China's elite tighten their belts as crackdown bites

China's elite tighten their belts as crackdown bites

HONG KONG - China's big spenders are reining in overt shows of wealth, shelving shopping trips in Hong Kong and Macau gambling sprees in the face of the Communist Party's anti-corruption and frugality drive, analysts say.

President Xi Jinping has launched a much-publicised graft crackdown since taking office last year with a series of high profile takedowns of party officials sending shockwaves through an elite who once did little to hide their prosperity.

A related austerity drive - ordering an end to excessive gift-giving and banquets within the state sector - has also meant officials are wary of popping too many champagne corks.

Fearful of attracting any scrutiny that might lead to a potentially career-ending probe, many of China's most powerful are either tightening their belts or being much more careful about how they spend their money publicly, analysts say.

That shift has been most keenly felt in the Chinese elite's nearest playgrounds of Hong Kong and Macau. But a ripple effect is beginning to have an impact as far afield as the luxury fashion houses of Europe.

"The corruption crackdown shows no signs of slowing down. It has created a lot of concern within the country and as far as I can see a lot of high profile individuals are much more cautious about their overt spending," Steve Vickers, a risk consultant and former head of the Royal Hong Kong Police's Criminal Intelligence Bureau, told AFP.

Recent key indicators of the luxury market in Hong Kong and Macau have shown a noticeable downward trend in areas where China's elite play a key role.

VIPs shunning Macau 

Gambling revenues in Macau have fallen for the second month in a row while retail sales in Hong Kong, a city that many locals complain has become a giant shopping mall for wealthy mainlanders, have been slipping since the beginning of the year.

The dip in Macau's gambling revenues - the first major drop since 2009 following the global economic crash - is particularly stark.

The territory's gambling watchdog, the Gaming Inspection and Coordination Bureau, said casino income dropped by 3.6 per cent year on year in July following a 3.7 per cent dip in June.

Analysts attribute the fall in part to a drop-off in so-called "VIP junkets", organised trips where Chinese high rollers from the mainland blow huge sums of cash on casino floors and in private rooms.

"We believe there is nothing on the horizon to suggest that a VIP recovery is imminent," Union Gaming Research Macau analysts Grant Govertsen and Felicity Chiang wrote in a briefing note shortly after the figures were released.

"To the contrary, the anti-corruption crackdown in the PRC (China) seems to be accelerating / expanding, which in our view should result in continued, although indirect, pressure on the VIP segment."

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