The brightest star in an emerging market

Macau’s growing economy looks to be paving the way for a booming banking industry to emerge, and a promising future for the people who live there

 

Soon, everyone will be impressed by the economic recovery speed of Macau. Shocked by European and US debt crises, as well as the subprime crisis, the global economy has been experienced a hard time and is recovering slowly. Macau’s two-digit growth in recent times feels like something of a miracle. Macau, a special administrative region of China, achieved spectacular economic performance compared with most developed countries.

The real GDP growth of Macau in recent years suggests that it may already have walked out of the financial quagmire. The region’s growth was mainly driven by service exports and domestic demand. Known as the ‘Orient Las Vegas’, Macau is a famous resort that attracted millions of tourists, even during these lean years. Its city centre has been listed as one of UNESCO’s World Heritage Sites, and many large projects have been launched. Macau’s employment and economic growth benefitted a lot from these.

Going global
Macau not only served as an economic cooperation platform, but also played an important role in the financial communication between China and Portuguese-speaking countries. With the internalisation of renminbi, cross-border business boomed not only in Hong Kong but also in Macau, helping a lot of Chinese enterprises to go global.

As the Hong Kong-Zhuhai-Macau Bridge started its construction, the process of regional integration of Guangdong, Hong Kong and Macau was accelerated. When it is completed, the natural connection between Macau’s and Hong Kong’s economies will be deepened. It already has a long history of close cooperation with Guangdong. By signing the Closer Economic Partnership Arrangement, Macau successfully enlarged its cooperating partners and acquired frequent trade and finance communication with most developed provinces in China. The Macau Government’s policies to improve citizens’ livelihoods have also greatly increased domestic demand. Ever since 2008, right after the subprime crisis, it adopted the ‘Wealth Partaking Scheme’ and made a cash subsidy to every qualified citizen every year. It also advanced its public housing policies in order to alleviate the burden placed on local people by high house prices. These policies stimulated domestic demand significantly.

The role of the renminbi
There is no doubt that Macau’s tourism industry will continue to flourish for an extended period, which in turn implies that services exports will stay high. Large projects like the construction of new hotels, tourism centres, and shopping malls will continue to guarantee Macau’s economic growth and employment.

The process of the renminbi’s internalisation will go on and Macau can still play an important role as a platform. China’s exports have been affected by the appreciation of the renminbi and growth rates have lowered. However, China has already started its plan on economic structure adjustment and the result looks to be positive. A strong China will provide continuous prosperity to Macau and Hong Kong.

Macau’s average income has been listed in the top 10 in the world in recent years, and local citizens have enjoyed the prosperity brought about by booming industry. But due to the appreciation of the renminbi and inflation in mainland China, inflation in Macau has increased a lot. Rising house prices, and the relatively high inflation rate, will bring negative effects on domestic demand.

Most important of all is the structure of the economy: the biggest challenge that Macau has confronted in the past, and which it continues to confront. Macau relies on the gambling industry so much that its economy may be fragile if external travel policies ever shift.

Macau’s government has already realised that and is beginning to change the situation. To quicken merging in the region seems to be one good solution to that. The integration of Hong Kong, Macau and Guangdong Province will deepen in the coming years. The cooperation between Macau and China’s other inner provinces will also be strengthened.

Although the development of Macau may be limited by its scale, the intensifying development of Hengqin Island, a neighbouring island to Macau and the third state-level new zone in China, would afford abundant space for the extension of Macau.

Macau’s banking sector
Since Macau returned to China, the banking industry in Macau has welcomed an historic era for development. The banking industry seized the opportunity brought by the upturn of the economy, the significant increase in private investment and the recovery of the property market to extend the scope and enhance the quality of its services.

Meanwhile, banks were actively dealing with non-performing loans, strengthening cost control and improving operational effectiveness. There have also been significant improvements and developments in the operation of the banking system itself. Total assets continued to increase. Deposits were growing steadily and the credit market was active.

The quality of assets greatly improved. Net interest income and non-interest income went up markedly. Operating expenses grew at the same time but under control, and the rise in operating profits was significant. Additionally, Macau’s Government announced a series of policies and measures to stabilise the financial system, including full protection for customer deposits, and, if necessary, provision of sufficient liquidity and capital support during the crisis in order to ensure the stability of the financial system.

The banking industry is the second-largest industry in Macau, and the market is competitive and healthy. As the market developed, some consolidated their positions strongly, while others left altogether. ICBC Macau is the most outstanding newcomer in the local market.

During the past few years ICBC Macau, as the largest locally registered bank in Macau, has kept the idea that ‘integrity leads to prosperity’ in mind at all times, and the reward has been notable progress and rewards without any big fluctuations. From 2009 to 2012, the bank’s profit quadrupled, while its total assets more than doubled; its non-performing loan ratio stayed extremely low at about 0.05 percent. Both its brand and recognition have been cemented.

The bank has already realised the biggest problems in Macau’s economy and has diversified its assets. Now its assets has been spread over Macau, Hong Kong and mainland China, through which the operating risk has been diversified.

Changes in store
The whole banking industry will face major development opportunities in 2013 as follows: first, Macau’s Government will strengthen its policies on expanding domestic demand and improving people’s livelihood. This will bring changes to the development of retail banking sectors. Second, the steady development and expansion of Macau’s service industry will bring financial service demand to corporation business. Third, both the increasingly diversified local economy and further development of Hengqin Island will bring opportunities to develop different clients. Fourth, the internalisation of the renminbi and movement of many Chinese companies abroad will bring chances to innovate products. Fifth, the winged development of ebanking and ecommerce will create blue sea for financial institutions under the background of financial disintermediation.

ICBC Macau will seize all of the opportunities mentioned above. It will also stick to its consistent operating strategy and further improve its corporate governance and risk management. It will improve its all-round performance in light of the above-mentioned development opportunities by adopting six identities: Value Creator, Brand Builder, Green Bank, Creditworthy Bank, Harmonious Bank and Charity Bank.

The bank will continue to win the trust of customers by providing quality services, the favour of shareholders with excellent performance, and will endeavour to understand its employees by establishing a strong working culture. This will position ICBC Macau as a multifaceted, universal bank; a truly cross-region financial institution.