“Macau egg tarts taste better than those in Hong Kong.”
Wang Guangya (王光亞), chief of the Chinese State Council’s Hong Kong and Macau Affairs Office, made those much-publicized remarks during a visit to the former Portuguese colony in 2011.
We can assume that the mainland official was not merely talking about pastry.
One year before Wang’s visit, the Macau legislature enacted Article 23 -– a clause related to national security — of its Basic Law, the same legislation that has been on indefinite hold in Hong Kong.
Former Chinese president Hu Jintao (胡錦濤) was never short of words of praise for Macau, hailing it for ensuring social harmony and for its “sense of responsibility in safeguarding national security”.
His successor Xi Jinping (習近平) visited Macau at the end of last year as the territory marked the 15th anniversary of its return to Chinese rule.
During the trip, which came amid the Occupy movement in the neighboring special administrative region, Xi made a negative reference to Hong Kong in a speech, admonishing the city for not doing enough to fend off “meddling by overseas forces”.
Apparently Hong Kong is a naughty kid in the eyes of Beijing, unlike Macau.
On top of its status as a gambling haven, Macau is much favored by Beijing for its docility.
The former Portuguese enclave once grabbed the global limelight due to its economic feats, in particular when its per capita gross domestic product shot to the world’s top levels in 2008.
The achievements prompted some Communist Party mouthpieces to draw comparisons with Hong Kong and paint the latter in a negative light.
The same logic was applied when the party organs denounced Hong Kong’s civil disobedience movement last year, saying the Occupy campaign could make the city become “a laughing stock worldwide”.
But now, Macau has lost its former glory as its economy has been in a downslide since late 2014, with the situation becoming even worse this year. Economic growth is in a free fall with GDP shrinking by almost a quarter in the first three quarters.
The plight was a result of the territory’s sagging gambling revenues which fell 35.5 percent in the first ten months of this year. Casinos are Macau’s only pillar industry, contributing half of the GDP and employing a fourth of the entire labor force.
Some blame China’s worse-than-anticipated slowdown for Macau’s woes, but given Beijing’s all-out stimulus to shore up growth at home, things shouldn’t have been so bad in the special administrative region.
The only sensible explanation for the downturn in Macau’s gaming industry is the mainland’s graft-busting drive, which has wiped out much of the sheen that the territory had built up over the years.
Is there any other place that has suffered a recession comparable to that of Macau?
Yes, there is one — Las Vegas.
In the thick of the financial tsunami, the American gambling capital, whose population is almost similar in scale to that of Macau, saw its GDP tumble by 11 percent, jobless rate soar to 14 percent and average home price fall by half in 2010.
Though its gambling revenues also plunged almost 40 percent during the period, Las Vegas’ diversified industries helped it sail through the crisis, while Macau is still nowhere near the end of the tunnel.
One basic fact about Macau is that counting on one single sector for growth is not only rare but also risky. The economy can ride on shadowy money from the mainland, but a meltdown will be around the corner whenever there is a shift in politics or macroeconomic fundamentals.
Now we know that the Macau model, which has long been applauded by Beijing, is inherently vulnerable. Hence, Hong Kong’s vigilance against becoming another Macau is totally justified.
Both Hong Kong and Macau faced the “hollowing out” effect on their manufacturing sectors amid sweeping economic integration with China. But when Hong Kong embarked on its path toward a financial hub, Macau relied solely on gaming, a strategy, as it turned out, has meant that the city has gambled away its future.
In the good old days like in the second quarter of 2004, Macau’s GDP ballooned by more than 50 percent – almost unseen in modern history – after Beijing lifted the floodgate of dirty capital as it allowed private business owners, once categorized as bourgeoisie in Marxism, to join the Communist Party.
Many of them flocked southward to Macau to whitewash their money, which in turn distorted the local economy.
One wonders who is now a laughing stock when Macau, a “patriotic and obedient” SAR that Beijing wants to be a role model for Hong Kong, finds itself in an abyss of economic ruin.
This article appeared in the Hong Kong Economic Journal on Dec. 3.
Translation by Frank Chen
[Chinese version 中文版]
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