Let’s visit the Chinese territory of Macau— to see how how rich mainlanders are getting their money out of China. Welcome back to China Uncensored. I’m Chris Chappell. You know what’s great about being a Chinese millionaire? Apparently, not being in China.
Nearly half of China’s wealthy want to get out of the country. But before they move out, they first want to get their money out. And one of the many ways they do that is through the city of Macau. Macau is home to the world’s most elaborate casinos, as you know from James Bond. Wait, what’s that Shelley? That scene wasn't filmed in Macau? It was done at Pinewood Studios in the UK? What’s next, are you going to tell me James Bond himself isn’t a regenerating time lord who changes his face every three to seven movies? I feel so lied to. Anyway, Macau is here, in southern China. It’s just across the water from Hong Kong navigate to this website. Macau is part of China’s “One Country, Two Systems” policy. So Macau has its own government, currency, and laws— but it still belongs to the People’s Republic of China. It’s like Hong Kong, but the good kid version. You know, the obedient kid who listens to your anti-subversion laws and does the chores l like laundering your money. But anyway, Macau was a Portuguese colony for four hundred years. But eventually the Portuguese got tired of being the only colonial power left in Asia and returned Macau to China in 1999. It was two years after the Hong Kong handover, and there was much less fanfare. The good news is, when the Portuguese went away, they left their egg tarts behind. Gambling had been a part of Macau since the 1800s. And after the 1999 handover, it became the only place in China where casino gambling is legal. It’s also the only place in China where komodo dragons roam free in dangerously open pits, as you know from James Bond. Anyway, the real Macau is in fact home to elaborate casinos, more than 30 of them. Most of them have been built up in the last 15 years. But instead of looking like exotic fantasies of the East, the real casinos actually look like… exotic fantasies of the West. Macau is basically Las Vegas on steroids. In 2016, Macau’s casino gambling revenue was $28 billion, which is three times more than Las Vegas. And a lot of that money is coming from— you guessed it— Chinese millionaires. 80% of Macau’s tax revenue is from the gambling industry. And I’m not talking just about the 30 million ordinary Chinese tourists each year who go there just to gamble for fun. The majority of Macau’s gambling revenue actually comes from a small number of mainland Chinese gamblers referred to as VIP clients. These VIP clients are China’s wealthy elite who go there largely to get their money out of China. In recent years, the Chinese government has put restrictions on how much money citizens can move out of China: You can only transfer the equivalent of fifty thousand US dollars a year. So if you’re rich and want to move, say, a million yuan, which is three times the limit, you need to find a way around that. Fortunately, China’s wealthy have become experts at getting around laws. I mean, how do you think they became wealthy in the first place? Enter: the Macau casino industry. Here’s how it works. The casinos work with organizations called junkets. Imagine a junket like a cross between a bank and a promotion company, but often run by guys with shaved heads and neck tattoos. And the junkets promise casinos that they’ll bring them VIP clients. So let’s say you’re one of these VIP clients: a Chinese millionaire who got your money from, you know, totally legitimate sources completely unrelated to corruption. So there’s a casino. And it hires the junket on commission. The junket hires an agent inside mainland China. That agent finds you, and sells you a VIP package for one million yuan. That VIP package might include transportation, a free luxury hotel room, plus a million yuan worth of “free” casino chips that just happen to be included as a bonus. This way, you’re technically paying for the package, not the chips. That makes it legal. But there’s a catch: Those casino chips cannot be exchanged for cash. They’re called non-negotiable chips, or rolling chips. You actually have to travel to the casino in Macau and gamble all of them. But any chips you win back, well, those will be negotiable chips. Which you can exchange for cash. So once you’ve spent enough time gambling that you’ve wagered all your non-negotiable chips and hopefully won back most of them or more in negotiable chips, you can go cash them in for any currency you want— like US dollars— and then do whatever you please with that money. You won that money fair and square... outside mainland China! No more 50-thousand-dollar transfer limits. So you can invest your new winnings in a sensible, diverse portfolio— or blow it all on one wild party... with a hot tub, in a limousine, on a yacht, on a much larger yacht. Or buy high-end real estate in New York City. Anyway, Chinese millionaires love the Macau junket system. The junkets give them fancy hotel rooms for free, and set them up to gamble in beautiful casino VIP rooms like this. The favorite game of VIPs is baccarat. And not just because they’ve seen it in James Bond movies. It’s because baccarat has lowest chance of losing money compared with other games. I mean, statistically you’ll still lose over time— but it’s less than 3% on average. But if you play blackjack or roulette, you’ll lose much more than that over time. So a lot of gamblers just stick with baccarat, and just consider it a small fee to turn Chinese yuan into any currency they want. Plus they get a swanky hotel room and the VIP treatment. Now you might think this whole system of gambling and shady junkets is just a way for corrupt officials to launder money and skirt the currency transfer laws. And you’d be right. That’s EXACTLY what it is. So...then why doesn’t the Chinese Communist Party just shut it down? I mean, on one hand, corrupt officials are using it to move money out of China without technically breaking the law. This makes it harder for Xi Jinping to go after them with his anti-corruption campaign. Plus on a large scale it sucks money out of the Chinese economy. But, on the other hand, VIP clients are a huge part of Macau’s economy. Macau’s gambling and tourism industries would pretty much collapse without them. And the CCP doesn’t want that to happen either. There are a lot of well-connected Party officials who directly profit from Macau. And from a bigger picture, Macau is supposed to be the shining example of how your economy will be great after you give up control of your territory to the People’s Republic of China— hint, hint, Taiwan. But if the VIP money stops rolling through, it will be pretty obvious that the entire system is a corrupt sham— and that would be a huge embarrassment for the Party. So the CCP is between a rock and a hard place. It’s like when you fall into a pit, and on one hand there’s a komodo dragon that wants to eat you, but on the other hand you can’t escape because there’s a gangster trying to kill you. I guess there’s no way out.
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