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JP Morgan Outlines China Criminal Law Amendment Implications

The criminal law amendment in China seeking punishment for organizers of trips with gambling purposes outside the country for mainland residents could make junket operators who used to bring high-rollers to Macau casinos anxious, a Tuesday memo from JP Morgan Securities (Asia Pacific) outlines.

Junket Industry under Threat

The ban effective from March 1, 2021 under the new amendment is making junkets “personally liable for the mere organization of a gambling trip”, further adding to the restrictions on casino gambling promotion beyond Chinese boundaries, which already is perceived by the industry as illegal.

The JP Morgan analysts noted in the memo that the definition of “outside the country” wording in the criminal law encompasses both special administrative regions (SARs) of Macau and Hong Kong, as well as Taiwan, further stressing out the junket industry as violations of the ban could be punished with up to 10 years in prison.

“This should put an end to the discussion on whether the Macau SAR is covered by this law, because ‘outside the borders’ is typically interpreted as being outside mainland China in the legal context.”

DS Kim, Derek Choi, Analysts, JP Morgan Securities

Earlier, GGRAsia news media received similar answers from two experts, a gaming scholar at Macao Polytechnic Institute and a Guangzhou-based legal source, both stating that the ban includes Macau.

“By the term ‘outside the borders’, that could mean activities that are conducted in the special administrative regions – i.e., Hong Kong, Macau – as well as Taiwan.”

Wang Changbin, Gaming Scholar, Macao Polytechnic Institute

Wang Changbin further added that the wording outside the borders is usually referred to things happening outside of mainland China, but encompassed all Chinese jurisdictions, including the SARs. Mr Wang singled out junkets as being the ones being mostly impacted.

“This legal change could have implications for Macau’s junket sector. I think they could be the ones taking the biggest hit.”

Wang Changbin, Gaming Scholar, Macao Polytechnic Institute

The legal source in Guangzhou who according to the media asked to remain anonymous due to the sensitivity of the topic, also reached the same technical view on what counts as outside the country within the Chinese context.

Visitations Historically Do Not Affect GGR

JP Morgan analysts also warned investors in a separate update not to overestimate the rise in daily average visitations to Macau for the December 23 to 27 Christmas period, compared to October or November, as volume increases historically did not reflect into the city’s casino gross gaming revenue.

Further, analyst Choi and Kim noted the pace of recovery for the tourism sector continued to lag behind expectations and consensus at the time Individual Visit Scheme (IVS) resumed in September, pointing December as a strong candidate to become the first month to fall short on sequential monthly improvement.

Categories: Legal
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