hainan-based companies - including those not involved in gaming – surge to their daily limit following the news.

To contain the speculative betting on Hainan’s possible opening up vis-à-vis gaming, the local government has issued measures that include restrictions on non-local residents buying up property. It has also banned newly registered companies from using the words “jockey” or “horse racing” in their business names, as a number of companies saw their shares surge after announcing plans to develop horse racing-related businesses, even if they did not have concrete plans yet.