China Wants Macau as Financial Hub

Beijing has directed state-owned banks and enterprises to help set up infrastructure in Macau to aid financial diversification, and to serve as a contingency plan if the situation in Hong Kong worsens.

Two officials who helped develop the Shanghai stock exchange moved to Macau to help establish its yuan-based stock exchange, one of the sources told «Reuters». 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 financial industry used to be an idea that we reserved for Hong Kong. We used to give all the favorable policies to Hong Kong. But now we want to diversify it, said one Chinese official who requested anonymity.

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, sources at Reuters added.

The slew of new policies for Macau is aimed at diversifying the city’s casino-dependent economy into a financial center. Macau’s casino operators, which have been hit by slowing economic growth and the Sino-U.S. trade war could look forward to the development opportunities in Hengqin, casino executives who were interviewed said.

Xi Jinping has made very clear that he wants a diversified Macau economy, said one Chinese official. The future focus will be on tourism and finance, to make it a center to host international meetings like Singapore.

Besides establishing a yuan-denominated stock exchange and speeding up a yuan settlement center which is currently being developed, the policies will also be looking at land allocation in Macau. As part of that effort, Macau will be allocated more land on the mainland island of Hengqin to develop in areas such as education and healthcare.

These policies also mark the 20th anniversary of the former Portuguese colony’s return to Chinese rule, as Xi plans a visit to Macau next week. There, Xi is expected to announce policies to further integrate Macau with mainland cities in the Greater Bay Area, the region around the Pearl River Delta that also includes Hong Kong, according to Chinese officials and Macau executives.