Macau’s Big Gamble

Even as foreign investors pour billions into ever-glitzier casinos, the tiny peninsula’s bid to become the Vegas of the Orient depends on China’s larger willingness to embrace transparency and the rule of law.


Today’s boom times in China are interesting in their own right, as economic booms always are. By chance and by design, I have lived in the middle of several of them: the Texas oil boom of the mid-1970s, Japan’s all-around boom of the late ’80s, and the Seattle and Bay Area Internet bubble of the late ’90s. Inside the boom zone, people don’t spend much time thinking about how the good times began, or asking how long the boom can last. Everyone, everywhere, takes their own prosperity as a sign of cleverness, wise planning, and hard work.

From outside, the questions concern the boom’s effects—on culture, on values, on old establishments and traditions. Such questions about China’s boom are unusually compelling, simply because of the country’s scale. What will its growth mean for the global environment? For jobs and prices outside of China? For the military balance of power and the ideological contest of ideas?

Right now the very most booming part of generally booming China raises questions like these in a peculiar and intriguing form. This part is the tiny peninsula of Macau—as it spells its name, versus Macao in American usage. Geographically, it is one-sixth the size of the District of Columbia, and it has a population of half a million. It officially became Chinese territory only in 1999, after centuries of colonial control by Portugal. Like its neighbor Hong Kong, which was transferred from British to Chinese control in 1997, Macau is a “special administrative region” of China, meaning it is supposed to run by its own laws and customs for at least 50 years after the handover.

From Atlantic Unbound:

Slideshow: "The Many Faces of Macau"

James Fallows narrates photos from China's glitzy, seedy, over-the-top gambling mecca.

While China’s overall economy has grown about 10 percent per year since the 1980s, Macau’s has recently been growing by 20. While Shanghai, Beijing, and other big cities are dotted with construction cranes, Macau appears to be made of them. Early this year, on a tour of Macau’s Cotai Strip, where a version of the Las Vegas Strip is being created, I counted more than 200 working cranes before I lost track. While the rest of China is struggling to contain the tensions between the very rich and the very poor, via what the central government calls its “harmonious society” policy, Macau is rushing to make itself more attractive to the very rich—and to anyone else who would like to visit the only part of Chinese territory where casino gambling is legal. (State-run lotteries are the only legal gambling outlet on the mainland.)

Last year Macau finally overtook Las Vegas in gambling revenues: Macau had about $7 billion, versus $6.5 billion for Las Vegas. As we will see, this statistical achievement is less significant than it sounds. But news outlets naturally presented it to Americans as more evidence of China’s incomprehensible scale and its unstoppable rise—plus, on the bright side, as another example of the riches open to Western companies (in this case, U.S. casino firms) that can figure out how to get part of the pot-o’-gold Chinese market.

Yes, what is happening in Macau should be of intense interest to casino operators everywhere, and to the financiers and suppliers who thrive off the world’s gambling industry, and to those compiling information on how Chinese people use their new wealth. But in repeated visits to Macau, I found it far more interesting than I would have guessed from most of the gambling-boom stories.

It is interesting in a lowbrow way, because of Macau’s ineradicable seediness. Look in one direction, and you see a new five-star hotel. Turn 90 degrees, and you see an alley down which Indiana Jones might run, pursued by gangsters, or where Sydney Greenstreet might totter out from a smoky den. But this same small locale is also deeply interesting in highbrow ways. The fate of modern Macau will be determined in part by the same political and ideological struggles that are determining so many other aspects of China’s rise. The more China influences businesses and societies elsewhere, the more it comes under pressure to adhere to broadly accepted international standards rather than to its accustomed ways. These standards include such vague-sounding principles as rule of law, transparency, and accountability, which in practice mean: Can you trust a contract? Can you win a lawsuit? Do you know who’s really making a decision? Will the decision be made in favor of whoever provides a “red envelope” containing the biggest bribe? How many sets of books should a company be keeping, anyway? How much money laundering is too much, if Macau wants to be internationally respectable?

Our story begins 450 years ago, when the Portuguese established effective control over Macau and began using it as their trading base for markets in China and Japan. By the mid-1800s, this business had been eclipsed by the rise of British banks and trading companies in Hong Kong. The Portuguese government of Macau responded by legalizing gambling and developing what two academic analysts recently called a “sordid” economic structure—a “mixture of gambling, opium, and coolies trade, together with prostitution, crime and contraband.” The businesses reinforced each other, since peasants who fell into debt at the gambling tables or in the opium dens could be turned into coolies or indentured seamen until they worked off what they owed.

Through the world wars of the 20th century and the rise of the Communists on the Chinese mainland, the Portuguese government oversaw Macau’s casinos and its vice- based economy. The prelude to Macau’s modern era began in 1962, when Stanley Ho, a 41-year-old entrepreneur from Hong Kong with a Chinese father and a Portuguese mother, paid Portugal about half a million U.S. dollars to take over monopoly rights to run all casinos in Macau. Soon he also dominated the helicopter and ferry businesses that brought customers from Hong Kong, the biggest department store, the racetrack, and so on. He held a one-third share in the airport and a one-seventh share in Air Macau. Perhaps it’s not surprising to hear that now, in his mid-80s, Ho is the richest man in Macau and one of the richest in all of China, with assets estimated at $7 billion. Or that he is debonair and sharply dressed, renowned for his skill at the tango and other ballroom dances, or that he has had, by most reports, four wives and 17 children. His flagship operation has been the Casino Lisboa—rendered in Chinese as Pujing, or “capital of Portugal”—which has a 1950s–Las Vegas look. (Earlier this year, he opened the glitzier, bigger Grand Lisboa Casino.) He is referred to in Macau as “Dr. Stanley Ho,” including on the avenue of that name running through the middle of the town and, for a while, on his apparently now-defunct online gambling site,

Stanley Ho has not been charged with any crime but is typically described (outside his home territory) as being “associated with” or “suspected of ties to” criminal gangs from Macau and surrounding areas. The New Jersey Casino Control Commission is now considering whether one of its licensees, MGM Mirage, can enter a partnership with one of Ho’s daughters, Pansy Ho. The decision will turn on whether Pansy Ho, whose reputation is otherwise positive, can prove that she is wholly independent of her father’s influence. (The Nevada Gaming Commission and Mississippi Gaming Commission have already considered the same question and given Pansy Ho their OK.)

By all accounts, the Macau of Stanley Ho’s heyday was loose, easy, and lightly regulated. British Hong Kong attracted business through rule-of-law government and investments in infrastructure and education. Portuguese Macau enticed visitors. During the mid-1980s, my family visited Hong Kong. One day while I stayed there for meetings, my wife took our two school-aged sons to Macau by ferry for a day trip. She returned, ashen; they were wide-eyed after their brief visit to Gomorrah. In those days, according to a recent Time magazine report on the “sleepy, sleazy” city, “its architecturally charming but rundown streets were lined with hookers and occasionally reverberated with gunfire and car bombings from triad gang battles.”

It’s less violent now, but the old Macau is with us still. One hotel where my wife and I stayed this year doubled as a brothel featuring Russian women. On my latest visit, I stayed in Ho’s original Hotel Lisboa, where the young women patrolling the corridors and popping into elevators to greet unaccompanied men were Chinese. To be fair, the city also has beautiful gardens, an informative city-history museum, a good collection of local art, elegant colonial buildings, abundant Portuguese-Chinese estabelecimento comidas for informal outdoor dining, and many other elements of the tropical good life. A 1,000-foot tower offers visitors a sweeping panorama of the Pearl River Delta. Sleaziness and all, it’s an interesting place.

The next big change for Macau began in 1999, with the handover to China and the selection by the Chinese government of Edmund Ho (no relation to Stanley) as Macau’s chief executive. This Ho was raised in Macau, educated in Canada, and worked in the United States and elsewhere before returning home, in 1983, when he was in his late 20s. He participated in the negotiations for Macau’s handover to China. His selection, at age 44, was seen as a significant signal that the Chinese authorities were interested in good government.

Edmund Ho quickly went to work as a reformer. “The Mafia-style murders just ceased,” says William Overholt of the Rand Corporation, who lived in Hong Kong at the time. “Suddenly there was serious planning for economic development, serious investment in infrastructure, serious interest in sound business regulation.” Edmund Ho apparently believed in good government, and his sponsors in Beijing thought Macau would do best if it were seriously cleaned up. In 2002, he ushered in Macau’s modern age by ending Stanley Ho’s monopoly and opening the casino business to foreign competitors. He acted as if he understood that the best chance to clean up the casinos would be to bring in companies that answered to laws and regulations outside Macau. At first, the rules authorized three casino operators, counting Stanley Ho (through his SJM, for Sociedade de Jogos de Macau, or “Macau Gaming Society”). Now the rules allow six.

In 2004, the first big foreign casino opened, the Sands Macao, owned by Sheldon Adelson’s Las Vegas Sands company. It was an instant success, creating profits so fast that it repaid all its capital costs in less than a year. In 2006, Steve Wynn opened the Wynn Macau, with rooms much bigger, fancier, and costlier than the norm for Macau. The other competitors are Galaxy, a company founded by Hong Kong construction tycoons and based in Macau, and two foreign-based firms affiliated with Stanley Ho’s children: MGM Mirage, in a 50-50 partnership with Pansy Ho, and Melco PBL, a partnership between the Packer publishing empire of Australia and Lawrence Ho, Stanley’s son. (Australian officials scrutinized his independence from his father’s influence, as American officials have done with Pansy Ho, before they approved the partnership.) Those are the players. Here is the play—that is, the many interlocking struggles in Macau that together create its larger political meaning.

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James Fallows is an Atlantic national correspondent. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

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