Xi bears gifts to peaceful MacauTop News | Reuters and Sophie Hui 13 Dec 2019
Reuters and Sophie Hui
President Xi Jinping will visit Macau next week to announce a raft of new policies aimed at diversifying the city's casino-dependent economy into a financial center, according to over a dozen interviews with officials and corporate executives.
The move is seen by officials and executives in Macau as a reward for having avoided the anti-government protests that have gripped nearby Hong Kong over the past six months.
The policies include the establishment of a yuan-denominated stock exchange and the acceleration of a renminbi settlement center already in the works, as well as the allocation of land for Macau to develop in the mainland, they said.
While there has been speculation about the proposals in recent months, the fact they have been officially approved has not previously been reported.
"The financial industry used to be an idea that we reserved for Hong Kong," said one Chinese official who requested anonymity. "We used to give all the favorable policies to Hong Kong. But now we want to diversify it."
Xi's trip to mark the 20th anniversary of Macau's return to China comes as the central government has praised the city for upholding the one country, two systems framework that governs both Hong Kong and Macau.
Beijing has instructed state-owned banks and enterprises to help set up infrastructure in Macau to aid financial diversification, four sources familiar with the matter told Reuters.
Two officials who helped develop the Shanghai stock exchange moved to the territory this year to help establish its yuan-based stock exchange, one of the sources said.
Chinese officials, and bankers in Hong Kong, say the push to develop financial infrastructure in Macau is part of a plan to avoid any major market disruption in Hong Kong that could impact Chinese businesses.
The idea is not for Macau to replace or undermine Hong Kong but for China to have a contingency plan in case the situation in Hong Kong worsens, they said.
"Xi Jinping has made very clear that he wants a diversified Macau economy," said another Chinese official who declined to be identified. "The future focus will be on tourism and finance to make it a center to host international meetings like Singapore."
Macau's new exchange will initially be focused on bond trading to encourage local and Chinese companies to issue debt in the city, according to a Chinese official familiar with the matter.
The exchange will also focus on start-ups and target companies from Portuguese-speaking countries, ensuring it does not directly compete with bourses in Hong Kong or Shenzhen, according to six Macau executives and Chinese officials.
An announcement that Macau will join the Beijing-backed Asian Infrastructure Investment Bank is also expected during Xi's visit, two Chinese officials said.
On the other hand, Fitch Ratings says there is little evidence so far that the social unrest in Hong Kong has adversely affected its role as a global financial centre, even amid severe short-term economic pressures.
China watcher Bruce Lui Ping-kuen said Beijing wants to send a political signal to Hong Kong by sending gifts to Macau.
Lui, a Baptist University lecturer in journalism, said it seemed Beijing was punishing Hong Kong politically, but the actual impact would not be significant.
This is because the enclave has many limitations, including an economic structure that is heavily reliant on gambling and a small population of about 600,000, he said.
Moreover, Macau operates under a civil law system unlike Hong Kong's common law system.
"It's difficult for Macau to replace Hong Kong under these limitations," he said.
But Lui said Beijing wanted a backup plan and Macau can share some of the things that the central government wanted to do in Hong Kong.
"They [the central government] don't want to put all the eggs in one basket," he said.