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By KATE O'KEEFFE And ALEXANDRA BERZON

The Chinese unit of U.S. gambling giant MGM Resorts International has won approval from the Macau government to build a second casino in the world's largest gambling center.

Macau's six casino operators, including MGM's fellow Nevada-based companies Wynn Resorts Ltd. and Las Vegas Sands Corp., are battling to expand their foothold in the Chinese territory, which now earns about six times the gambling revenue of the Las Vegas Strip. A greater share of Macau's casino market is crucial with annual revenue growth in the territory beginning to slow–in 2012 gambling revenue rose 14% compared with the 42% growth seen in 2011–and access to labor and gambling tables remaining restricted by the government.

Shares of MGM's Hong Kong-listed unit MGM China Holdings Ltd. were trading 5.1% higher at HK$15.58 (US$2) at the midday break, against a 0.4% rise in the benchmark Hang Seng Index.

Wednesday's government approval is "a very important milestone in the project's development timeline and likely came sooner (perhaps significantly sooner) than investor expectations," wrote Union Gaming Group analyst Grant Govertsen. He said MGM China's Cotai project is conservatively worth about HK$3 per share, representing 20% upside to Tuesday's closing price of HK$14.82.

MGM's 17.8-acre site in Macau's up-and-coming Cotai area is designated for a complex including a five-star hotel, gambling space and open areas, according to a Wednesday announcement in the territory's official gazette.

MGM China reiterated in a statement that the resort, with a budget of $2.5 billion, will include approximately 1,600 hotel rooms, 500 gambling tables and 2,500 slot machines as well as restaurant, retail and entertainment offerings. Construction, for which the company still needs government approval, is expected to take up to three years.

Preliminary drawings of the casino resort seen by the Wall Street Journal featured towers designed to look like stacks of patterned Chinese jewelry boxes.

MGM owns 51% of its Macau subsidiary, which developed the MGM Macau casino. That property opened in 2007 and accounts for about 10% of Macau's gambling market. The Macau venture is a partnership with Pansy Ho, a daughter of tycoon Stanley Ho, who once enjoyed a monopoly in the Chinese gambling enclave.

The Cotai project will be MGM's first casino development since 2009 when it opened CityCenter, a massive $9.2 billion resort in Las Vegas. The company is also hoping to win approvals to build casinos in Maryland and Massachusetts.