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Data: YCharts; Chart: Axios Visuals

Macau casino stocks imploded Wednesday on news that gaming companies on the island are now squarely in China's regulatory crosshairs.

Why it matters: Macau historically operated at arm's length from Beijing, developing a reputation as a Wild West not only for casino gambling but also for money laundering and loan-sharking.

  • Now, the Chinese Communist Party apparently wants to rein in Macau's excesses even more than it already has.

What happened: Gaming licenses in Macau, which will expire in June 2022, are undergoing an expected renewal process. What was unexpected was Macau officials announcing a review of how the gaming industry is regulated. The process includes a 45-day consultation period starting Sept. 15.

  • “Among the topics being covered: how many licenses — known locally as ‘concessions’ — will be allowed, how long their terms will be, and the level of supervision by the government,” Bloomberg reports.
  • Shares of Sands China and Wynn Macau tumbled by a third amid the prospect for tighter regulation. Las Vegas Sands, MGM Resorts International and Wynn Resorts International also traded lower.

The big picture: China is unlikely to do to Macau gamblers what it did to teen gamers. There are still going to be casinos on the island — and they are still going to be owned largely by foreign companies.

  • Investors are worried, however, that Sino-American geopolitical tensions will result in U.S. operators being penalized, either by being forced to lower their profit margins or by being forced to partner with Chinese companies.

What they’re saying: "Fear of the unknown is the dominant narrative,” Deutsche Bank analyst Carlo Santarelli wrote on Wednesday. "Investors have taken note of other sectors in China that have been hit hard by Government intervention and increasing control.”

The bottom line: Investors are acutely aware that the Chinese government sees capitalism and profit as a means to an end, rather than a goal in itself.

  • The CCP has already made it a lot harder for Chinese people to gamble in Macau. This week's announcements suggest that process is far from over.

Go deeper: Ex-intel officials claim antitrust could hurt U.S. in China tech race

Go deeper

The China whisperer

Nick Burns. Photo: Chen Mengtong/China News Service via Getty Images

President Biden's nominee for ambassador to China will face aggressive questioning Wednesday about the most important, and potentially perilous, bilateral relationship in the world.

Why it matters: While Nick Burns is an experienced diplomat with support on both sides of the aisle, lawmakers want to use his confirmation hearing to force the administration into some tough positions on China.

30 mins ago - World

Biden's ambassador nominee: "China is not an Olympian power"

Nick Burns testifying before the Senate Foreign Relations Committee. Photo: Sarah Silbiger/Bloomberg via Getty Images

President Biden's nominee to serve as ambassador to China delivered a stark assessment of the challenges the U.S. faces in confronting Beijing, but stressed that the rising superpower is "not all-powerful" and the West retains "substantial" advantages.

The big picture: Nicholas Burns, a retired career diplomat and former U.S. ambassador to NATO, used his confirmation hearing Wednesday to echo the growing bipartisan consensus that China poses "the greatest threat to the security of our country and the democratic world" in the 21st century.

Scoop: U.S. and Israel to form team to solve consulate dispute

Secretary of State Antony Blinken (left) and Israeli Foreign Minister Yair Lapid (right) meet in Washington. Photo: Andrew Harnik/Pool/AFP via Getty Images

The U.S. and Israel are planning to form a joint team to hold discreet negotiations on the reopening of the U.S. Consulate in Jerusalem, Israeli officials say.

Why it matters: The consulate handled relations with the Palestinians for 25 years before being shut down by then President Donald Trump in 2019. Senior officials in Israeli Prime Minister Naftali Bennett's government see the consulate issue as a political hot potato that could destabilize their unwieldy coalition.

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