Macau's casino crackdown a worthy attempt to evolve under 'one country, two systems' framework

Macau has taken a battering of late. Share prices of casino stocks listed in Hong Kong have halved in the past year as gaming revenues continue to plunge. News media are filled with tales of woe for the once-thriving special administrative region, as Beijing appears to be throttling the junkets, which have long driven the VIP sector, with waves of anti-corruption campaigns. Even mass-market revenues, which had been seen by investors as a cause for long-term optimism, are taking a hit.

Against this backdrop, we saw President Xi Jinping visit Macau for the 15th anniversary of its handover, suggesting that Macau needs to prioritise clean and efficient government. Meanwhile, Li Fei, chair of the Basic Law Committee, called on Macau's leadership to diversify the economy, and reports suggested that the Ministry of Public Security will start monitoring fund flows through Macau's banking system as part of its "fox hunt" for corrupt officials fleeing overseas.

Taken together, it would be natural to assume that Macau's best days are behind it, and that the president's "new normal" means the party is over for the gaming industry as Macau's government comes under intense scrutiny from the North. This would be to miss the bigger picture of what is happening in China, however, and to assume that Macau is incapable of evolving beyond its traditional role - one might say stereotype - as the country's Casablanca.

The comparison with that north African city during the second world war is apt when recalling the raid that took place two weeks ago on the Hotel Lisboa, resulting in the arrest of Alan Ho, a nephew of Stanley Ho Hung-sun, for allegedly running a prostitution ring. A scene springs to mind from the Humphrey Bogart movie where Captain Renault marches into Rick's Place and declares himself "shocked, shocked, to find that gambling is going on in here!"

Having said that, the Lisboa raid was no laughing matter. It took much courage for the Judiciary Police, and particularly the new cabinet's secretary for security, to launch it. " The paddock", as it has been called by wags, had been operating with abandon for nearly 20 years at the iconic hotel. Wong Sio-chak, the security secretary, was previously the head of the Judiciary Police. By launching the raid, he must have understood the risk of implicating the department, and even himself, in having previously tolerated it.

A similar act of courage could be seen by the Monetary Authority of Macau, inviting into town the Ministry of Public Security, in order to address obvious concerns about loopholes in the cross-border monitoring of fund flows through the China UnionPay network. Such a decision has raised concerns about "one country, two systems", yet the Monetary Authority clearly saw the need to prioritise cooperation with Beijing above protection of data privacy so as to stem rampant abuses of the system - abuses that it had previously tolerated.

Indeed, critics have been too quick to judge that Macau is being whacked into line by a stern and unforgiving new leadership in Beijing. In both of these cases, and countless others that the Macau government has been loath to take credit for, action has been initiated domestically before resulting in the assistance of counterparts at the national level.