MACAU SAR: An Introduction to General Business Law
Investing in the China Macau SAR
The Macau Special Administrative Region of the People’s Republic of China (“Macau”) is located in the southwestern part of the Pearl River Delta’s estuary in the southern province of Guangdong in the People’s Republic of China (“China”), and has undergone one of the fastest post-pandemic economic recoveries in the region, where it remains among the lowest and simplest tax jurisdictions.
With an area of approximately 33 km2 bordering the city of Zhuhai and the Guangdong-Macau In-Depth Cooperation Zone in Hengqin (“Hengqin”), Macau is directly connected to two of the main financial centres of China: Shenzhen, via an hour ferry trip; and the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), also via an hour ferry trip, or a 55km drive through the Hong Kong Zhuhai Macau bridge (HZMB).
Macau is a core part of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) which has a total population of over 86 million in a total area of 56,000 km2, and in 2023 had an overall GDP of over USD2 trillion in the first year without strict pandemic restrictions. It is also a member of the World Trade Organization (WTO) and a party to the China and Macau Closer Economic Partnership Arrangement (CEPA), which grants locally made products tariff-free access to the Chinese market. Its official languages are Chinese and Portuguese, with English widely spoken, and its currency is the Macau pataca (MOP) which is pegged to the Hong Kong dollar (HKD).
The economy is driven mainly by the betting and gaming industry, the largest in the world, and the tourism, hospitality, real estate, financial services and trading sectors. In 2023, the first year after the pandemic during which Macau’s borders were opened to the outside world, its GDP per capita was over USD66,800, while its overall GDP was over USD47 billion. In 2023, during the first post-pandemic year, Macau’s economy grew approximately 80.5%, which placed Macau among the fastest-growing economies in the world. In 2024, despite the economic challenges facing the region and the world, the International Monetary Fund (IMF) is projecting the Macau economy to further grow by approximately 13.9%.
With an open economic policy and a free port without foreign exchange controls, where approval procedures for foreign and local investments are one and the same, Macau presents one of the lowest and simplest income tax regimes in the region under the “one country, two systems” policy that grants it its own executive, legislative, and independent judicial powers, as enshrined in its constitutional document, which guarantees the preservation of this status quo until at least 2049.
Trends and Developments
The 20th anniversary of the return of Macau to China was preceded, marked and followed by the launch of several milestones in the renewed push for the economic diversification of Macau’s gaming-dependent economy, a trend that was significantly accelerated after the pandemic laid bare the unsustainability of the model. Although Macau has now bounced back as one of the fastest-growing economies in the middle of a generally adverse economic regional context, the need to grow non-gaming industries and widen the skillset of the population were made priorities after gaming revenues and visitation dropped by more than 80% at their lowest during the pandemic.
The push to divert from the gaming industry became apparent by the end of 2022, when the gaming concessions were renewed for a ten-year period instead of the original 20-year period, and subject to an additional requirement of conducting minimum mandatory investments in the diversification of the economy in an estimated overall amount of approximately USD13.5 billion over the new concessions’ period, including investments in international visitation, conventions, exhibitions, entertainment shows, sporting events, culture and art, health and well-being, gastronomy, and community and maritime tourism.
The introduction of the new gaming law and regulations, the planned termination of the existing sports betting monopoly, and the tightening of the gaming promotion industry regulations have set the framework for the Macau government to launch the 1+4 diversification strategy where tourism and leisure will be the main economic focus that will facilitate and support the development of the following four key industries to go hand in hand with the development of Hengqin:
- big health and preventive care;
- financial services;
- technology; and
- conventions, exhibitions, sports, commercial and trade.
Of the four key industries, the Macau government has put an added emphasis on further developing the financial services industry. In 2018, the Macau Monetary Authority’s (AMCM) approved the establishment of a local debt capital market to be jointly led by the Chongwa (Macau) Financial Asset Exchange Co. Ltd. (MOX) and the Macau Central Securities Depository and Clearing Limited (MCSD), which was established in 2021. From late 2018 to September 2023, a total of 332 bonds are reported to have been issued or listed in Macau as a whole, with a cumulative reported amount of around USD64.4 billion (MOP519.3 billion) covering sovereign bonds, local government bonds, corporate bonds, and green bonds. The AMCM also recently approved the establishment of the Micro Connect (Macau) Financial Assets Exchange Co., Ltd (MCEX), two fund management entities, and a number of financial leasing companies, in a trend that is expected to continue.
New rules and regulations have also been promulgated to support the sector’s growth, including the “new financial system act”, the “trust law”, the “financial leasing law”, and the “insurance intermediary activities law”, the AMCM guidelines on bonds, investment funds and financial leasing activities, and the upcoming draft “securities law” and “investments funds law”, and are complemented by the digitalisation of the judiciary system and the arbitration and new talent laws.
In addition, neighbouring Hengqin brings additional development space for Macau and is expected to further expand, diversify and integrate its economy with the Chinese market, and support the consolidation of the tourism industry with the addition of key infrastructure and know-how.
On the international level, Macau is also looking to capitalise on its historical relations with the Portuguese-speaking countries, with which it shares similar legal frameworks and language. Macau seeks to take advantage of its open economic policy, favourable tax regime and a free port without foreign exchange controls, to add value to China’s investments in the Portuguese-speaking countries.
Opportunities and Challenges
Macau remains an attractive destination for foreign investment, with its strong economic growth offering opportunities not only in the gaming sector and its ancillary industries, but also in the selected four industry sectors that are also expected to receive investments of the gaming concessionaires.
The challenges that Macau will need to navigate through include the current economic slowdown in the region, geopolitical instability, domestic red tape regarding human resources, licensing approvals and increased competition from the other GBA cities and Asian capitals.
These challenges should, however, be overcome by the current trends, in the first year after the 25th anniversary of the return of Macau to China, in which Macau will be led by a new local administration and, for the first time, co-host a country-wide sport event with the upcoming 2025 National Games.