Ungaming the System

Twenty-five years ago, the city ranked around 40th globally in terms of GDP per capita and faced significant challenges, including unchecked organized crime, which led to gang violence, and high unemployment. Today, the Macao Special Administrative Region (SAR) is one of the safest, wealthiest and fastest-growing regions in the world, known for its high life expectancy and exemplary social welfare system.　

From 1999 to 2019, Macao’s GDP surged from 51.9 billion patacas (US$6.46b) to 444.5 billion patacas (US$55.5b), reflecting an average annual growth rate of 11 percent. By 2023, Macao’s per capita GDP had reached approximately US$69,000, more than four times its 1999 level. According to Forbes magazine’s 2024 ranking of the world’s richest jurisdictions based on GDP per capita (purchasing power parity), Macao ranked third globally, behind only Luxembourg and Singapore.　

“Over the past 25 years, the people of Macao have gained a strong sense of security, fulfillment and happiness,” said Ip Kuai Peng, vice president of the City University of Macau. In recent years, Macao has endeavored to develop new growth engines to reduce its reliance on gambling. This seems to be paying off, but more efforts are needed.

According to Si Ka Lon, a member of Macao’s Legislative Assembly, while the city has made notable progress in economic and social development, its reliance on gambling has created deep-rooted challenges. “The dominance of the gambling and tourism industry has significantly crowded out other sectors,” Si said. “Structural issues have emerged across society, including challenges related to employment, income distribution and social stratification.”　

“As a microeconomy driven by external demand, Macao’s economic growth is highly volatile, characterized by a reliance on a single pathway and relatively weak resilience to risks,” he added.　

According to Lei Ngan Leng, a professor and special researcher at the Research Institute of Guangdong-Hong Kong-Macao Greater Bay Area Studies at City University of Macau, the Macao government has long sought to find a pathway to diversify its economy. “Macao’s exploration of ‘economic diversification’ has gone through three main stages,” Lei told NewsChina.　

It began in 2001 when Macao’s first chief executive, Edmund Ho Hau Wah, proposed an economic strategy to make gambling the leading industry, develop services as the main sector, and coordinate the development of other industries. The following year, the Macao government liberalized its gambling industry, which triggered explosive economic growth and laid the foundation for the city to surpass Las Vegas as the world’s leading gambling hub in the following years.　

In 2003, the central government introduced the Individual Visit Scheme, which allowed residents of specific Chinese mainland cities to visit Macao without joining tour groups. This substantially boosted tourism-related industries, including gambling. Between 2003 and 2019, Macao’s annual tourist arrivals soared from 11.9 million to 39.4 million. The proportion of mainland visitors rose from 48.3 percent to 70.9 percent.　

Lei said that during this period, the idea of economic diversification started to enter the government’s vision, but it was not clearly defined. As the gambling industry rapidly expanded, it led to social issues such as imbalanced income distribution, which prompted the government to take economic diversification more seriously.　

The second stage started in 2015, when Macao’s first Five-Year Development Plan (2016–2020) positioned “appropriate diversification” as a key focus. The government continued to support the expansion of the gambling industry, but the “1+4” strategy also began to take shape. The 1+4 strategy aims to enrich Macao’s function as “One Center” for integrated tourism and leisure, and four nascent industries: traditional Chinese medicine (TCM) and health services, modern finance, new and high technology, and conventions, exhibitions, sports, and the commercial and trade industries.　

In November 2023, the SAR government released “The Development Plan for Appropriate Economic Diversificaton of the Macao SAR (2024-2028).” As the first systematic industrial development plan issued in Macao, the document set a goal of allowing the non-gambling sector to contribute about 60 percent of GDP by 2028. According to Professor Lei, this development plan marks the start of the third stage of the city’s efforts to diversify its economy.　

But for Ip Kuai Peng, there are still unresolved questions surrounding the development plan. “Throughout the evolution of ‘appropriate diversification,’ critical questions, such as what defines ‘appropriate’ and how to achieve it, remain unanswered,” Ip told NewsChina. “While the overall direction of diversification has become clearer, successful implementation will demand strong political will.”

The city’s current policy focus remains on boosting inbound tourism. At the start of the year, Macao set a target of attracting 33 million visitors in 2024, including two million international tourists. By the end of November, the total visitor count had reached 31.9 million, surpassing the international visitor target with over two million arrivals.　

Maria Helena de Senna Fernandes, director of the Macao Government Tourism Office, told NewsChina that visitor numbers have recovered to more than 80 percent of pre-Covid levels, with international arrivals rebounding to approximately 75 percent. “In terms of visitor numbers, this year has indeed been relatively good,” she said.　

Fernandes noted that there have been significant changes in how tourists choose to travel in the post-pandemic era. In 2019, there were approximately eight million group tour visitors, but in 2024, the figure was around two million. “Group tours follow fixed itineraries with limited flexibility. Now, both domestic and international tourists seem to prefer traveling individually or with family, enjoying more relaxed and flexible trip planning,” she said, “[Chinese] social media platforms like [lifestyle platform] Xiaohongshu and Douyin influence their choices.”　

In response, Macao adapted its strategies. Mobile payment systems were significantly upgraded to match those in the mainland. On the promotional front, there was a substantial shift toward leveraging new media platforms. “Initially, we lacked a clear strategy, but we’ve since developed themes and promotional elements. Macao can no longer rely solely on traditional ‘golden assets’ such as its historic city center and cuisine. We must also spotlight lesser-known attractions, festivals and events to entice visitors to return,” Fernandes said.　

Data from Macao’s Statistics and Census Service reveal that the gaming industry contributed 38.3 percent to the city’s gross value added (GVA) in 2023, which measures each sector’s contribution to the overall economy. Non-gaming sectors accounted for 61.7 percent of GVA, an increase of 12.9 percentage points compared to 2019. These figures suggest that Macao is on track to achieve the government development target of reducing the gaming sector’s share of GDP to 40 percent by 2028.　

However, in terms of government revenue, the gaming industry continues to play a dominant role. According to data from Macao’s Financial Services Bureau (DSF), gaming taxes accounted for 80.6 percent of the government’s total revenue during the first 11 months of 2024, which shows the city has a long way to go to diversify its revenue sources.

In 2009, the State Council, China’s cabinet, approved a development plan for Hengqin, designating it as a platform for cooperation and integration between Macao and Guangdong Province. In December 2023, the National Development and Reform Commission, China’s top economic planner, released the “Overall Development Plan for the Guangdong-Macao In-Depth Cooperation Zone in Hengqin,” to advance integration efforts.　

The plan grants Macao joint administration of Hengqin, aiming to create new space for Macao to push economic diversification. Macao-funded enterprises in Hengqin enjoy incentives, including rent subsidies, brand establishment rewards, research and development subsidies and exhibition subsidies.　

According to data from the Statistics Bureau of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin, as of September of 2024, Hengqin’s registered population has reached 38,000, a year-on-year increase of 11.7 percent. Additionally, 21,000 Macao residents live and work in Hengqin, up by 15.2 percent from previous years.　

In the meantime, the number of Macao-funded business entities operating in Hengqin increased by 11.5 percent to reach 6,461. In the first nine months of 2024, cross-border traffic between Hengqin and Macao surged by 40.3 percent to reach 16.2 million trips, among which are 3.56 million trips made by Macao residents, a jump of 26.9 percent from the previous year.　

Nam Kwong Group, a Macao-based exhibition company, is embracing the new opportunities by hosting forum activities in Hengqin hotels. “Macao has advanced facilities, comprehensive services and convenient transportation, making it attractive to international visitors. However, its limited land and population pose constraints,” Zhou Jinyang, general manager of Nam Kwong International Conference & Exhibition Co., Ltd., told NewsChina, “Hengqin, on the other hand, provides ample land, resources and policy incentives, though it lacks standard exhibition venues.”　

The integrated circuit industry, a hightech sector with strong cross-regional collaboration potential, is also flourishing in Hengqin. The area currently hosts around 60 companies, marking significant initial growth.　

According to Professor Ben U Seng Pan, co-founder of the State Key Laboratory of Analog and Mixed-Signal VLSI of the University of Macau, Hengqin offers critical advantages, including access to abundant venture capital and market proximity. However, he noted that talent recruitment is a bottleneck, exacerbated by geopolitical challenges. To address the issue, he suggested leveraging Macao’s appeal to international talent through the Hengqin-Macao cooperation mechanism.　

Despite progress, cross-regional collaboration is still in its early stages and faces numerous challenges. Si Ka Lon, the Macao lawmaker, told NewsChina that apart from the meetings, incentives, conferences and exhibitions sector, known as MICE, and cultural tourism, there is no concrete action roadmap regarding the four nascent sectors highlighted in Macao’s diversification plan, and the development of emerging industries remains slow and is yet to deliver notable economic outcomes.　

Si noted that due to regulatory and cultural differences, Macao enterprises still face difficulties in adapting to the business environment in Hengqin.　

According to Li Ziwei, director of the Economic Development Bureau in Hengqin, a major challenge for deepening Macao-Hengqin cooperation is to integrate the emphasis on rules and procedures with an efficiency-oriented and goal-driven approach.　

Professor Lei Ngan Leng believes that authorities should strive to achieve seamless flows of people, goods, capital and information between Macao and Hengqin, which not only involves enhancing hard connections such as cross-border infrastructure and transportation, but also improving soft connections in areas like education, values and welfare systems. “In the future, both sides of the Hengqin-Macao partnership need broader perspectives and more innovative thinking. Establishing a mechanism for the free movement and allocation of production factors is essential to truly achieve integrated governance,” she said.　

Macao should take a more prudent approach in its pursuit for a more diverse economy, according to Professor Yuan Chiping. “For a micro-economy like Macao, the importance of having a central industry must not be underestimated, as it is essential to Macao’s development,” Yuan said, “When it comes to diversifying industries, Macao still lacks sufficient support in key factors necessary for modern industrial growth, such as land, human resources, technology and information.”　

“Progress will take time,” Yuan noted.