The China Problem

When you read a title like "The China problem" what are you first thoughts? Perhaps concerns about a slowing economy or whether the Chinese central bank is really going to continue to ease. Perhaps you think about whether housing is a bubble, or whether or not the Chinese lower labor cost advantage is really anything more than advanced looking communism that is bound to fail. All are reasonable concerns. But the China problem I am referring to is different, and it lies right here in New York. Only in this case, China is not actually the problem, in fact, it is the solution.

In a throw away line, as if its obvious, Reuters writes " Macau's gaming revenue easily trumps that of Las Vegas" (http://www.reuters.com/article/2012/01/03/uk-macau-revenue-idUSLNE80200620120103) While this might seem surprising to some, it probably is not to anyone who has spent significant amounts of time in casinos. That is because gambling plays a big role in Asian culture. To the Chinese, a particular year or moon might be lucky for gambling. Casinos in America are lined with Chinese players, and it is staggering to see just how many come from the buses in Chinatown, New York. These buses go to Pennsylvania as well as Connecticut casinos; bringing revenues one could only imagine (how much is probably rather difficult to get statistical data on). But one has to wonder, at a time when money is always tight in state and city budgets, how long it can be until New York starts getting a piece of the action?


While gambling is slowly being expanded in New York (at facilities like Aqueduct and Yonkers Raceway) we are still a long way from having a full blown casino. Poker is still not legal, and where gambling is legal, real live (as opposed to electronic) table games are not permitted. But the potential dollars that could be brought in and used to fund programs would probably blow anyone's mind. Keep in mind that the Chinatown economy in New York is almost exclusively cash. It is practically a self sustaining economy that need not put dollars into businesses outside their local street territory. As such, tracking the proper taxes owed by Chinatown residents must be a mere impossibility. But with New York state run casinos, the money from that otherwise underground economy would finally come to New York. And how hard of a political sell could this really be? New jobs anyone?

Chris Christie, the Jersey governor recently decided that he wants to legalize gambling across the state. This is a change from his previous position. While Christie is all about balancing budgets, one can understand why he previously didn't support the notion. Namely, New Jersey has Atlantic City. What will sadly come to be an even more depressed city in years to come, has no shot for survival in this environment. People from New York would rather drive an hour less each way and go to Pennsylvania for a day trip. The new casinos are taking away business that was once exclusively Atlantic City's. It is only a matter of time until AC can no longer stand on its own two feet. So, it appears Christie has chosen to get in front of getting those gambling customers from Northern Jersey and New York in his state, rather than in Pennsylvania.

The gambling movement has been picking up a lot of steam lately. There is money to be collected. New York is sitting on a gold mine (even as the gold mining stocks under-perform) right in its backyard. Let's see how long it takes until they tap into it.