Can Macau replace Hong Kong as global financial hub?

January 10, 2020 18:16
Compared to Hong Kong, which is roiled by months of anti-government protests, Macau enjoys a far greater degree of social stability. Photo: Xinhua

Last month, President Xi Jinping paid an official visit to Macau to celebrate the 20th anniversary of the city’s handover to Chinese sovereignty.

Meanwhile, mainstream media outlets on the mainland were promoting Macau's achievements over the past two decades in a high-profile fashion.

Even before Xi's visit, there was a news report, citing sources, that the central government intended to develop the former Portuguese enclave into a new global financial center.

But can Macau really replace Hong Kong as a new international financial hub?

First, let's take a closer look at Macau’s socio-economic structure.

Its decades-long social stability is, to a certain extent, a result of the huge income brought by the gambling industry to the city over the years.

However, there are both advantages and disadvantages with this single-industry development model.

Since 80 percent of the revenue of the Macau SAR government comes from the gambling industry, the city’s economic structure is very homogeneous, thereby imposing constraints on its development in other aspects.

As far as the development of the financial services industry is concerned, Macau lacks the necessary support measures, not to mention its inadequate laws in regulating financial products and talent, for example.

So based on the city's current conditions, it would be rather difficult for Macau to become a new international financial center in the short run, let alone replace Hong Kong.

Nevertheless, Macau offers some useful lessons for Hong Kong, such as its untiring efforts at perfecting its legal system and framework in relation to the implementation of the Basic Law, improving the livelihood of its people, and enhancing its economic development.

Patriotic sentiment

In particular, Macau has done a very remarkable job in cultivating an awareness and appreciation of the legal system among its citizens, especially the importance of the constitution and the Basic Law.

And thanks to the SAR government’s sustained efforts, the patriotic sentiment among the people of Macau and their love for their city have provided a strong foundation for good governance. They understand the vital importance of pursuing the city's development and enhancing the quality of life.

Macau is currently ranked second after Qatar in terms of per-capita gross domestic product. In 2018, its GDP per capita exceeded US$122,000, almost twice as much as that of Hong Kong.

Undoubtedly, the gambling industry has remained a stable and lucrative income source for the Macau government and a strong fiscal pillar that supports the city’s expenditures in healthcare, education and elderly care.

So for the time being, the gambling industry is irreplaceable in Macau.

Yet in order to enhance the diversity of its economy, Macau in recent years has been stepping up its investment in the tech sector and fostering the growth of other high-value-added industries.

The government has also continued boosting housing supply mainly through massive land reclamation projects in order to meet rising demand.

Although both Macau and Hong Kong, now governed under “one country, two systems”, used to be Western colonies, and their populations are overwhelmingly native Cantonese speakers, the aspirations and mindsets of their people are quite different.

For example, while the people of Hong Kong like to fight for such abstract values as democracy and freedom, Macau citizens are more inclined to pursue endeavors that bring practical benefits.

Policy initiatives

And unlike in Hong Kong, over the years the policy initiatives proposed by the Macau government have rarely provoked any widespread controversy in society.

Macau, for example, has already enacted Article 23 of the Basic Law and passed its own national security legislation in 2009.

And ever since social disputes arising from the proposed retirement packages of top officials in 2014, Macau hasn’t witnessed any large-scale protests on its soil.

By contrast, seven months into the anti-extradition bill saga, Hong Kong appears to have become a “society of social movements”.

This might seem a good thing for the development of civil society and democracy, but at the same time, the endless protests have also disrupted the normal operation of society and taken a heavy toll on our rule of law and freedoms.

As such, from Beijing’s perspective, facilitating Macau’s development with great effort might help it hedge against the risks in Hong Kong.

After all, just as the late paramount leader Deng Xiaoping once remarked, build a few more Hong Kongs.

This article appeared in the Hong Kong Economic Journal on Dec 28

Translation by Alan Lee

[Chinese version 中文版]

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Chen Xiaofeng, Doctor of Juridical Science