Crackdown on illegal money exchangers contributed to Macau's summer GDP slump

The decline in Macau's summer GDP was due to the crackdown on illegal money exchangers, leading to a slump in the gaming industry's revenue forecasts for July. The city's casinos are expected to generate slightly less net gaming revenue than originally projected, as the Chinese economy's instability and reduced tourist flow further impact the economy.

Despite June's growth compared to the previous year, the GDP still fell short of analyst estimates and remains below pre-pandemic levels.

Macau has experienced seasonal GDP declines before, attributed to the influx of Chinese tourists during the spring "golden weekend" in May, followed by a quieter summer period. However, this year saw an additional factor - a government crackdown on illegal currency exchangers.

Initiated in June, the crackdown aims to reduce capital outflow and the proliferation of high-interest loans, as well as to regulate the amount of cash Chinese tourists can bring into the city.

Chen Shiku from China's Ministry of Public Security highlighted the presence of "money exchange gangs" near casinos supplying large quantities of Hong Kong dollars to gamblers, noting that the Hong Kong dollar is the primary currency used in Macau's casinos.

On the other hand, analysts pointed out that worries about illegal currency exchangers are blown out of proportion. George Choi and Ryan Cheung noted that most individuals in the industry have legitimate ways of bringing money into Macau, allowing them to place high-stakes bets without relying on illegal means. Ben Lee of IGamiX Management and Consulting questioned the necessity of illegal exchangers considering that casinos already provide currency exchange services.

Lee also raised concerns about merchants potentially engaging in cross-border money transfers, a significant issue for Chinese authorities, with VIP and premium players bearing the brunt of the repercussions.