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China to tighten rules on Macau casinos

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China to tighten rules on Macau casinos

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Macau released a new bill that would cut the length of new casino licenses in half and require operations to comply with China’s national security needs, but not reduce the number of licenses at the lucrative gaming hub.

Details of the bill were unveiled by the Macau cabinet on Friday and will be submitted to the local legislature for deliberation. The project follows a series of earlier proposals in September that raised fears of a crackdown among investors, as Beijing seeks to increase regulatory oversight of what has been a cash cow for Western casino operators.

Ben Lee, managing partner and founder of Macau-based consulting firm IGamiX, ​​said the bill was much sweeter than people expected.

The bill would not reduce the current number of casino licenses, and it removed an earlier provision to place government officials in casinos to more closely monitor their operations.

“This is a positive development as it gives us a little more clarity for the future,” said Mr. Lee.

US-listed shares of major casino operators with operations in Macau surged on Friday morning. Sands of Las Vegas Corp.

LVS 13.73%

gained over 15%, and Wynn Resorts Ltd.

WYNN 7.05%

increased by 9%. Shares of both companies had fallen sharply last year, while MGM Resorts International, which has less exposure to Macau, performed better.

The Chinese gambling enclave has been hit by setbacks as the pandemic has largely kept mainland tourists from visiting the city and wiped out billions of dollars in gambling revenue, a vital part of Macau’s economy. The arrest of one of the most prominent figures in Macau’s gaming industry late last year also sent shivers down the industry, especially the junket operators who have served many big players.

According to the new draft, Macau would grant a maximum of six casino licenses for a period of 10 years, which could be extended for three years in exceptional circumstances. Casino operators currently hold three concessions and three 20-year sub-concessions, which means that in theory there could be enough new licenses for each of them. The licenses, held by US companies and local competitors, expire in June.

The proposal said authorities would step up oversight of businesses and individuals involved in gambling.

The casino’s operations must also comply with national security and Macau’s security, according to the bill. Last month, Chinese state media reported that Beijing’s top envoy to Macau would be appointed as the local government’s national security adviser. The clause could expose U.S. operators to fallout from political tensions between the U.S. and China, Lee said.

To increase local ownership, the government’s plan requires 15% of a casino company’s share capital to be owned by a director who is a citizen of Macau, up from 10% in previous rules. Companies must increase their amount of capital to the equivalent of $ 624 million to ensure that they have sufficient financial resources.

The authorities have also introduced a cap on the public float of the licensee’s shares. Ku Mei Leng, head of the office of the Macau Economic and Financial Secretary, told a press conference on Friday that if the proportion of listed shares is too large, it could affect the government’s supervision of shareholders and finances of a company.

The implications of the new provision were not immediately clear. The aim is to ensure the healthy development of the gaming industry and not to restrict market freedom, Ms. Ku said.

Write to Elaine Yu at elaine.yu@wsj.com

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China to tighten rules on Macau casinos

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