During a three-day visit to Macau, China president Xi Jinping applauded the city’s ongoing shift from a gaming-centric economy. Experts say getting there won’t be easy.
On 20 December, Xi concluded an historic three-day visit to Macau, marking 25 years since the former Portuguese colony returned to Chinese rule.
At the inauguration of new chief executive Sam Hou Dai, Xi hailed Macau’s drive “to promote appropriate economic diversification” and reduce its reliance on the gaming industry.
He said the territory must “step up policy and funding support so as to cultivate internationally competitive new sectors”.
Covid sped diversification
Ieong Meng U, assistant political professor at the University of Macau, told Agence France Presse Beijing has been pushing for a more diverse economy for “at least a decade”, but Macau “didn’t budge”.
“With gaming,” he said, “the money came too easily. (Macau) basically didn’t have to do much for a robust income.”
That changed after Covid-19, which closed city borders for three years and crippled the top industry. In the depths of the crisis, in the first half of 2022, casino operators shed gross gaming revenue of HKD25.4 billion year-on-year (£2.6 billion/€3.1 billion/$3.2 billion), according to Macau’s Gaming Inspection and Coordination Bureau.
After the city reopened, in 2023, former chief executive Ho Iat Seng announced his “1+4” strategy to expand the economy. The five-year plan will build on Macau’s strength as an international tourism destination and also develop “four nascent industries, namely: ‘Big Health’; modern financial services; high and new technology; and convention and exhibition, sports and the commercial and trade industries”.
That’s a tall order, Seaport Research analyst Vitaly Umansky told AFP. “[The government] would like other industries to start developing,” but it will be “very, very difficult” for Macau to develop robust finance, technology and medicine sectors without an influx of foreign talent.
Casino concessionaires kick in
The city’s six casino operators must do their part to support the end goal, which will see their contributions to gross domestic product drop from a high of 63% to about 40%. Their licence terms, renewed for 10 years in 2022, are contingent on HKD115.8 billion in non-gaming investments such as theme parks, waterfront developments and conference facilities.
Ben Lee, managing partner of consultancy IGamiX, said the operators must hew to the central government’s command. “The casinos are rational economic entities” who would prefer “easy wins”, he told AFP. “They will only do as little as they think they can get away with.”
However, in a mid-year estimate reported in Macao News, Umansky said the approach is already working. Operators’ non-gaming revenue for 2024 is expected to increase 17.7%, which would “equate to 15% of all revenues” he said.
Xi sees Macau as China’s link to the world
Once called China’s most powerful leader since Mao Zedong, Xi has overseen the virtual downfall of Macau’s lucrative junket industry, a crackdown on illegal money exchanges and stronger safeguards against cross-border gambling, capital flight and money laundering.
According to Radio Free Asia, he envisions Macau as China’s link to the wider world, a role once ascribed to Hong Kong. The former British colony, like Macau a special administrative region (SAR), returned to Chinese rule in 1997. But it has repeatedly pushed back against Beijing’s authoritarian rule and anti-communist sentiment continues to run high.
Macau, for its part, has earned a reputation as more compliant.
“Macau has followed the directive from the central government, the people have accepted it and there hasn’t been much protest or noise from the community,” Larry So Man-yum, former professor of social work at Macau Polytechnic Institute, told the New York Times.
During his visit, Xi flattered the preferred SAR, calling it “a shining pearl… a treasured place of the great motherland, one that, under Sam Hou Fai, will continue to grow a multifaceted economy that shores up the mainland”.
