Xi Jinping’s crackdown spreads to Macau and Hong Kong

Fears about an Evergrande default have spread far beyond China

(Image credit: © MARK RALSTON/AFP via Getty Images)

“Recent crackdowns have proven that few sectors are safe from Beijing’s control,” says the FT’s Lex column. “No industry looks as vulnerable as Macau’s gambling market.” Shares in the territory’s casino operators fell sharply amid a regulatory review that may end up cutting the number of casino licences in the world’s largest gambling hub. “Should the new laws limit the number of licences below six, some operators could go out of business” when all current permits expire in June 2022.

Even if that doesn’t happen, “it is clear that Macau will be more demanding than in past years”, says Katrina Hamlin on Breakingviews. Operators may face “unprecedented micromanagement, including state representatives scrutinising daily operations, and stricter oversight for junkets, which organise visits and credits for high rollers”. There’s even a suggestion that firms may require government approvals to pay dividends.

The message for markets extends beyond Macau, says Shuli Ren in Bloomberg: China is serious about its “common prosperity campaign”. Hence shares in Hong Kong’s four biggest property developers also tumbled after reports that Beijing has “asked the territory’s real-estate billionaires to resolve the city’s housing crisis”. The high cost of property in Hong Kong is often blamed for fuelling the widespread political protests in 2019. Investors now fear developers could be forced to donate some of their large land banks to the government.

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Deflating Hong Kong’s real-estate bubble won’t just mean squeezing the tycoons – it will also require a big shake up in tax policy, adds Jacky Wong in The Wall Street Journal. The territory earns twice as much from land sales as income tax, which is partly why tax rates have stayed so low until now. “Hong Kong’s housing market has produced immense wealth for some... Leaner times could be ahead.”

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Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.