China criminalizes attracting gamblers abroad

An amendment to mainland China's criminal law, which includes targeting new cross-border gambling activities, is undergoing its second reading at the Standing Committee of the National People's Congress on Tuesday, state media China News Service reported.

The agency said the amendments to the law included defining specific crimes called "organisation and solicitation by overseas casinos," which would allow mainland residents to take them abroad to gamble. The amendments also reportedly included conditions for coordinated punishment for existing crimes called "casino establishment" in the mainland.

The report did not specify the proposed penalties for new crimes, or new penalties for existing crimes for mainland casino installations, or when the proposals would take effect.

But the report highlighted the official criticism of "cross-border gambling," saying it had "seriously damaged the national image and economic security."

The report did not clarify the definition of "cross-border" gambling. Many investment analysts said that Macau, a semi-autonomous region of China and the only place in the country to legalize casinos, is usually not considered a "cross-border" place.

In any case, there have been a number of reports recently showing cross-border capital controls are also tightening between the mainland and Macau, with commentators suggesting that Macau's recovery from the COVID-19 pandemic may have limited its scope for casino gross gaming revenue.

JPMorgan Securities (Asia-Pacific) said in a note on Tuesday following the report that China's legal changes could further cloud the business prospects of junket promoters, which traditionally act as intermediaries for wealthy mainland residents to gamble in Macau and elsewhere.

Analysts DS Kim, Derek Choi, and Jeremy An said, "While the promotion of gambling for overseas casinos has already been understood as illegal by industry participants, a clear ban on these activities will undoubtedly lead to fear among many junket operators and agents. This is because even personal solicitation by [mainland players] may be considered illegal under the reported amendments."

There is currently "uncertainty surrounding potential money flow constraints outside of China" regarding the Macau casino business, according to a Monday memo from brokerage Sanford C. Bernstein Ltd, which covers Macau gaming stocks.

Casino gambling operations or public relations in the form of bricks and mortar are illegal in mainland China, and gambling operations based outside the mainland's borders, including all play within the Macau Special Administrative Region, are illegal, as is direct marketing within the mainland.

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