The gambling center Macau has appointed Sam Hou Fai, a Beijing-supported former top judge, as its new leader. This decision, according to analysts, may boost efforts by Chinese authorities to encourage the former Portuguese territory to reduce its reliance on the gaming industry.
Sam Hou Fai, who was educated in Beijing and Portugal, will assume office in December following an uncontested election. He garnered 394 votes from a 400-member selection committee primarily composed of pro-Beijing politicians and business figures, representing less than 1% of Macau’s population.
Outgoing Macau Chief Executive Ho Iat Seng announced in August that he would not pursue a second term, citing health issues. Sam, aged 62, previously served as the president of Macau’s top court for over two decades and was regarded as Beijing’s favored candidate. The Beijing office overseeing Hong Kong and Macau praised Sam as a “patriot.”
Sam has previously expressed concerns about the unrestrained growth of the gambling sector, which is expected to face more scrutiny from Beijing. Ben Lee, an Asian gaming expert and managing partner at IGamiX Management and Consulting, noted that Sam understands China’s expectations for Macau.
Sam is the first postcolonial leader of Macau without the strong business background or connections of his predecessors. According to Lee, Sam’s apparent lack of ties to the traditional ruling families represents a significant advantage in China’s goal to diversify Macau’s economy.
Macau faced significant challenges during the pandemic as China’s strict travel restrictions cut off a major source of visitors and gamblers. This situation followed Beijing’s extensive crackdown on the gambling industry in 2021, aimed partly at limiting capital outflow through the territory, the sole legal gambling location in China. The crackdown, along with heightened regulatory oversight, severely impacted Macau’s six major casino operators, which include US-owned Sands, MGM, and Wynn.
As part of this campaign, authorities targeted junket operators, who help casinos attract high-spending mainland VIPs, arresting leaders of two major junket companies for alleged money laundering and illegal gambling activities.
While mass gross gaming revenue has rebounded to 130% to 140% of pre-pandemic levels as of this month, the critical VIP segment has recovered to only 30% to 35% of its former levels, according to JPMorgan analysts. Overall gross gaming revenue is projected to reach roughly 80% of 2019 figures for 2024, the bank estimated.
China is increasingly guiding Macau to replicate Las Vegas’s economic diversification by hosting international events. As a condition of their gaming license renewals last year, Macau’s major casino operators committed to investing a significant portion of their combined $15 billion investment in non-gaming activities over the next decade, such as conventions and exhibitions.
In August, when Sam announced his candidacy, he remarked that “our tourism and gaming industry had for a period of time developed disorderly and expanded wildly.” He emphasized that having only one dominant industry is detrimental to Macau’s long-term development and carries very negative impacts.
Despite these efforts, the territory faces a considerable challenge in diversifying as government revenues still largely depend on a 35% gaming tax, noted David Green, founder of Newpage Consulting and a former adviser to the Macau government. Moreover, Macau is increasingly competing with regional players like the Philippines and Singapore, Green added.
Macau’s economy continues to heavily rely on Chinese tourists, making it vulnerable to Chinese policy changes, according to Aras Poon, associate director at S&P Global Ratings.
Gaming operators recently experienced a surge in revenue during China’s weeklong National Day holiday, as visitor numbers increased following Beijing’s announcement of imminent stimulus spending. Anthony Lawrance, founder of consultancy Intelligence Macau, shared that he does not expect Sam to make drastic changes, as major policies seem to be decided in Beijing. The only potential risk is if Chinese President Xi Jinping decides to initiate another crackdown.