Macau Sex Ring Bust Shows China Expanding Crackdown on Graft

This article originally appeared in Bloomberg:

The arrest of a prominent Macau executive in the largest prostitution bust in the city’s history shows China’s President Xi Jinping is broadening his crackdown on corruption to restrict even long-tolerated vices.

Police in the former Portuguese colony arrested Alan Ho, handcuffing him and covering his head with a black hood, for allegedly operating a prostitution ring out of the casino complex of his uncle, Stanley Ho. The elder Ho held a monopoly on gambling in Macau for four decades and SJM Holdings Ltd. (880), the company he founded, is still Asia’s biggest casino operator.

The authorities’ latest target of the sex industry comes as Xi wages the most sweeping campaign in decades against bribery, embezzlement and other kinds of corruption in an effort to bolster the legitimacy of the ruling Communist Party. Macau casinos that suffered last year from the fallout of Xi’s crackdown are likely feeling the noose tighten further, particularly on junket operators, middlemen who bring in high-stakes gamblers from the mainland.

“There is undoubtedly a new sheriff in town,” said Steve Vickers, a political risk consultant in Hong Kong. “This is consistent with President Xi’s call for Macau authorities to show ‘greater courage and wisdom’ and to ‘strengthen and improve regulation and supervision over the gaming industry’.”

Xi, who visited Macau last month for the 15th anniversary of its handover to China, said this week that there will be no let-up in his “fierce and enduring” battle against corruption, which has already taken down thousands of senior officials including the country’s former security chief.

Actions including restrictions on illicit fund flows have prompted mainland VIPs to avoid Macau, putting some junkets out of business. The David Group, a top 10 Macau junket operator, is in the process of shutting its VIP rooms throughout the city, Nomura analysts led by Stella Xing wrote yesterday.

Read the full story at Bloomberg.


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