Xi Jinping’s visit: good or bad?

One thing is certain: this time Xi Jinping cannot be accused of contributing to the economic downturn. Recession didn’t wait for the Chinese president…

Last time a senior Chinese official was in Macau (2016), Bloomberg news agency wrote that the announcement of Li Keqiang visit “has agitated some casino players and investors in the city, who have suggested his appearance could threaten the city’s nascent, yet still fragile, recent recovery.”

In addition to the sources of information they may have heard, Bloomberg based this information on two reports, from Union Gaming and Nomura, suggesting Li’s visit will scare off high-rollers, “and possibly break the city’s winning streak in gaming revenue.”

To create all context, Bloomberg has also reported that the previous time a top Chinese leader visited Macau (Xi Jinping), the trip resulted in two years of declining casino revenues and a consequent economic downturn.

President Xi Jinping’s visit in December 2014, for the 15th handover anniversary, when he ordered Macau to diversify its economy beyond gaming, reinforcing the fight against internal corruption, caused an earthquake in casino revenue, from which it took two years to recover.

Xi Jinping again

Will it be different now?

Shortly after learning that Xi plans to be in Macau later this month, equity research analyst at China Renaissance, Angela Han Lee, said in an interview with Bloomberg that the visit of Chinese President for the 20th handover anniversary ceremony in December could negatively impact the sector.

“Five years ago before he came, there were many kinds of crackdowns, tightening transit, visa policies, the implementation of the smoking ban; so in all senses there could be more negatives on the policy side than positives. I won’t expect much recovery this year, but there could be a meaningful recovery in the first half of next year,” the analyst said last July.

Two months later, a report from Bernstein stated that while “some investors have questioned what the impact of XI’s visit will bring to Macau gaming, it is possible that Macau GGR (especially VIP GGR) may have some negative impact.”

Once “his last Macau visit coincided with the intensification of the anti-corruption campaign,” Bernstein’s team started out that, “Xi has always taken a strong stance on anti-corruption since he became China’s president, and there seems to be a view that some individuals would prefer to stay away from Macau around the time he is there.”

“There will likely still be some impact, as VIP players (and some larger premium mass players) and agents push back their visits to Macau, but it should be a temporary impact,” they also add.

But the analysts at Bernstein research house wanted to go further and analyzed all the visits by top Chinese officials to Macau since 2009 (see graph on these pages).

They began to alert that “the sample size of visits by senior officials is pretty small to derive any meaningful prediction for this coming December.” Maybe that’s why, “it’s hard to draw a clear conclusion though. There is just no evidence to suggest that players/agents would be staying away because of Xi’s presence, aside from maybe the week or so surrounding his being in Macau -so the impact should only be in mid-December.”

Positive news

Not only will Xi Jinping come to Macao to praise MSAR’s 20 years, he will surely bring with him some gifts that could help the economy recover faster from its depression.

In the past, this has happened.

The visit of then President Hu Jintao in 2009 registered several fundamental ideas: fighting corruption, economic diversification, “social harmony and stability” of Macau, lauding the local government’s efforts in implementing the principle of ‘One country, two systems.’

The following year it was the turn of Premier Wen Jiabao to come to Macau to speak on how appropriate diversity should be promoted in the economic development of Macau. To achieve such a goal, Mr. Wen suggested the Macau government place more value on small-sized enterprises.

In 2014, President Xi Jinping ordered Macau to diversify its economy from gambling (“Focus on building a global tourism and leisure centre… promote the Macanese economy’s appropriate diversification and sustainable development”) and reinforced the fight against corruption.

Finally, in 2016, Premier Li said, “new measures and policies” would favour Macau, aimed at making “better use of its position as a world centre of tourism and leisure and trade and trade co-operation service platform” between China and the world’s Portuguese-speaking countries.