Macao is the Casino capital of the world, For China, that’s not enough

NEW YORK: Macao, the world’s gambling capital, is becoming more intertwined with a Chinese neighbor — one person, train and building at a time. A former Portuguese colony, Macao was reclaimed 25 years ago by China and declared a special administrative zone, part of the mainland but with some independence. Beijing agreed to mostly keep its hands off the 12-square-mile territory.

Like nearby Hong Kong, Macao would be part of China but free to govern itself and run its economy without interference from Beijing. It quickly rose to become the world’s most lucrative gambling destination, drawing big American casinos like Wynn and Sands and catering to mostly Chinese tourists. Now China’s political experiment in Macao is undergoing another transition. China’s leader, Xi Jinping, who visited Macao last week to mark the anniversary of the territory’s “return to the motherland,” wants Macao to operate less independently of mainland China. In Xi’s vision, Macao will wean itself off an economic reliance on gambling and play a role in boosting China’s own lagging consumer economy.

At the heart of this new push is Hengqin, a Chinese island separated from Macao by a river. In a sprawling new immigration complex at Hengqin Port, officers for China and Macao sit side by side, waving people over a new border. More than 16,000 Macanese citizens have moved to Hengqin in recent months. A train made its maiden journey from the city into Macao this month. There is even talk of creating a Macao Stock Exchange in its financial district.

Hengqin was one of Xi’s first stops after landing in Macao last week. He met with Macanese citizens living and working in a new economic zone that is being administered jointly by Chinese and Macanese authorities, part of a “birthday gift” to Macao during the 20th anniversary of the former colony’s handover. “I hope Macao will embrace a broader vision,” Xi said at a welcome dinner, adding that Macao should “proactively align itself with national development strategies.”

Xi attended the inauguration of Sam Hou Fai, Macao’s next chief executive and its first leader born in mainland China. Sam, who had been Macao’s top judge since the territory was returned to China from Portugal in 1999, was chosen for his new post by an election committee of mostly Beijing loyalists.

Beijing has given Macao more land to expand in Hengqin, eased restrictions on Chinese tourists traveling to Macao to gamble at its casinos and offered the casinos favorable investment policies to build resorts and conference centers in Hengqin.

Xi’s treatment of Macao, with a population of 700,000 people, stands in contrast to his approach in Hong Kong, where in 2019 millions of people protested moves to make the territory more like the rest of China. Beijing responded by imposing a tough national security law and jailing pro-democracy leaders.

“Macao has followed the directive from the central government, the people have accepted it and there hasn’t been much protest or noise from the community,” said Larry So Man-yum, a retired professor of social work at Macao Polytechnic Institute. The preferential policies in Hengqin for Macanese citizens “are like candies for well-behaved children,” he said.

In many ways, Macao needs China. It has little space to build new industries and housing, and its government derives most of its revenues from one industry — casinos. Its freshwater supply comes from a river that flows into the Pearl River in China. A crackdown by the Chinese government in recent years on money laundering, as well as Beijing’s strict pandemic policies, has reduced the number of Chinese visiting to gamble. Sam, the incoming leader, has warned that relying too much on casinos could result in economic perils for the territory.

At the same time, Beijing needs Macao. It is the only place in China where gambling is legal. Macao offers Chinese tourists a destination where they can let off steam and explore European-style cobbled streets, culture and other remnants from the territory’s four centuries under Portuguese rule.

Closer ties with Hengqin are likely to make Macao further subject to Chinese regulations, said Carlos Alvares, the CEO of Banco Nacional Ultramarino, one of two banks in Macao that print the local currency, the pataca. “But Macao is going to maintain this historical side and its historical perspective, because what the authorities say is that they like very much that Macao stays a different city from the others,” he added.

Xi is hoping that Hengqin can piggyback on Macao’s reputation as a place that attracts both foreign investments and tourists willing to spend money and boost its flagging economy. He told Macao’s leaders last week to “seek to play a bigger role on the international stage.”

Macanese businesses have been asked to cough up money to build attractions like entertainment centers and resorts in Hengqin, as part of a broader Chinese project known as the Greater Bay Area, which is merging and blurring the boundaries between major southern Chinese cities as well as Hong Kong.

While the changes in Hengqin mean small businesses in Macao have growing competition for tourism, gambling revenue at Macao’s casinos in October jumped to their highest levels since the pandemic. In October, the number of visitors to the territory during China’s Golden Week holiday hit a record.

For Chung Kwong-ming, 65, who sells refrigerator magnets featuring the Ruins of Saint Paul’s and Senado Square in a little booth near the attractions, the return of Chinese tourists is a positive sign.

“I welcome more mainland tourists to Macao,” Chung said. “That can help my business.”