A week after a gambling “experiment” was shut down in Sanya, Hainan, investors in Hong Kong were having meetings on how to pursue their plans to develop casinos in the southern Chinese island, known as the Hawaii of China, despite the set-back.

According to gaming insiders, Jester Bar owned by “the colorful” art, film and real estate mogul, Zhang Baoquan, wasn’t the only operator “licensed” to test the cashless casinos.

Our sources told us that “up to 10 licenses were issued or were about to be issued,” when Jester’s was shut down apparently following a Reuters’ dispatch revealing the activities of the casino bar at the Mangrove Tree Resort World.

Inside the Macau-inspired gaming hall, with 50 tables, punters could play Baccarat, Black Jack, Poker and Sic Bo (Big & Small) enjoying all-purse betting limits ranging from as low as RMB20 to as high as 100,000 at VIP tables. One Mangrove chip costs RMB1, but chips cannot be cashed out, only traded for accommodation, luxury goods, jewelry and artwork for sale at the resort.

When the news broke out, an MDT reporter was vacationing in restive Sanya. Our reporter then visited the hotel, looked around and queried some staff and guests about Jester’s and the “experiment”.

On arrival at the spacious lobby we enquired about the location of the casino bar and a receptionist told us we could not play because “it’s closed – for some reasons.” When asked when it would reopen she said, “We don’t know, my boss says there are some problems. Maybe in half a month.”

When did it close? “Three days ago (Feb 20). Government officials came and checked it.”

That day, Jester’s bar was closed and the entrance cordoned off by red rope, while a signboard read (in Chinese):
1. Closed for renovation.
2. If you still have chips, please go to the bar reception to change them into credit tokens [vouchers to be used in the hotel].
3. If you still have an entrance ticket to the bar purchased on the 18/02/13, exchange it for vouchers/tokens before 20/02/13 17:00.
At that time, brochures promoting the cashless casino were still being handed out at Sanya airport, in Chinese, English and Russian.

A hotel guest from northern China told us “there were mainly customers from the north (in the bar), because local people can’t afford to spend (much money). There were not many people and it is not worth playing: If you lose, you lose your own money and if you win, you can’t bring the money out. You can change it for credit tokens for consumption in the hotel. Northern people come here because we cannot go to Macau.”

People in Sanya may not be able to afford to gamble, but apparently many have been well aware of the “experiment” and the bold government plans.

A taxi driver predicts the bar will open again “because the government wants to develop Hainan to be the first place in China to have gambling. Now, it’s a test run here. They don’t want to announce it now. It’s closed to let things calm down.” He went on to say that it is widely known that “the daughter and the son of some Chinese leaders partially own the hotel.”’
A Shanghainese living in Sanya, surnamed Lin, confirmed the “rumors” that “they want to have a special zone for gambling in China. So Sanya officials are very willing to try gaming here.”

Moreover, he told us, “there are other bars like this in Sanya. I know at least three. The first time I went to one was three years ago. Many people go there. They open and close all the time. Jesters will open again.”

Mr Lin gave yet another reason for the closing of Jesters:

"They closed it because of troubles during a visit by government officials.”

A police officer in Sanya told him that there were some problems at Jesters. “People got drunk and didn’t want to pay. So they were afraid of government officials becoming aware of this trouble. The other bars are in smaller hotels, so they were not afraid and didn’t close.”

A former Galaxy Macau executive, Eric Coskun is managing the casino operations at Jester’s and was subsequently “advised to keep a low profile”. MDT couldn’t reach him or other managers at the hotel for comments as nobody is responding to calls on the Mangrove Tree hotline. 

Hainan is purported to have the most illegal gambling operations in China.

Despite the denials from Sanya’s government stating no gaming operations were ever officially sanctioned “it’s obvious that Zhang Baoquan has had the tacit approval of central government officials, even if only by turning a blind eye on the tycoon’s operations,” a gaming expert told the Times.

Zhang – ranked by Forbes as one of the country’s 300 richest people last year – started to develop the idea of opening a casino bar in 2010 after the State Council decided to promote tourism in Hainan.

The Mangrove Tree Resort World will be China’s biggest resort by the time construction is completed next year. It will have more than 4,000 rooms, a convention hall accommodating 6,000 guests, more than 20 luxury retail shops and facilities including a water park.

On Sanya’s shores other resorts are developing. MGM opened there in February 2012 with “over 4,000 square meters of technologically advanced flexible meeting space” and Caesars is scheduled to open in 2014. “They chose Hainan to commence their foray into China, and the question is, why would American companies such as these open hotels on Hainan? They both appear very sensitive in their statements about emphasizing their non-gaming focus. They doth protest too much, methinks,” said a gaming consultant.
A view of MGM Grand in Sanya and (right) an artist impression of Mission Hills Lan Kwai Fong Haikou

On the northern tip of the island, in Haikou, Mission Hills’ Ken Chu’s partnership with Alan Zeman’s Lan Kwai Fong Group to launch a 5-star hotel-resort answers very directly to why Hainan is a good choice for investment and development in more entertainment options: “Confidence in Hainan’s potential is high, attracting many top property developers; in 2010 46.8 billion RMB was invested – a 62.5% rise compared to 2009.”

Mission Hills Lan Kwai Fong Haikou is a project featuring “not only world-class golf facilities but also international brand-name shopping, natural hot-spring spas, quality dining & entertainment, and local Hainanese culture. This joint venture brings leisure to the next level at China’s favourite tropical destination, setting a new standard for vacation and MICE resorts in Asia.”

A golf course, 300 brand-name shops, 168 spa pools, innumerous international restaurants, a cinema multiplex, more than 1,000 rooms are the major features of the huge property comprising four hotels operated by the Ritz Carlton, Renaissance, Mission Hills and others. 

Construction has already begun with completion expected in the 3rd quarter of 2013.

Investors from Macau, Hong Kong and elsewhere are salivating at Hainan’s tourist dollars. No wonder: In 2011, the Hawaii of China logged 30 million overnight stays, according to official numbers.

For now, Hainan is competing with Hong Kong and Macau more as a luxury retail destination for mainlanders – while gambling legalization is not in view.

However, Wang Xuehong, from the Research Institute for Fiscal Science of the Ministry of Finance, was recently quoted by Global Times saying that “Gaming is not completely forbidden in China.” And that the Chinese government will decide “whether to relax wider gaming based on market development and civil demand.”
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