Analysis | Macau casinos might be fertile ground for digital yuan

Macau might have an important role to play in the launch of China’s digital yuan if the city’s casinos adopt the currency instead of the Hong Kong dollar, according to analysts.
China is accelerating the launch of the digital yuan in the Greater Bay Area with a special pilot in Shenzhen.
Last week, Shenzhen issued 10 million yuan worth of digital currency to 50,000 randomly selected residents who applied from a pool of more than 1.91 million.
Issued and managed by the central bank, the digital currency is an electronic form of the renminbi. It’s meant to supplement third-party payment apps like WeChat Pay and Alipay in a country that has already accepted e-payments as the norm.
Beijing previously announced that it wanted to roll out the digital currency in the Greater Bay Area as a pilot program, with various municipalities taking part. Some analysts are suggesting Macau might get a highlighted role if the currency is rolled out in casinos.
The digital yuan “is a very elegant solution to a lot of grey areas in Macau,” according to gaming analyst Ben Lee, managing partner of IGamiX Management & Consulting, who believes that recent developments in e-commerce have been clearing the way for the digital currency.
“Macau is already prepared for the digital yuan. We have been socially-engineered to accept digital currency, but [only recently and] the speed of that conversion is really surprising.”
“It doesn’t make sense for Macau to be a clearing center for renminbi without the involvement of the gaming industry,” rationalized Lee. “When you look at the volume [of transactions] in the gaming industry, you see that there is no gravity of transactions in Macau outside of the casinos.”
Lee also believes it is inconvenient for patrons to need to convert their yuan into Hong Kong dollars just to gamble in Macau, and then convert it back again when they cash in. “Historically, the Hong Kong dollar was the default gaming currency, but that hasn’t been the case for the past two decades,” he said.
Asked when the digital currency might be introduced, Lee said, “speculatively, I would say that it makes sense for it to [coincide] with the new concessions in 2022.”
Economist Albano Martins also believes that casinos in the Macau SAR would readily accept the digital currency “as long as some entity guarantees it,” in this case the Chinese central bank.
Swapping out Hong Kong dollars for Chinese yuan shows just how dependent the Special Administrative Regions of China have grown on the mainland, he said. Although the city has historically relied on the Hong Kong dollar, many of the reasons for that dependence are already fading.
Another economist, José Sales Marques, agreed that this shift reflects the diminishing importance of Hong Kong to Macau’s economy.
Today, “the Macau economy depends mostly on the gaming and tourism businesses [that cater to] visitors from Guangdong Province. Hong Kong is still important as a traditional market for Macau, but things depend more on the wider area [of Guangdong],” said Sales Marques.
“Things have been developing in this way for a long time. Guangzhou may remain the political capital of the province, but the economic core is moving away from Hong Kong and toward Shenzhen,” he added.
President Xi Jinping was in Shenzhen yesterday to mark the 40th anniversary of the city’s designation as a special economic zone, China’s first under the innovative model designed by Deng Xiaoping. There he envisioned a second era of technical reform, once again kicking off in the southern city known for financial services and high technology.