On this episode of China Uncensored,
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.
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 t
hat 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.
Thanks for watching this episode of China Uncensored.
I’m Chris Chappell.
See you next time.
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