Macao is at an exciting point in its economic evolution. Over the past 25 years, the Special Administrative Region (SAR) of China has transformed itself into one of the most prosperous and economically stable territories in the world. Gross domestic product (GDP) per capita surged by 334 percent between 1999 and 2023, official data shows. And according to Global Finance’s 2024 wealth rankings, Macao has the highest GDP per capita of any territory bar Luxembourg when taking differences in living costs into account.
By the end of 2024, the International Monetary Fund expects the SAR’s GDP to have grown by 13.9 percent year-on-year (that’s three times more than its prediction for the global average). Add an extremely low unemployment rate, minimal inflation, zero external debt and strong fiscal reserves, and you have an economic success story underscoring the successful practice of the ‘One Country, Two Systems’ policy. This has been in place since the Chinese government resumed the exercise of sovereignty over Macao.
The city’s progress is the result of many factors, including growth in the gaming and tourism industry, which the government was quick to liberalise in the early 2000s. With a new focus on economic diversification, this forward momentum looks set to continue as the SAR celebrates its 25th anniversary.
Tai Kin Ip, director of Macao’s Economic and Technological Development Bureau (known by its Portuguese initials DSEDT), says diversification is crucial to Macao’s ability to “sustain long-term growth”. He also notes that a key part of the SAR’s diversification plan lies in “coordinated development” with the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). Promulgated in 2019, the GBA is a megalopolis of nine mainland cities and two SARs with a combined population of about 86 million. It aims to become a world-class bay area and innovation hub through leveraging each component’s unique strengths. The GBA is often referred to as China’s economic growth engine.
Macao may be the smallest city within the GBA, but it has something very valuable to offer: strong ties with Portuguese-speaking countries (PSCs), collectively home to around 290 million people (about one-fifth of the global population). These include Portugal, a long-standing partner in Europe; Brazil, the largest economy in South America; Timor-Leste in Southeast Asia; and six nations across Africa.
In return, the SAR can leverage the GBA’s massive population and resources to develop its own sustainable, high-value sectors. Tai points to several ways this is already happening, such as a new cross-border scheme helping Macao start-ups get off the ground. Jointly established by the SAR government and Guangdong Province’s nine municipal-level governments, the scheme consists of 23 innovation accelerators across the GBA that provide training, investor introductions, and useful advice to fledgling entrepreneurs from Macao.
Four emerging industries find space to grow
Macao’s government unveiled its 2024-2028 Development Plan for Appropriate Economic Diversification in October last year, building on the ‘1+4’ model Chief Executive Ho Iat Seng first introduced in his 2023 Policy Address. In this model, the ‘1’ refers to Macao’s integrated tourism and leisure industry – which will remain its economic backbone. The ‘4’ stands for four emerging industries, namely modern financial services; ‘big health’ with a focus on traditional Chinese medicine; high technologies; and meetings, incentives, conventions and exhibitions (collectively called MICE), along with large-scale sporting and cultural events.
The plan’s stated aim is to “gradually elevate” the amount of gross domestic product (GDP) contributed by non-gaming industries until they combine to make up about 60 percent of the total. In fact, this target was met in 2023.
Tai says that “each key industry has distinct foundations, and all hold considerable potential”. He points to the SAR’s 10 higher education institutions and four State Key Laboratories as places where cutting-edge research into the likes of traditional Chinese medicine, the Internet of Things, electronics and even planetary sciences has been happening for some time.
He also notes that the biggest opportunities for immediate growth lie just across the river, in the Guangdong-Macao Intensive Cooperation Zone in Hengqin – a major GBA initiative established in 2021 to facilitate the SAR’s economic diversification. This 106-square-kilometre island is jointly administered by the SAR and Guangdong’s respective governments.
As of September this year, 16,539 Macao residents lived in Hengqin while 5,132 worked there. A number of joint innovation hubs – the Guangdong–Macao Traditional Chinese Medicine Technology Industrial Park and the Guangdong-Macao Integrated Circuit Design Industrial Park, for example – are currently thriving in the cooperation zone, as are several Macao university campuses. By the end of October 2024, 6,521 Macao-registered enterprises were registered in Hengqin.
According to Macao banker Carlos Cid Álvares, Hengqin is a “fundamental approach to solving Macao’s limited space and exploring new development directions.” Álvares, the CEO of one of the SAR’s two note-issuing banks, Banco Nacional Ultramarino (BNU), also hails the ‘1+4’ plan as “a great opportunity for Macao … to strengthen its status and role in the nation’s economic development and opening up to the world.”
Modern finance for a new era
BNU is actively involved in growing one of Macao’s four emerging industries, modern financial services. Álvares says the bank recently launched a cross-border wealth management service connecting Macao, the mainland and Hong Kong – an initiative he believes is testament to the three regions’ ability to cooperate. Álvares notes that the very fact this type of cross-border service is possible “shows the Central Government’s substantial support for the GBA.”
He adds that BNU also contributes to the yuan’s internationalisation, a policy priority for China. Under the ‘One Country, Two Systems’ policy, Macao has its own, open financial infrastructure – positioning it to “serve the needs of the country and support it in the implementation of its political strategies,” according to the diversification plan.
One way the government is helping grow Macao’s modern finance sector is through further developing its bond market, particularly in regards to ‘dim sum bonds’ (offshore bonds issued in yuan), green bonds, and state and local government bonds. Macao also offers innovative financing channels for small and micro-sized enterprises in the mainland and is becoming a strategic hub for offshore yuan clearing. In addition, the government is expanding the city’s role as a financial services platform between China and PSCs.
City of culture, sports and MICE
The government is committed to increasing the number of large-scale events held in Macao. This means more performances, more art exhibitions and expanding the likes of the already well-established Macao Arts Festival and the Macao International Music Festival. But it also involves introducing more “branded sports events with Macao characteristics” to the city’s calendar.
Again, a large number of long-standing events already serve as a foundation in the sporting arena. The most iconic being the Macau Grand Prix, established back in 1954. This world-renowned motor sporting fixture transforms much of the city into a race track each November, giving visitor numbers a major boost.
The vast majority of events held in the SAR relate to its highly respected MICE industry: the city boasts a staggering array of state-of-the-art conference centres, luxurious hotels and versatile exhibition spaces catering to a diverse range of corporate needs. A total of 1,160 MICE events took place in 2023 and the government wants that number to hit between 2,000 and 2,500 come 2028. The first half of 2024 saw 34 percent year-on-year growth in the sector.
MICE events relate to a broad range of industries, from tech innovation to travel to forestry. The SAR government also helps organise several major trade shows, including the Macao International Trade and Investment Fair, the Macao Franchise Expo and the Guangdong-Macao Branded Products Fair. The MICE sector is very valuable to Macao; MICE visitors tend to spend more than double the amount leisure tourists do, and they boost the amount of business being done in the city.
A platform for trade and investment
Speaking of which, Macao has been praised by the World Trade Organization as an easy place to do business. Its commercial environment aligns with international conventions and standards, and the same rules apply to both local and foreign investors. In addition, the SAR – typically as ‘Macao, China’ – maintains trade and economic ties with over 100 territories worldwide, and is a member of over 50 international organisations.
With a free port, competitive tax rates and separate customs regime to the mainland, the SAR is able to actively promote itself as a favourable environment for large corporations that intend to expand their business internationally. Indeed, many international companies have bases in the city, and a large number of foreign chambers of commerce operate here. While a lot of these companies are focused internally, serving and supplying the luxury integrated resorts, others use Macao as a foothold to expand into the fast-growing GBA, and further into the mainland.
Macao’s Commerce and Investment Promotion Institute (known by its Portuguese initials IPIM) offers a number of services to local and foreign business investors. IPIM President Vincent U tells Macao magazine that the institute focusses on three main areas: outreach to GBA enterprises, attracting big-name MICE events to Macao and organising trade delegations to PSCs. He also says it aims to “attract more high-quality projects to Hengqin”.
U notes that IPIM “assisted” a total of 586 investment proposals between 2022 and June 2024, creating 2,199 new jobs in the process. He says that about 40 percent of the proposals related to Macao’s four emerging industries. In the first half of this year alone, investments totalling 1.32 billion patacas “reflected investors’ confidence in Macao’s business environment and development prospects,” he says.
Driving Sino-Lusophone trade
IPIM is heavily involved in Sino-Lusophone relations. Earlier this year, its office and supporting office of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (better known as Forum Macao) merged in order to streamline their complementary operations. U told the magazine that one of the new body’s first initiatives was to send a 40-strong delegation of entrepreneurs from Macao and Hengqin to Angola, resulting in 10 new contracts being signed. Areas of cooperation ranged from finance to environmental protection. Other delegations have travelled to Mozambique, Brazil, Timor-Leste and Portugal this year, their agendas spanning cross-border ecommerce, the biomedical sector, agriculture and supermarkets. Reciprocal delegations from these countries also visit Macao to explore opportunities in the SAR and GBA.
U can point to many other recent PSC-related initiatives, including the China-PSC Business Compass helping companies from PSCs get established in both Macao and the mainland; November’s Let’s Hang Out–Lusophone and Macao Products Bazaar in Hengqin; and the Pavilion of China-Portuguese-speaking Countries Commercial and Trade Service Platform in the China-PSCs Complex (a massive exhibition space). The China-PSCs Complex hosted Forum Macao’s 6th Ministerial Conference this past April.
Since its 2003 establishment, Forum Macao has been connecting China with Portuguese-speaking markets around the world. The importance of this role is backed up by stats: Sino-Lusophone trade surged from US$131.4 billion in 2013 to US$174.2 billion in the first three quarters of 2024.
Earlier this year, Forum Macao Deputy Secretary-General Xie Ying told Forum Bulletin the platform’s “role as a bridge will be even more valued and fruitful” as the SAR’s economic diversification continues to accelerate. “The Portuguese-speaking countries can take advantage of Macao’s platform to connect with the vast Chinese consumer market, deepen scientific and technological cooperation with China, share the development opportunities in China, foster Sino-Lusophone cultural and people-to-people exchanges, and achieve complementary strengths,” she explained.
Xie added that developments within the GBA, and especially in Hengqin, would “inject new impetus, provide new space, and create new opportunities” for all members of Forum Macao.
Indeed, her predictions could be said for the SAR in general. BNU’s Álvares says he feel “optimistic regarding Macao’s economic future”, noting that in the ‘1+4’ economic diversification strategy the SAR had “successfully found the most appropriate path for its long-term development”.
Tai, from the economic bureau, echoes the banker’s sentiment, congratulating the government on its triumphs over the past 25 years – describing them as setting the stage for the next quarter century. With continuous support from the Central Government, Macao’s leaders have capitalised on the city’s unique advantages, improved living standards for all residents, and committed to integration initiatives that enable the SAR “to play an important role in assisting the country’s comprehensive opening-up in the new era,” he emphasised.
