Tim Zhang, a 24-year-old Macau native, quit his job at the Chungwa (Macau) Financial Asset Exchange in July to study for a master’s degree in finance at a university in Sydney.

Disillusioned with a lack of exciting opportunities at home, his plan was to improve his CV in preparation for finding himself a good finance job overseas.

But his plans have changed.

“Now I will probably go back to work for my former employer,” said Zhang.

He feels a fresh sense of excitement about the city’s prospects after Beijing recently announced a raft of policies aimed at developing Macau’s financial industry.

“Over the years, Macau has just focused on gambling, tourism and resort development. The economic base is too narrow. For young people like me, who focus on finance, we did not see any prospects other than joining traditional banks,” said Zhang.



“The new policies create new hopes and opportunities for the new generation and for the city.”

President Xi said on December 20 that his government supported the former Portuguese colony with its goals of developing into a service platform for commercial and trade co-operation between China and Portuguese-speaking countries, and of becoming a world centre for tourism and leisure.

Ending his three-day visit to Macau to mark the 20th anniversary of its return from Portuguese to Chinese rule, Xi said the government of Macau should moderately diversify its economic development and seize the opportunities of the Belt and Road and Greater Bay Area initiatives.

He highlighted cooperation with the Zhuhai city government to develop Hengqin Island as this would provide long-term development potential for the city.

Ever since its return to Chinese sovereignty in 1999, the former Portuguese colony has been trying – with no shortage of prodding and cajoling by Beijing – to diversify its economy away from its reliance on gambling to focus on tourism, financial services, entertainment and cultural events.

After the handover on December 20, 1999, the Macau government’s long-term plan was to use revenues from tourism and gaming to help boost the cultural and creative scene, as well as other industries in the city. But in the absence of a comprehensive plan, the government spent a rather long time exploring the possibilities.

It wasn’t until September 2016, in its first five-year development plan, that the government of the Special Administrative Region (SAR) formally embraced a long-term policy to change the make-up of its gambling-focused economy. The strategy involved accelerating growth of its convention and exhibition industry, cultural and creative offerings, and taking its role as a service provider for business co-operation between China and the Portuguese-speaking countries to a new level.

It has called for casino operators to focus on non-gaming elements such as hosting conferences and cultural events in their casino and hotel establishments.

Now the question is whether the latest incentives announced by the Chinese President will prove sufficient to turbocharge the city’s transformation.

On the same day as Xi’s speech, China’s banking and insurance regulator unveiled a raft of policies to increase financial cooperation between the Chinese mainland and Macau.

Macau banks are encouraged to set up branches in the mainland, and mainland insurance capital can invest in Macau, the China Banking and Insurance Regulatory Commission said in a statement.

Additionally, mainland Chinese finance firms will get support in expanding into Macau, the statement said.

On December 18, the first day of Xi’s visit, the People’s Bank of China announced it would raise the daily limit of individuals’ remittances from Macau to mainland China to 80,000 yuan (US$11,412) from 50,000 yuan to facilitate cross-border trade. The following day, the central bank said it would allow Macau payment apps to be used in the Greater Bay Area.

“I’m very positive long-term on Macau,” said Lawrence Ho Yau-lung, the chairman of US-listed Melco Resorts & Entertainment. He said strong casino performances coupled with accelerating diversification, means the city is on a promising trajectory that has already seen it winning tourism dollars from rival resorts across the region.

Macau’s economy has grown rapidly in the last two decades, and is now nearly nine times its size at the time of the handover in 1999. The main contributor to this impressive growth has been the gaming sector, which accounted for about 50 per cent of overall economic activity in 2018, up from 30 per cent in 1999, according to international ratings agency Fitch.

Macau’s is one of only two governments globally rated by Moody’s to be saddled with no debt, the other being the Isle of Man, a self-governing British Crown dependency in the Irish Sea between Great Britain and Ireland.

Macau recorded large fiscal surpluses from the early 2000s through to 2014 because of a boom in the gaming industry. Last year, its surplus was equal to 13.4 per cent of its nominal GDP of US$54.5 billion.

According to figures from the IMF, the casino hub will overtake Qatar to have the highest per-capita gross domestic product in the world next year. At US$86,355 Macau’s GDP per capita is 77 per cent higher than Hong Kong’s at US$48,717.

But now Macau, the world’s largest gambling hub, is heading towards its first annual revenue decline in three years, hit by lacklustre demand from high-rolling mainland Chinese gamblers whose enthusiasm has been dampened by slowing economic growth in China. Gross gaming revenue was 22.9 billion patacas (US$2.8 billion) in November, down 8.5 per cent from a year earlier, according to data from the Gaming Inspection & Coordination Bureau.

Ho believes diversification is the right move to revive growth, and said his company has long been turning its casinos into lifestyle, leisure and entertainment resorts.

“I started Melco in 2004, and it was all the way back then that I saw the opportunity for Macau to start diversifying away from gaming. That’s why we started building resorts that deliver incredible entertainment, world class hospitality, and unique retail,” Ho told the South China Morning Post in a written reply to questions.

Melco won one of the six casino licenses issued by the government of Macau when it liberalised the gaming market in 2002, breaking the monopoly of SJM Holdings, controlled by Lawrence’s father, Stanley Ho Hung-sun, dubbed the “King of Gambling”.

Within its resorts, just 5 per cent of its floor space is dedicated to gaming. “And the 95 per cent that surrounds it is already incredibly diversified,” said Ho.

He said the company works with some of the world’s most creative minds to deliver fresh new activities and attractions such as “The House of Dancing Water”, the world’s largest water-based extravaganza.

Macau has begun to make its mark in non-gaming sectors, according to Ho.

For example, Macau qualified for the first time for the 2020 IKA Culinary Olympics in Stuttgart, the world’s most prestigious and hard-fought competition for chefs. Melco, which operates six Michelin-starred restaurants, will be the representative.

“Macau will continue to take on more interesting roles within the Greater Bay Area. The creation of a yuan-denominated stock exchange in Macau is an interesting prospect, especially as it’s most likely to carve a niche for itself in focusing on companies from Portuguese-speaking countries, meaning it’s complementing the Greater Bay Area, not creating competition for its neighbours,” said Ho.

The Greater Bay Area refers to Beijing’s plan to link Hong Kong, Macau and nine cities in southern China to form a huge economic powerhouse.

In October, a Chinese official who oversees economic affairs revealed that a plan to set up a yuan-based stock exchange in Macau has been submitted to the central government, according to local media reports.

Neither Xi nor the Chinese government revealed any further details during the 20th anniversary celebration. But a day after Xi’s visit, the official Securities Times reported that the Guangdong provincial government had been working closely with Macau authorities to speed up the process to establish the stock exchange, which analysts expect could be a major breakthrough for Macau.

Patrick Rozario, managing director of accounting and advisory firm Moore Hong Kong, whose family is from Macau, is optimistic about the outlook.

“There would be a lot of companies interested in raising funds in Macau by offering stocks or bonds. These would include companies in the Greater Bay Area as well as those from Portuguese-speaking countries which need to raise funds to build up their infrastructure projects,” said Rozario.

Nine Portuguese-speaking countries have issued 861 bonds globally to raise a combined US$314.24 billion between 2014 and 2019, according to data from Refinitiv. They are Brazil, Portugal, Angola, Cabo Verde, Equatorial Guinea, Guinea-Bissau, Mozambique, Sao Tome and Principe, and East Timor.

There were 29 new stock offerings from these countries, raising a total of US$17.24 billion during the same period.
If these offerings were carried out in Macau, it would be very good for business, Rozario said.

It is not the first time Beijing has pushed for Macau to diversify away from the casino industry.

When it celebrated the 15th anniversary of its handover to Chinese rule in 2014, President Xi was widely reported by state media to have called for Macau to focus on building a global tourism and leisure centre. His urge for diversification came as the city was struggling under his own pervasive anti-corruption campaign, which had all but stopped high rollers visiting from mainland China.

In the same year, Beijing looked into the possibility of establishing a financial trading platform in Macau, with representatives of the State-owned Asset Supervision and Administrative Commission visiting the city, according to the Chungwa (Macau) Financial Asset Exchange’s official website.

The Chungwa (Macau) exchange, Zhang’s former employer, was formed in August last year to help Macau to become the new engine of economic development for the bay area, providing financial services to facilitate business between China and Portuguese-speaking countries, its official website says.

Chungwa (Macau), controlled by state-owned Namkwong (Group), was the only bookkeeping and service provider for the Ministry of Finance’s issue of two billion yuan of national bonds in Macau in July this year.

Economists and investors believe the new policies this time round will speed up the development of the city, though it would need a big revamp of its regulatory and legal systems to support the plan.

Macau currently has 12 local banks and 18 branches of lenders from other jurisdictions. These include the big four Chinese stated-owned banks, the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China. There are also subsidiaries and branches of Hong Kong banks, as well as lenders with Portuguese, Singaporean and Taiwanese parents.

Bank of China Macau Branch is the largest bank, with a market share of nearly 40 per cent.

Most of them offer retail and commercial banking services. No big investment banks have an office there.

Fitch expects the development of the bay area to provide lending opportunities to support the growth of Macau’s banks.
However their high exposure to mainland China, at 41 per cent of total assets, poses a big risk to the banking system, said Savio Fan, associate director, financial institutions, at Fitch.

“Macau has a sound legal system, which is under Portuguese laws. It promotes free trade and offers low tax rates. It can be turned into a financial hub but on a smaller scale than that of Hong Kong,” said Richard Yue, co-founder of Arch Capital, a Hong Kong-based real estate private equity management company.

His company bet its first major investment on Macau in 2006 with a residential project called One Oasis, a 4,500 unit development in the Cotai South of Macau close to the Cotai Strip and Hengqin Island. The company has reaped property sales of HK$25 billion over the past 13 years.

“But labour shortage is an issue,” said Yue.

With a population of just 675,000 and an area of 32.9 square kilometres, Macau is the smallest of the 11 bay area cities.
“Macau, by the nature of its physical size is limited in certain growth areas, so Hengqin Island (in Zhuhai) is an important opportunity to relieve some of the existing pressure around business expansion,” said Ho of Melco.

“I would like to see it become a test bed for next generation entrepreneurs, of which there are many locally. Hengqin would be the perfect place to incubate and support their growth.”

Xi, speaking at a ceremony marking the handover anniversary, said Zhuhai will join hands with Macau to develop the leisure and recreation industry on Hengqin Island.

Following Xi’s speech, the State Administration of Foreign Exchange (SAFE) issued policies and measures relaxing restrictions on raising debt and eased currency restrictions for Hengqin-Macau enterprises. Beijing will simplify the payment and remittance application procedures for these enterprises.

Hengqin, which is three times larger than Macau, is seen as the next phase of Macau’s growth story, said Yue.

“Ongoing policy efforts aimed at further developing Macau’s financial industry could be viewed as complementary to Hong Kong and other parts of the Greater Bay Area, rather than propelling direct regional competition,” said Andrew Fennell, director of sovereigns at Fitch.

Hong Kong has a history of almost 130 years of operating a stock market while Macau would now be starting from scratch. It would take a long time for Macau to develop its whole financial system and to expand its yuan pool to prepare for a stock exchange, said Clement Chan Kam-wing, managing director of accounting firm BDO.

For Zhang, the small size of his hometown is not an issue. As he counts down the remaining days to his return, he is excited and hopeful.

“It does not matter how small Macau is. If we can build up a well established platform for financial services, it can attract non-Macau investors and international companies to come in,” he said.