The national development strategy of the Guangdong-Hong Kong-Macau Greater Bay Area states that Macau must link up with China’s broader national strategy and promote a moderately diversified development of the economy, focusing on ‘one platform, one centre, one base’. The purpose of diversified economic development is to maintain a moderately balanced industrial structure, cultivate new pillar industries and drivers of economic growth, and promote the sustainable development of Macau’s society and economy.
Since the start of the year, a novel coronavirus has raged around the world, forcing major countries to go into lockdown, economic activities to suddenly halt, social confidence to weaken and the global economy to fall into recession. Notably, the price of oil has fallen and US stock markets have slumped, hitting their emergency circuit breakers several times in a short period and triggering financial turmoil. In response, Macau has developed an economic and industrial strategy of moderate diversification to help the country tackle the crisis and achieve sustainable development.
Since reuniting with mainland China, the Government of the Macau Special Administrative Region (MSAR Government) has fully administrated the ‘one country, two systems’ constitutional principle as mandated by law. Macau’s economy has developed rapidly, displaying abundant social wealth and recording one of the highest GDP per capita in the world (see Fig 1), all while maintaining social harmony and general prosperity.
As one of the world’s most open economies, Macau has established stable business relations with 120-plus countries and regions. It is a member of 30 international economic organisations and adheres to more than 100 international conventions and multilateral treaties. International assets and liabilities account for more than 80 percent of Macau’s total bank assets, and business-operating standards are in line with international norms. What’s more, Macau’s investment and business procedures are simple, encompassing a low tax system and the free flow of capital. The MSAR Government also has close ties with Portuguese-speaking countries and many overseas Chinese.
However, as a typical microeconomy, Macau’s economic structure is fragile and relies heavily on the gaming industry, which makes economic growth highly volatile, reduces the city-state’s capacity to respond to challenges and risks, and delivers weaker growth momentum. In early 2020, as the COVID-19 pandemic took hold, socioeconomic life in Macau was almost completely shut down, forcing the gaming industry to engage in an unprecedented 15-day closure in February. As of mid-March, around 80 percent of Macau’s casino tables were back in action, albeit with social distancing restrictions in place. Nevertheless, gross gaming revenue in Q1 2020 was MOP 30.48bn ($3.82bn), a 60 percent decrease from the same period in 2019, according to Macau’s Statistics and Census Service (DSEC).
As a tourism hub, Macau is a free market economy and frequently engages in economic exchanges with surrounding and Portuguese-speaking countries. It has been greatly affected by the coronavirus pandemic and the resulting global economic recession, which highlights the urgency and necessity of developing a moderately diversified economy. As such, Macau needs to make greater efforts to cultivate diversified industries and promote sustainable economic development.
In recent years, the MSAR Government has made steady economic development and orderly structural adjustment a priority in its policy address. It has focused on supporting the growth of industries such as tourism, exhibitions and conventions, culture, entertainment and traditional Chinese medicine. In conjunction with the Belt and Road Initiative and the economic outline for the Greater Bay Area, the government also intends to broaden the scope of the region’s financial industry and emphasise the development of specialised finance. It will provide support in terms of talent, systems and laws to assist the finance industry, helping it to cooperate with the mainland and surrounding areas, as well as create value in the disciplines of financial leasing, wealth management and asset management.
A specialised service
The development of a specialised finance industry is the most realistic way for Macau to achieve moderate economic diversification within the framework of the government’s strategy. Developing such an industry requires three steps, the first of which is to leverage unique advantages. Based on a national strategy of creating a service platform for commerce and trade cooperation between China and Portuguese-speaking countries, Macau will leverage a platform economy to promote the development of specialised finance.
The second step is to focus on specialised industries. Macau will emphasise its advantages and develop distinctive financial services – notably, finance leasing and wealth management – with neighbouring financial centres. The third is to serve specialised areas. Macau will serve the western part of the Pan-Pearl River Delta, Portuguese-speaking countries and countries along the Belt and Road route, playing a different role to other financial cities by facilitating coordinated regional development.
Developing specialised finance also focuses on three sectors. The first involves the development of industrial sectors, including financial leasing, wealth management, online banking and green finance. The second concerns the establishment of a service platform and the strengthening of the financial features of the existing Sino-Portuguese business cooperation service platform. It will endeavour to promote the mutual benefits and synergies inherent within Sino-Portuguese financial capital, focusing on the construction of the Sino-Portuguese renminbi clearing centre and the expansion of the Sino-Portuguese cooperative development fund. The third is to cultivate trading market sectors, including bond markets, commodity markets and financial derivatives markets.
ICBC (Macau), the largest locally registered bank in Macau, is the main local credit issuer in the region, maintaining a leading position in terms of channel layout and financial technology. The bank, one of the most localised institutions in the ICBC Group, displays robust operational performance and plays an important role in sustaining Macau’s long-term prosperity and stability through economic diversification. In March 2018, the MSAR Government signed a memorandum of cooperation with ICBC Group to promote the development of Macau’s specialised finance system. In December 2019, on the 20th anniversary of Macau’s return to China, the MSAR Government awarded ICBC (Macau) the Medal of Merit (Industry and Commerce) for the outstanding professional services it has provided to the public.
At the beginning of 2020, ICBC Macau Branch opened, making ICBC Group the first dual-licenced financial institution in Macau. In this context, the capabilities of banking services and businesses will be greatly increased moving forward. Further, the government has granted ICBC Group a local licence for financial leasing, giving the bank a comparative advantage and great development potential in terms of specialised finance and diversification.
With a focus on integrating into the Greater Bay Area, expanding in Portuguese-speaking countries and extending to countries along the Belt and Road route, ICBC (Macau) will develop a specialised finance industry to better serve local markets and enhance its support for larger enterprises in their aims to go global. Meanwhile, in support of Macau’s commitment to the Greater Bay Area and the Belt and Road Initiative, the bank will enhance the positioning of its Sino-Portuguese asset platform to promote the balanced business development of assets and liabilities. This should also help to steadily increase profits, enabling us to become an important platform that connects domestic customers, funds, products and markets with those overseas.
In March 2018, we launched our Sino-Portuguese asset platform, collectively undertaking nearly 20 projects in the Portuguese language worth $3bn. Through the establishment of Macau’s first financial asset exchange, the bank issued $500m worth of 10-year US-denominated subordinated notes in September 2019. The offering was substantially oversubscribed, with more than 130 sophisticated institutional investors from 16 countries applying – the largest bond offering in the international market by a locally registered bank.
In October 2019, the subordinated notes were listed on the Macau Financial Asset Exchange, further enriching the trading products of the Macau bond market. What’s more, the Central Government of the People’s Republic of China issued sovereign bonds in Macau for the first time. As the deputy underwriter and the placing bank, ICBC (Macau) completed the initial issuance in Macau, shouldering the responsibility to promote the development of specialised finance.
In the face of the COVID-19 pandemic, the bank will continue to actively cooperate with the government to implement economic support policies and meet the needs of SMEs by introducing various financial relief measures to restore social confidence and stabilise the local economy. Then, once the pandemic has passed and life begins to return to normality, ICBC (Macau) will be ready to support the economic recovery.