The 'Red King of Gambling' owes $160 million, and that says everything about China's problems
Shao Dongming is the CEO of Chinese property development company Dongding Investment, and he's one of richest men in Shanghai.
He's also known as the red king of gambling, infamous for going to Macau and making multi-million dollar bets with abandon.
Unfortunately his luck has run out.
Shao is being investigated for corruption in the country's ongoing, far-reaching anti-corruption campaign. Specifically, the government is looking into the $160 million worth of gambling debts he's racked up in Macau. According to reports, Shao refused to pay these debts when his creditors tried to call them in, and he reportedly even threatened representatives of his creditors with bodily harm.
His story is a reflection of a new China.
Two years ago, this probably wouldn't have been a problem, but with a national anti-corruption campaign afoot in China — in which President Xi Jinping vowed to go after lowly "flies" and powerful "tigers" — and Macau's casino industry going through a massive slowdown, there is no longer any tolerance for the red king's excesses.
There's also little tolerance for his pride. A report from China's NDTV noted that Shao bragged that "anyone creating trouble for him would end up in jail." He has close ties to the mayor of Shanghai, and he has held high-level positions within the Communist Party.
No matter. He's still going to get a "stringent inspection," according to the Party.
It's about more than ShaoNow, the fact that Shao's being targeted for corruption is not the only way his case reflects Xi's new China. His investigation may spell more trouble for the country's slowing housing market and show that an already dire situation in Macau isn't getting any better.
Overall, Shao's business has seen better days. Chinese housing is facing its roughest patch since 2011. New home prices fell 5.1% in January from the same time the year before. In December that figure was 4.3%.
Last month, massive property development company Kaisa defaulted, and now $2 billion worth of its assets are frozen. Naturally, having a billionaire property developer under investigation won't help matters.
As for Macau, the fact that Shao's debts are being called in at all is a sign of weakness, especially for the island's high roller segment. Coming off of the worst year since it opened to western casino operators, analysts think that the global gambling hub will continue to slow. Foot traffic is up slightly among retail gamblers, but it's not nearly enough to make up for the loss of high rollers, who've been scared off by Xi's corruption crack down.
Moreover, one would think Chinese New Year would be a boon for Macau, but it hasn't been.
"Based on checks through February 22, we believe Chinese New Year (CNY) revenue trends have been soft to date. Our checks suggest that revenue trends in both the VIP and mass segments have been soft. Notably, there were a number of mass tables empty on the third and fourth days of CNY," wrote Wells Fargo analyst Cameron McKnight in a recent note. "Continue to expect -35% to -45% growth for February."
What's more, reports indicate that the Chinese government is looking to cap the number of visitors to Macau — period. That means the end of the islands massive boom, and the beginning of what McKnight calls a "new normal."
Oh and there's this: "our analysis shows a 95% correlation between Chinese home price growth and VIP volume growth," McKnight wrote in a note.
So if the ship starts to go down, it all goes down together.
Read more: http://www.businessinsider.com/red-king-of-gambling-owes-160-million-2015-2#ixzz3SfEUKrRz