Snapshot - Strategy & economics

What casino revenues can tell us about Chinese economic growth

Macau is the only place in China where casino gambling is legal. The spending data, therefore, offers an alternative view of moves in the Chinese economy.

18/12/2018

Emma Stevenson

Investment Writer

Schroders

China and other Asian economies have been under pressure recently from trade tensions and softer technology demand. The slowdown in China is reflected by weaker Macau casino receipts, as shown in the chart below.

Chart of China GDP and Macau casino revenues

Macau casino revenues are considered to be a good indicator of consumer income and activity. Macau is the only place in China where casino gambling is legal. The casinos report their revenues on a monthly basis and the data is perceived as reliable. Since the official GDP data from China is viewed with a degree of scepticism, casino receipts can be better at capturing changes in the business cycle.

However, the recent slowdown in casino revenues hasn’t shifted immediate growth forecasts. The Schroders Economics Team had already lowered its 2019 growth expectations for China in August. Emerging Markets Economist Craig Botham explains that this was “to incorporate a full-scale escalation of the US-China trade war.”

He adds “We have, however, altered our expectations around the currency; we now expect a larger depreciation of the renminbi versus the dollar, even in an environment of broader dollar weakness. Combined with expectations on oil and food prices, this leads us to revise our inflation expectations higher for 2019, to 2.6% from 2.4% previously.”

The team forecasts Chinese economic growth at 6.6% for 2018, slowing to 6.2% in 2019 and 6.0% in 2020. Global GDP growth is forecast to slow to 2.9% in 2019 and 2.5% in 2020. This compares to an expectation for 2018 growth to be 3.3%.

For more on the economic picture for 2019, please see Outlook 2019: Global economy

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