Why is Macau so rich? | CNBC Explains

This might look like Las Vegas but it's far from it. This small peninsula of land is China's answer to Sin City. And with gaming revenue that's five times that of the Las Vegas Strip, it's become one of the wealthiest places on earth. Macau is rich and it's only getting richer with the International Monetary Fund tipping it to surpass Qatar as the wealthiest place on earth by 2020. So how did it get so rich? One word - gambling. Macau is located off the southern coast of China about 40 miles from Hong Kong. And its gaming history can be traced back all the way to the 16th century. Macau is a former Portuguese colony and when its role as a trading port began to fall behind Hong Kong, the Portuguese government decided to legalize gambling in 1847 to give it an edge. It remained under Portuguese control until 1999 when it was formally handed over back to China. And while it's technically part of China, it's known as a special administrative region which means it has its own rules and economic freedoms. Casinos and pool betting are illegal throughout China but not Macau, which is why it's become a hot spot for China's high rollers. Macau quickly grew as a gambling hub. In 2003, the number of visitors from mainland China began to surge as travel restrictions loosened and hundreds of millions of Chinese citizens were lifted out of poverty. And Macau's gaming revenue and GDP thrived along with it. There's not a lot of land here in Macau and yet it has a population of about 650,000 making it one of the most densely populated places on earth. Its small population relative to its economy means its GDP per capita is high. By 2020, Macau's GDP will reach around $143,000 per person. Compare that with Qatar, which is projected to be $139,000, followed by Luxembourg at $118,000. Vegas is big. Macau tries to be bigger. This is the Venetian, it's twice the size of its sister casino in Las Vegas and it's the largest casino resort in the world. The gaming industry here in Macau has brought in more money than Las Vegas for the past 10 years now. In fact, the majority of profits for both the Vegas-based Las Vegas Sands and Wynn Resorts come from Macau. In 2017, Macau accounted for 53% of adjusted earnings for Las Vegas Sands and 71% for Wynn Resorts. It hasn't always been fun and games though. Gaming revenue reached $45 billion in 2013. That was its peak. Then Beijing began cracking down on corruption. Since coming to power, China's President Xi Jinping has punished more that 1.5 million Communist Party government officials for corruption. Along with reining in corruption in business and among private sector billionaires. That crackdown meant less money would flow through its gambling capital. Casinos here experienced more than two years of gross gaming revenue declines. The industry began to pick up at the end of 2016 and in 2017 it increased its gaming revenue for the first time since its peak. China's slowing growth and uncertainty around the U.S.-China trade war has also placed some question marks around Macau's rebound. Critics also point to the wealthy area's rising income inequality and poverty. The government says just 2.3% of its population is living in poverty. But other reports estimate it's about 10%. Now, Macau is hoping to diversify its revenues beyond gaming by taking after Vegas and upping its entertainment offerings. Non-gaming in Macau accounts for just 12% of its total revenue. In Las Vegas that's 65 percent. It's upping its offerings by bringing in the likes of Celine Dion and Bruno Mars to perform, as well as increasing the types of dining options. But whether it can actually move beyond its gaming fortunes to become an entertainment hub for China remains to be seen. Until then, its gaming revenues might just be enough to propel it to be the richest place on earth. Hey guys, it's Uptin! Thanks for watching. For more of our videos check out, "What does Qatar own around the world?" here. And, "Why is Dubai so rich?" here. We're also taking suggestions for future CNBC Explains, so leave your comments in the section below and while you're at it subscribe to our channel.

Channel: CNBC International

Views: 855,888

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Id: HMaDV4p1Tho

Length: 4min 6sec (246 seconds)

Published: Thu Oct 25 2018