My latest article on CalvinAyre about why Beijing is killing the Macau gambling market via its power grabbing stupid capital controls. Basically, capital controls are limits that the Chinese government places on rich people looking to gambling lots and lots of money. So instead of taking the money from China to Macau (which is illegal) where they can gamble, they go to a junket operator in Macau who gives them money, and promise to pay them back in China if they should lose money.
China doesn’t recognize gambling debts so there is no judicial redress in the event of a dispute, and things get really nasty.
Now China is clamping down on capital controls in order to deal with the nastiness, instead of letting go of the capital controls and letting disputes be solved in court as opposed to the street.
Here’s an excerpt.
While a Macanese junket operator does typically perform the legitimate function of catering to the swanky needs of superrich VIP’s (everything including those little paper margarita umbrellas), that is not the main reason for their existence. The main reason for the existence of a junket operator is not as a swanky butler, but as a financial middleman performing a function a lot more shady. Beijing places strict limits on the amount of capital that can be taken from the mainland at any given time, restrictions that are being more strictly enforced as time goes by. This forces the superrich to employ the services of a junket, because that way a VIP gambler can take loads of cash from a junket operator who has capital already in Macau, and pay him back later when they both return to China. That way, capital does not technically cross the border from China to Macau.
This presents one huge and dangerous problem. Since the whole process is very dark grey, and since Beijing does not recognize gambling debts incurred by skirting its own capital controls, junket operators cannot exactly defer to the courts in order to settle gambling debts. Things therefore can get very nasty if a conflict ensues. I would venture to guess that this nastiness, caused by Beijing in the first place by necessitating the use of junkets due to arbitrary capital controls, is the very selfsame “corruption” that the government is cracking down on in the first place.