As Las Vegas Sands Corp. eyes Macau and Singapore for future growth, an expert warned that this move will likely be entangled with economic and political risks.
The upscale resort and casino company announced on March 3 that it has reached an agreement to sell its Las Vegas real property and operations, including The Venetian Resort Las Vegas and the Sands Expo and Convention Center, for an aggregate sale price of approximately $6.25 billion. Meanwhile, the company plans to continue its business in Asia.
The move marks the company’s growing interest in the Asian market.
However, an expert in China’s economy and politics warned that the risk in the Asia market is piling up for Las Vegas Sands.
Frank Tian Xie, John M. Olin Palmetto Chair Professor in Business at the University of South Carolina Aiken, told The Epoch Times that the risks are from two different aspects: economic and political.
Xie said Sands’ investment in Macau obviously aims at attracting people from China. In the past, a lot of Chinese Communist Party (CCP) officials went to Macau to gamble to either enjoy themselves or to launder money.
However, Xi Jinping’s vigorous “anti-corruption campaigns” since 2012 have largely curbed officials from going to Macau, or other parts of the world.
In the meantime, the Chinese economy is not doing well, foreign exchange reserves are tight, so there is not much money to take outside of the country.
“Sands has underestimated the economic risk,” Xie said.
The other issue is political risk.
Jiang is the former leader of the CCP who heads a faction that has struggled with Xi Jinping for control of the Party.
“Furthermore, the chances of a total collapse of the CCP’s political system and economy are increasing, and Sands has under-assessed this risk too,” Xie said.
Since Sands was granted a gambling license in Macau in 2002 and became the first foreign gambling group to be licensed there, the scale of Sands’ investment in China (Macau) has grown by factors of tens.
Macau’s Gambling License Renewal: a CCP Bargaining Chip?
Sands is facing some uncertainties after it decided to completely shift its focus to China. The biggest one is whether Sands’ gambling license in Macau can be renewed after it expires in June 2022.The Macau government has not yet openly disclosed its intention as to whether it will renew Sands’ license. However, as the tensions between the United States and China continue, there are concerns that as Sands is a U.S. company, its license renewal could be affected.
The media outlet quoted Macau current affairs commentator So Man-yan as saying, “Apparently, one of the main reasons for the Macau government’s delay in announcing the license renewal arrangement is that it is waiting for instructions from the central government.”
So said, three of the six licensed gaming companies (including Sands’ Venetian Macao) are U.S. companies, and this could be an important bargaining chip for the Chinese Communist authorities in the U.S.-China trade war.
Katherine Jiang, a Hong Kong-based financial and investment analyst, told the Epoch Times that in addition to the uncertainty surrounding the extension of Macau’s gambling license, Sands’ growing investment in China will make it hard for it to pull out, and the “bet” is very risky.
Old Connection With Beijing Facing New Tests
Company profiles show Sands’ properties in Macau include Sands Macao, the Venetian Macao, the Plaza Macao, the Parisian Macao, and the Londoner Macao. The company also owns Cotai Expo, one of the largest convention centers in Asia, as well as Cotai Arena, the largest performance venue in Macau.The company invested $265 million in the Sands Macau Hotel in May 2004 and opened the $2.4-billion Venetian Macau in August 2007.
Various lawsuits indicated that Las Vegas Sands gained their gambling license in Macau through intensive engagement with CCP officials.
Edmund Ho, then-governor of Macau, issued gambling licenses afterward to Sands when Macau’s three gambling licenses were split into six.
However, the old connection established by Sands then will likely face new tests as Xi Jinping became the leader in China in 2012.
It’s unclear if Sands has a strong tie with the Xi faction.