As Macau celebrates the 20-year anniversary of its return to China, there is speculation that Beijing is looking to elevate its status from a gambling hub to an offshore financial center. While not meant to replace Hong Kong, Macau offers the same one country, two systems model under Portuguese legal governance. Following President Xi Jinping’s visit in 2019, policies were announced to deepen financial ties between Macau and the mainland, encouraging expansion of banks and financial firms between the two regions.
The launch of a new asset trading exchange in 2023, the Micro Connect Macau Financial Assets Exchange (MCEX), introduced Daily Revenue Obligations (DROs) to provide funding to China’s SMEs. This initiative aims to support the vulnerable segment of China’s economy, especially as SMEs have struggled to recover from zero-Covid restrictions. Retail investors are excluded from trading DROs, with access limited to institutional investors such as banks, insurance companies, asset management firms, and pension providers in Macau or other jurisdictions.
Following the establishment of MCEX, the Macau Financial Asset Exchange (MOX) signed a cooperation agreement with the Luxembourg Stock Exchange to include MOX-listed securities for trading on the Euro MTF. This marks a significant step in building international financing channels for multi-currency and cross-border capital operation systems, bridging domestic and overseas markets. Macau’s Chief Executive visited the Luxembourg Stock Exchange to learn from their success in developing a significant financial sector and building a modern financial industry in Macau.
Despite the progress made in growing its financial sector, Macau is not attempting to replace Hong Kong as an international financial hub. Hong Kong has continued to grow as a wealth management hub, with wealth management assets reaching US$3.9 trillion by the end of 2022. Additionally, Beijing has tripled the investment limit for individuals participating in the cross-border Wealth Connect scheme in the Greater Bay Area, providing GBA residents with better access to offshore markets. Hong Kong remains the paramount anchor in the GBA’s development as a financial hub.
Looking ahead, the Greater Bay Area will continue to develop as a financial hub, with Hong Kong playing a central role as a global financial center. Macau is expected to play a complementary role, focusing on providing funding for Chinese SMEs and developing cross-border bond issuance markets with Luxembourg and potentially other jurisdictions. While it may not compete with Hong Kong, Macau’s unique position and initiatives in the financial sector hold promise for its continued growth and potential contributions to the broader financial landscape in the region.
