Industry Worried About Junket System In Macau After One Operator Disappears With Up To $1.3B

Macau is the world’s top gambling hub, and it’s still growing at an incredible clip. Casinos there recorded $45 billion in gambling revenue in 2013, causing some to predict that figure could be on its way to doubling by 2020. Nevada currently sees one fourth of Macau’s figure.

The region’s casino economy is fueled by high rollers from mainland China, ones who apparently lose vast sums playing high-stakes table games. In order for this to be the case, junket operators had to come into existence. The problem was, at first, that China has restrictions on the amount of money people can move from the mainland to Macau. Thus, these middlemen were created to give casinos and high rollers what they wanted.

The junket operators give the players credit and collect debts for commissions. This is much different than Las Vegas, where casinos are the ones to give high rollers credit.

These middlemen drive two thirds of Macau’s gaming revenue, according to a report from The Wall Street Journal. They are the heart of the area’s casino success.

So, when rogue junket operator Huang Shan disappeared recently with $1.3 billion worth of investor money, many in the industry over there have become concerned, the WSJ reported. Shan was affiliated with a large junket company but reportedly had a side business of his own.

While investors in Shan’s junket are scrambling to get their money back, other casino industry people are worried that there could be credit crunch in Macau if other investors are reluctant to put money into other junkets. Nearly 220 junkets are licensed in Macau.

No casinos are expected to suffer any direct losses from Shan’s disappearance. According to the report, the authorities currently haven’t accused him of any wrongdoing.

“The key question remains whether this is an isolated incident or whether we will see a chain reaction” that causes slowing of VIP gambling revenue growth, one analyst told the WSJ.

Other junket figures have disappeared in the past, but it didn’t do much to slow Macau’s growth, so there is also that. However, Shan’s figure is much larger than any other case.

Thanks to these boom years in Macau, high-stakes poker has found a new home in the former Portuguese colony. Some of the game’s most recognizable pros, such as Tom Dwan, square off on a somewhat regular basis with Chinese businessmen, and some pots have been rumored to be worth millions. A credit squeeze in Macau could possibly affect poker.

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