The United States has officially classified Macau and Hong Kong as “foreign adversaries,” placing them alongside nations such as Russia, North Korea, Cuba, and Venezuela.
This designation, made under the section 4 “America First Investment Policy” signed by former President Donald Trump on February 21st, marks a significant shift in US foreign relations.
The policy underscores the link between economic security and national security, signaling that the US government could impose restrictions on capital investment in these newly designated adversary regions.
Macau has attracted several major American operators, including Las Vegas Sands, Wynn Resorts, and MGM Resorts International. These companies have played a key role in transforming the once traditional Oriental casino town into the world’s largest gaming market.
The influx of foreign investment began after China ended its 40-year gaming monopoly in 2001, with sector liberalization starting in 2002. Despite ongoing Sino-US tensions, these American operators continue to thrive in Macau, which remains heavily reliant on their tax contributions.
As for Hong Kong, also classified as a “foreign adversary,” it remains a key financial center where many of these gaming operators are listed on the Hong Kong Stock Exchange.
Short-term and long-term effects on Macau’s investment climate
In an interview with AGB, Sonny Lo, a commentator and political scientist, noted that the “America First Investment Policy focuses 90 percent on Chinese investment within the US.” However, he pointed out that the memorandum only briefly addresses investment in “foreign adversaries,” and many of the details have yet to be realized through law or administrative measures.
Lo suggests that, in the short term, the policy will not lead to drastic changes in Macau’s investment climate. However, he sees “a lot of uncertainty” in the long run, as the concrete policies of the US government remain unclear. He emphasized that while the memorandum has been signed, it is still a policy outline that requires implementation through actual law or administrative action.
Lo also notes that changes may occur in US policy, but countermeasures could be implemented by China, potentially impacting Macau. In this context, Lo predicts that “China will likely wait to see how the US moves before deciding how to respond.”
Although Trump’s new policy primarily focuses on restricting Chinese capital investment in high-tech and military-related industries in the US, it also limits American capital from investing in similar industries in China or its affiliates. This has little direct connection to Macau’s industries. However, Lo outlined several potential impacts on Macau that may emerge in the wake of the policy:
- Tighter Reporting Requirements: Under Trump’s leadership, the US may introduce stricter reporting requirements for American investments in “foreign adversary” countries and regions, including Macau.
- More Rigorous Auditing: The US could increase the scrutiny and auditing of these investments, potentially affecting both the financial and operational aspects of the companies involved.
- Tax Implications: Increased auditing could lead to higher taxes for businesses operating in adversary countries, adding financial pressure on American companies.
- Fund Flow Restrictions: After collecting profits from investments in these regions, the US could impose additional restrictions on the flow of funds, making it more challenging for companies to repatriate capital.
Although it is still early to foresee the possible consequences, it is worth noting that many top casino executives in Macau, including those with US parent companies, hold political roles in the Chinese People’s Political Consultative Conference (CPPCC), adding an additional layer of complexity to the situation. This could potentially increase scrutiny of their operations, partnerships, and personal activities.
Since the news broke last week, however, there has yet to be a comprehensive analysis of the risks these connections pose to businesses operating in Macau.
Robert Glen Goldstein, Chairman and CEO of Las Vegas Sands, met with Wang Shouwen, Vice Minister of Commerce, in January this year to discuss expanding investments in China. However, it remains uncertain whether the latest developments regarding US policy will affect Sands China’s future investment decisions.
Additionally, Miriam Adelson, widow of the late Sheldon Adelson and a significant donor to pro-Trump super PACs, remains a close ally of Donald Trump. Her political contributions highlight the intersection of US politics and Macau’s gaming sector, given her affiliation with Las Vegas Sands. She donated $95 million to her pro-Trump PAC, Preserve America, positioning herself as one of the largest donors in the current election cycle.
