Rolling the dice in China

Though games of chance have long been a part of Chinese culture – lottery proceeds were supposedly used to finance construction of the Great Wall – prohibitions on gambling have existed in some form or another for centuries. The Communists, for example, banned gambling – along with drugs and prostitution – due to its “great incentive to moral and social degradation.”

Fortunately for gaming enthusiasts – and perhaps even real estate investors – there’s always Macau. A small, densely populated, 6.5 square mile region in southeastern China, Macau, originally established as a Portugese trading post in the 1500s, is the only area on the Chinese mainland where gambling is legal. Though it was formally handed over to the Chinese government in 1999, Macau’s popularity as a destination for high stakes gamblers has continued unabated – it is often referred to as the “Monte Carlo of the Orient”.

Yet, Macau may have more in common with a certain city in the Nevada desert than it does with its European counterpart. In 2004, gross gaming revenues in Macau reached approximately $5.3 billion, or about 75 percent of the total in Las Vegas. Since 2002, when the government liberalized the gaming industry, a number of high profile casinos have already been established and several more are on their way: Steve Wynn’s latest project is expected to open in 2006 and two others, named after the Venetian and the Mirage in Las Vegas, are anticipated to arrive in 2007. Many gaming analysts predict that in the very near future, Macau will replace Las Vegas as the gaming capital of the world.

Boosted by all of this “degradation,” the local economy has grown substantially in recent years, with GDP increasing by almost 20 percent a quarter since the second half of 2003. And though growth in the first quarter cooled off to a more reasonable level, real estate construction remains dramatically robust – in fact, a consortium of casino operators and hospitality companies, including The Sands, Four Seasons and Intercontinental, have unveiled plans to develop a $12 billion Las Vegas-style Strip in Macau.

“It took 75 years for Las Vegas to emerge as an international destination,” said Sheldon Anderson, chief executive of The Sands, in March. “Our intention is to establish that feat in less than three years.”