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(Nikkei Asian Review) — China’s new restrictions against cross-border casino trips threaten to deal a blow to Asian economies that depend on Chinese tourist spending, but will give a leg-up to the reopened gambling hub of Macao.

China’s Ministry of Culture and Tourism said on Aug. 26 it will create a blacklist of overseas gambling destinations. The announcement did not specify the banned locations, but it did mention cities that are “disrupting China’s outbound travel market and endangering Chinese citizens’ lives and property.”

The move was unwelcome news to Southeast Asian destinations as they struggle to attract visitors while fighting coronavirus outbreaks.

“The timing of this policy that decreases Chinese tourists is a negative,” one insider in Vietnam’s tourism industry said.

Although Vietnam has sharply limited the intake of foreign travelers since March in response to the pandemic, officials have been looking to restart international flights as the outbreak shows signs of being contained.

Last year, Vietnam welcomed about 6 million Chinese visitors, official statistics show, ranking China as the top origin of incoming tourists. One decision by Beijing can decide the fate of more than 40 casino resorts in Vietnam.

China’s travel ban appears to be based on concerns that foreign casinos are turning into hotbeds of corruption and other crimes among.

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Macao, the gambling capital of the world and the only legal casino city in China, is known for junkets, which provide wealthy clients with everything from transportation to loans for betting.

Vast amounts of money changed hands in these operations. But the anti-corruption campaign under Chinese President Xi Jinping disrupted the junket industry, prompting some operators to shift to Southeast Asia.

The relocated junkets have wooed China’s affluent to casino resorts abroad. These operations are especially numerous in Vietnam and Cambodia — places that are generally out of reach of Chinese authorities.

The same Chinese officials appear to have decided that farther-reaching measures were needed to pursue Xi’s anti-corruption campaign.

Any Asian country that depends on Chinese tourists will be hit hard if it appears on the casino blacklist. The Philippine capital of Manila is home to four large casino resorts, along with smaller parlors, all of which are heavily frequented by Chinese visitors.

Last year, Chinese accounted for over 20% of foreign tourists in the Philippines. The country’s casino market grew 15% on the year in 2018 to 216.3 billion pesos ($4.45 billion).

Singapore is in the same position, since visitors from China account for the largest percentage of tourists. The Singaporean government continues to bar the entry of travelers from major countries, potentially prolonging the pain for casinos.

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The Marina Bay Sands reported revenue of only $7 million in the second quarter, a 99% plunge from a year earlier. A Chinese travel ban would deepen the wound.

Ever since the blacklist was reported, stocks exposed to the measure have taken a dive in Hong Kong trading. Suncity Group, which is developing a casino resort in Vietnam, gave up as much as 10% of its stock value. Nagacorp, which operates a resort in the Cambodian capital of Phnom Penh, fell as much as 14%.

Adding to the uncertainty is the fear that China could wield the blacklist as a political weapon against trading partners. China once imposed de facto restrictions on travel to South Korea in response to the country’s adoption of the U.S.-made THAAD missile defense system, as well as to Japan amid an island dispute.

In Macao, however, the blacklist is seen by many to be a net positive. People from neighboring Guangdong Province in China have been allowed to enter the territory since late August. Macao’s casino industry anticipates the gradual lifting of restrictions will lead to a recovery in demand.

Macao instituted an entry ban against foreigners in March and largely limited visitors from the mainland. As a result, the number of incoming travelers since April fell to less than 1% of the year-earlier tally. Gaming revenue dropped 82% on the year in the January-August period.

With the news that the entry ban would be eased, there has been a rush of applications in Guangdong for documents needed for travel to Macao. As part of a plan to bring in clientele, the Macao government is distributing 290 million patacas ($36.3 million) worth of product vouchers, according to China’s state-run Xinhua News Agency.

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The easing of border restrictions will be huge for Macao, since mainlanders make up 70% of the visitors. U.S. investment bank Jefferies expects gambling revenue will start to recover this month, then cross the break-even point for profitability during China’s long National Day holiday in October.

Shares in Galaxy Entertainment Group, Sands China and other Macao casino operators have climbed over 10% from the end of June. Research by Morgan Stanley analysts shows that wealthy Chinese VIPs have driven the gambling markets in the Philippines and Cambodia. If such demand is redirected toward Macao, revenue from VIPs could jump by as much as 30%, according to the report.

This story was first published in the Nikkei Asian Review.

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