Macau, the only place in China where folks can go and legally gamble away their money, and one of the most convenient places where they can illegally siphon money out of China and send it to destinations beyond the reach of the government – is it on the way to ruin?

Until last year, it was an awesome ride. In 2001, Macau permitted foreign casino operators to set up shop. In 2002, Macau blew past Las Vegas as the number one gambling destination in the world. Even during Financial-Crisis year 2009, Macau gaming revenues rose 9.6%. They’ve been a thermometer into China’s economic boom.

The first few months last year promised the same relentless glory. In February, gaming revenues soared 40.3% year-over-year to a record of 38.0 billion Macau patacas ($3.76 billion), according to the Gaming Inspection and Coordination Bureau (DICJ). But in the second half, all heck broke loose. VIP revenues, which used to account for 66% of total revenues, plunged. Increased marketing to regular folks with not much money to lose couldn’t fill the hole.

The year culminated with a “shocker” December, when revenues plummeted 30.4%, the worst decline in the history of the data going back to 2002. Gaming revenues for the year fell 2.6% to 351.5 billion patacas ($44 billion), the first annual revenue drop in the history of the data.

In January, revenues dropped 17.4%. All hopes were on February, the month of the Lunar New Year, which in 2014 had produced spectacular results. But revenues plunged 48.6% – worse even than the record plunge in December – to 19.5 billion patakas. It was the ninth month in a row of collapsing revenues, beating the financial crisis record of seven months.

This is what that series of events looks like:

In an ironic – and by now typical twist – it was “leaked” a few days ahead of time that gambling revenues in February would plunge “50%.” The figure was picked up by the business media around the world, which set investor expectations. When the actual revenue plunge of 48.6% was published today, it beat expectations, so to speak. As a result, shares of the beleaguered Hong Kong-listed casino operators jumped initially (before giving up some of the gains during the day).

This is what it looks like when three-and-a-half years of surging revenues just dissipate, dropping to the lowest level since January 2011:

For the mainland Chinese, that’s a good thing. Macau’s gambling revenues are their losses.

For Macau, which depends on gaming revenues for its budget, it’s not such a great thing. Casino operators have been getting slammed. Junket promoters see their business model threatened. They’re commissioned by casinos to entice VIPs to Macau, and they do so by offering a variety of services, such as evading China’s currency controls. And these services are now being targeted by the Chinese government.

The reasons changed with the gravity of the situation. In June, the soccer World Cup was blamed. In July, it was the investigation of Zhou Yongkang, former head of state security, the most senior guy at the time to get tangled up in China’s corruption crackdown. VIPs were having second thoughts, apparently. In August, the blame hit Taipei’s District Prosecutors Office that had indicted the Taiwan branch of Macau casino operator Melco Crown Entertainment for alleged violations of banking and foreign-exchange laws.

New reasons bubbled up every month: pro-democracy protests in Hong Kong; Macau’s tighter visa regulations; new curbs on the UnionPay credit card which mass-market gamblers use to get around China’s currency controls. Then there was the smoking ban in casinos. In November, it was reported that Hong Kong had launched a money-laundering investigation into Cheung Chi-tai, one of the largest shareholders in VIP junket operator Neptune Guangdong Group, and seven of his closely held companies. This too shook up VIPs, it was said. In December, they cited President Xi Jinping’s visit to Macau.

But no economy dependent on one activity can survive that sort of revenue plunge for long without making serious adjustments. So what kind of adjustments? A number of multi-billion dollar casino projects are under way, and now the hope is that regular Chinese with little money to lose can somehow make up for the VIPs that have been sacred away by the corruption crackdown. This will be a tough slog.

The crackdown is real. It is impacting business in China. It is making wealthy and powerful Chinese nervous. But VIPs may have another reason to stay away: The property sector, a disproportionately large part of the Chinese economy where many of these VIPs made their highly leveraged fortunes, is crumbling. Property prices are dropping. Developers are getting in trouble. And this might ruin their remaining appetite for junkets to Macau.

China has long frustrated the hard-landing watchers. But maybe not much longer. Read… Housing Crash in China Steeper than in Pre-Lehman America

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