Macau, China WT/TPR/S/82
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I. ECONOMIC ENVIRONMENT
(1) INTRODUCTION
1. The period since Macau, China's previous Review in late 1994 has been marked by two main
events.  The most important of these was Macau's reversion to the People's Republic of China (PRC),
on 20 December 1999, and its designation as a Special Administrative Region (SAR).  Under the
Basic Law of the Macau Special Administrative Region (MSAR) of the People's Republic of China(Basic Law), which provides for "one country,  two systems", the MSAR has a high degree of
autonomy for 50 years in the administration of all its affairs, except defence and foreign policy.  The
MSAR will retain its status as a free port and will be exempt from all taxes imposed by the Central
Government of the PRC.
2. Macau's reversion to China took place subsequent to the second main event during the review
period, namely the outbreak of the economic crisis in Thailand in July 1997 and its spread to other
countries in (and beyond) South-East Asia.  This crisis has seriously impaired Macau, China's
economic performance, which had already started to deteriorate in 1996;  real GDP contracted in
four successive years (1996-99), with largest nega tive growth, of 4.6%, in 1998.  Concurrently, the
unemployment rate has more than doubled since 1997 (reaching 7.1% in the second quarter of 2000).At the same time, the MSAR has experienced mild deflation since 1998.  As for the external sector,
although Macau, China's merchandise trade account has been in deficit, this has been more than offset
by a large surplus in services trade.
3. Trade is critical to the economy;  exports and imports (of goods and services) were equivalent
to roughly 80% and 50% of GDP, respectively, in 19 99 (Table I.1).  In addition to keeping the MSAR
economy open to trade and foreign direct investment (FDI), the authorities have largely refrained
from interfering with the normal functioning of the free-market system.
Table I.1
Major features of Macau, China's economy
Area 23.8 sq. km. GDP (1999) P 51.1 billion
Population (1999)a437,455 GDP per capita (1999) US$14,145
Population growth (1994-99) 9.7% Exchange rate (fourth quarter 1999 ) P 8.0/US$
Labour force participation rate (1999) 64.7% Exports of goods and services/GDP (1999) 79.4%
Employment distribution (1999) Imports of goods and services/GDP (1999) 51.6%
Manufacturing 22.0%
Construction 8.1%
Services 69.3%
a End of year.
Source: Information provided by the Macau, China authorities.
(2) RECENT ECONOMIC DEVELOPMENTS
(i) Macroeconomic performance
4. After experiencing 3-4% growth in 1994-95, Macau, China recorded negative growth in 1996
partly as a result of weak demand in the real estate market.  With the Macau economy already in
recession, the outbreak of the Asian financial crisis in mid 1997 seriously compounded the difficult
economic situation facing Macau, China, particularly by reducing the number of tourists and, hence,
revenues from gambling and other tourism-related services.  Real GDP growth remained negativeWT/TPR/S/82 Trade Policy Review
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during the period 1996-99 (Table I.2).  The main factors behind this GDP shrinkage were the sharp
drop in business investment and weak private consumption;  public consumption was the only factor
contributing positively to growth during the period 1994-99.  The unemployment rate has been rising
since 1997, recording 6.4% in 1999, and reaching an unprecedented high of 7.1% in the second
quarter of 2000.  Inflation, measured by the General Consumer Price Index (excluding rents), has
been moderate or negative during the period under review;  in 1999, the Index declined by 3.2%.
Table I.2
Performance of Macau, China's economy, 1994-99
1994 1995 1996 1997 1998 1999
(Annual percentage change)
Real GDP 4.3 3.3 -0.4 -0.3 -4.6 -2.9
Private consumption 6.1 2.8 4.0 1.4 -0.9 1.7
Public consumption 7.2 6.9 4.5 4.1 2.4 9.5
Gross fixed capital formation 0.6 -7.5 -22.1 1.9 -12.7 -9.2
Exports 5.0 5.7 -0.6 -1.7 -2.5 0.9
Goods 7.2 3.6 0.8 3.8 3.5 4.4
Services 3.7 7.1 -1.4 -5.1 -6.6 -1.6
Imports 5.5 -0.8 -7.9 -1.1 -1.0 8.1
Goods 8.8 -0.7 -9.1 -4.3 -1.0 7.8
Services -8.6 -1.2 -1.6 13.9 -0.7 9.4
(Index 24-28 October 1983 = 100)
Effective exchange rate 107.3 106.0 107.7 112.9 110.5 111.5
(Annual percentage change)
Money supply (M2)a13.1 13.5 7.9 4.8 10.0 4.6
Consumer price index (excluding
rent of housing)6.3 8.6 4.8 3.5 0.2 -3.2
Rent of housing .. .. .. .. .. -3.2
(Per cent)
Interest ratesa
Prime rate (Hong Kong dollar) 8.5 8.5 8.5 9.5 9.0 8.5
Interbank rate (Macau Pataca)b
1-month 6.0 6.0 5.5 7.3 5.3 5.7
3-months 6.5 6.0 5.6 9.4 5.3 5.9
Unemployment rate 2.5 3.6 4.3 3.2 4.6 6.4
.. Not available.
a End of year.
b Macau Interbank Offered Rate.
Source: Information provided by the Macau, China authorities.Macau, China WT/TPR/S/82
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(ii) Macroeconomic policies
(a) Monetary and exchange rate policies
5. The autonomy of the MSAR in formulating its monetary policy is stipulated by the Basic
Law1;  the Law further stipulates that neither foreign exchange nor capital controls can be used.2  The
objective of monetary policy is to maintain the stability of both the currency and the financial system.
Accordingly, the Basic Law requires that the territory's currency, the Macau pataca, be fully backedby a reserve fund.  The exchange rate is pegged at 1.03 to the Hong Kong dollar, and hence indirectly
to the US dollar, under a currency-board type of arrangement (Box I.1).
3  Foreign reserves stood at
US$2.9 billion at the end of 1999 (more than 13.4 times the Macau pataca notes issues) compared
with US$ 2.0 billion at the end of 1994.
6. The pegging of the pataca to the Hong Kong dollar means that the authorities have little, if
any, scope for controlling the money supply and ther efore interest rates.  The outcome is relatively
high real interest rates, which constitutes a potential impediment to the territory's economic recovery.
The peg to the Hong Kong dollar and thus the U.S. do llar has also resulted in an effective appreciation
of the pataca, particularly in relation to the devalued currencies of those countries in the region much
more heavily affected by the Asian financial crisis;  nevertheless, the low share of these countries inthe MSRA's exports of goods and services may explain the moderate appreciation of the overall
effective exchange rate of the pataca.
4  The authorities believe that the advantages of the peg outweigh
its disadvantages.  One possibly major disadvantage is that the effective appreciation of the pataca,
particularly vis-à-vis the devalued currencies of neighbouring countries, due to the Asian crisis and
associated high real interest rates, may hamper both the Territory's economic recovery and the
Government's efforts to diversify the economy.  On the other hand, the authorities consider that
maintenance of the peg between the pataca and the Hong Kong dollar imparts a high degree ofstability to the financial system and the economy as a whole.
7. There are no exchange controls.  Nor are there any restrictions on capital flows or controls on
the use of payments or invisible receipts, apart from the obligation imposed on merchandise exporters
to convert 40% of their export proceeds in foreign currency into pataca.  The authorities maintain that
the sole objective of this regulation is to encourage local currency circulation, and that there are noother restrictions imposed on either fund flows or foreign exchange operations.
(b) Fiscal policy
8. The Basic Law requires the MSAR Government to strive to achieve fiscal balance, which
accords with Macau, China's traditional practice of prudent fiscal policy.  There has been a fiscal
surplus, albeit declining, since 1994;  the surplus in 1999 was P 306 million (0.6% of GDP), aboutone fifth of that in 1994.   The share of public expenditure in GDP, including by autonomous bodies
5,
                                                     
1 Article 107:  the Macau SAR Government shall, "on its own, formulate monetary and financial
policies".
2 Article 109.
3 The Hong Kong dollar pegged at 7.80 to the U.S. dollar.
4 For example, in 1997, Macau's exports to East Asian economies, except to Hong Kong, China;
Chinese Taipei;  Japan;  and China, were about 1.5% of its total exports.
5 Autonomous bodies involve the Services with Administrative Autonomy, which are directly funded
by the central budget, and the Autonomous Services and Fu nds, which are either funded by the central budget or
may be financed by other sources of income.  In 2000, there were five Services with Administrative Autonomy
and 38 Autonomous Services and Funds.WT/TPR/S/82 Trade Policy Review
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has been increasing since 1994, representing some 20% in 2000.  The accountability of the
Government and its autonomous bodies for expenditures, including those involving the procurementof goods and services, could be improved.
Box I.1:  Monetary institutions and arrangements
The framework of monetary institutions and arrangements in Macau, China has remained essentially
unchanged since the reversion of the territory to China.  Macau pataca banknotes are issued by two banks:the Bank of China and Banco Nacional Ultramarino, SA.  These two banks are required to surrenderHong Kong dollars to the Monetary Authority of Macau (AMCM) in return for the Certificates ofIndebtedness (CIs) required by law as backing for the bank notes issued by them, at the fixed rate of1.03 pataca per Hong Kong dollar.  The surrendered Hong Kong dollars are deposited in the official foreign
exchange reserves held by the AMCM.  The Macau pataca is legal tender in Macau, China, but the
Hong Kong dollar circulates widely alongside them.  Data provided by the authorities indicate that by theend of June 2000, Macau patacas and Hong Kong dolla rs, respectively, accounted for 27.1% and 53.9% of
M2, compared with 42.9% and 46.8% of M1.
The principle mandates conferred on the AMCM are to:
(i) advise the Chief Executive in the formulation and conduct of monetary, exchange-rate, financial,
and insurance policies in Macau, China;
(ii) ensure internal monetary stability and the external solvency of Macau's currency;
(iii) guide, coordinate and oversee money, foreign exchange, financial, and insurance markets in line
with the relevant rules, regulations, and laws;
(iv) monitor and ensure the stability of the financial system;
(iv) act as the central monetary depository and manage the territory's foreign exchange reserves and
other foreign assets;
(v) perform the duty of lender of last resort;  and
(vi) serve as the intermediary in the monetary and external financial relations of the MSAR.
Macau, China has operated a currency-board type of system since 1977, when the Territory switched its
currency peg from the Escudo, the legal tender of Portugal, to the Hong Kong dollar.  Bank notes and coins
must be fully backed by foreign reserves.  As a result of such backing requirements, the AMCM cannotprovide an overdraft facility for the Government and thereby monetize any budget deficit.
In addition to the mandates described above, the AMCM may provide short-term liquidity to banks.The AMCM has also been responsible for the management of the MSAR fiscal reserve fund (formerly
known as land fund) since 1 April 2000.
Source:   Macau SAR Government.
9. Taxes on gambling and other exclusive concessions accounted for about 31% of government
revenue in 1998 (Table I.3).  As about 95% of the land in the MSAR is owned by its Government, the
leasing of land is another major source of government revenue.  Profits from land concessions and the
renewal of previous concessions are allocated in equal shares to the Reserve Fund and the budget of
the MSAR.6
                                                     
6 The Reserve Fund amounted to about P 10 billion in April 2000;  responsibility for the management
of the Fund rests with the Monetary Authority of Macau (AMCM).Macau, China WT/TPR/S/82
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Table I.3
Government budget, 1994-99
(Pataca million)
1994 1995 1996 1997 1998 1999
Spending 11,251.3 15,468.4 14,681.3 14,240.7 15,505.7 16,636.2
Revenues 12,811.2 16,191.0 14,711.3 15,000.6 15,548.4 16,942.6
Direct tax 6,060.4 6,716.0 6,425.6 7,583.5 6,346.0 5,978.9
Corporate tax 623.4 595.1 555.5 569.6 632.7 573.9
Professional tax 242.9 258.4 292.2 308.6 296.5 293.1
Industrial tax 26.8 27.1 27.2 27.2 26.7 26.8
Property tax 120.4 134.3 162.9 199.0 230.4 260.2
Property transfer tax 402.1 324.5 325.7 344.2 260.7 346.6
Gifts and inheritance tax 14.3 19.4 10.9 7.5 13.3 13.4
Gambling and other exclusive
concessionsa 4,630.6 5,357.3 5,051.2 6,127.4 4,885.6 4,464.9
Indirect tax 715.7 648.9 712.3 644.4 573.0 578.8
Consumption tax 401.0 343.0 371.8 172.6 139.7 159.1
Vehicle tax - - - 156.5 126.1 96.2
Stamp duties 190.6 202.6 227.7 213.8 214.1 238.9
Tourism tax 124.1 103.3 112.8 101.5 93.1 84.6
Other sources 6,035.1 8,825.1 7,573.4 6,772.7 8,629.4 10,385.0
Entrepreneurial and property incomeb2,505.3 746.4 628.4 463.8 482.9 838.7
Export-related feesc24.9 9.1 7.2 8.0 7.1 0.0
Other tax 780.6 2,734.9 908.6 1,874.5 3,141.7 2,547.3
Autonomous 2,724.3 5,334.8 6,029.2 4,426.3 4,997.7 6,999.0
a Concessions of exclusiveness for exploration, gambling, telecommunications, electricity, water supply and others;  gambling 
accounted for 95% of total revenue from concessions in 1999.
b Receipts from land concessions.
c Levied for the issuance of certificates of origin.
Source: Information provided by the Macau, China authorities.
(iii) Structural/industrial policies
10. During the period under review, it appears that the Government has not attempted to
materially influence the long-run structural ev olution of Macau, China's economy either through
border protection or internal measures.  Applied tariffs are zero, and non-tariff border measures are
almost absent (Chapter III(2)(v));  non-tariff border measures that do exist stem from Macau, China's
obligations under various international undertakings (for health, safety, security or environmental
reasons).  At the same time, little, if any, direct as sistance is provided to specific firms or industries
(Chapter III(4)(ii));  the Government has instead focused on the provision of support for thedevelopment of infrastructure and the adoption of new technologies. The Government does use
various tax incentives as instruments of industrial policy (Chapter III(4)(i)).  More importantly,
however, the MSAR's internal tax system is characterized by a low level of taxation and heavy
reliance on direct taxes, particularly those derived from gambling;  low tax rates contribute to the
attractiveness of the MSAR for domestic and foreign investors.  The stance of minimum interferencewith market forces extends to competition policy, with the authorities eschewing a comprehensive
competition law;  competition thus appears to be  lacking in several services sectors, such as
electricity, water, telecommunications, transport, and gambling.WT/TPR/S/82 Trade Policy Review
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11. Macau, China's industrial structure remains largel y services oriented;  services' share of GDP
rose from some 88% in 1995 to about 90% in 1998.  The share of manufacturing also rose from 7.9%
to 9.3% during the same period, while that of construction declined (Chapter IV).  With
manufacturing accounting for only 9.3% of GDP and employing roughly 20% of workforce, labour
productivity in the sector is much lower than in services, for example;  manufacturing's relatively low
labour productivity constitutes an impediment to the sector's competitiveness.
(3) TRADE DEVELOPMENTS
12. Exports of goods and services by Macau, China were equivalent to 79.4% of its GDP in 1999,
a substantial increase from 72.9% in 1994;  imports of goods and services were equivalent to 51.6%
of Macau, China's GDP, compared with 49.9% in 1994.7
13. Macau's merchandise trade was in deficit during 1994-99;  its trade deficit amounted to
US$299 million in 1999 (Table I.4).8  In the period 1994-97, exports grew, on average, by 4.8%
annually;  exports remained almost unchanged in 1998, but increased again in 1999.  Reflecting weak
domestic demand, imports declined between 1994 and 1998, except in 1997.  Imports rebounded in
1999;  however, the authorities ascribe this rebound to the one-off purchase of aircraft equipment and
expenditure made in relation to the transfer of sovereignty process.
14. By contrast, Macau's services trade has shown a large surplus;  exports of services were
considerable higher than those of goods during the period under review.  More than 90% of services
exports comprised non-residents' expenditure in the domestic market, e.g. on gambling and tourism
(Table I.5).
Table I.4
Estimates of Macau, China's external sector, 1994-99
(US$ million)
1994 1995 1996 1997 1998 1999
1. Merchandise exports (f.o.b.) 1,863.6 1,998.2 1,995.3 2,146.1 2,140.9 2,196.2
2. Merchandise imports (c.i.f.) 2,673.5 2,669.3 2,514.1 2,521.6 2,397.5 2,495.5
3. Trade balance (1-2) -809.9 -671.1 -518.7 -375.5 -256.6 -299.3
4. Services exports 2,719.8 3,155.1 3,251.7 3,160.6 2,844.1 2,683.1
5. Services imports 466.1 506.1 529.8 628.1 633.6 677.6
6. Services balance (4-5) 2,253.7 2,649.0 2,721.9 2,532.5 2,210.6 2,005.5
7. Balance of goods and
services trade (3+6)1,443.8 1,977.9 2,223.2 2,157.0 1,953.9 1,706.2
Foreign exchange reserves .. .. .. .. .. ..
(in months of imports of
goods and services).. .. .. .. .. ..
Memorandum:  Exchange rate
(Patacas per US$)7.96 7.97 7.97 7.97 7.98 8.0
.. Not available.
Source: Information provided by the Macau, China authorities.
                                                     
7 Data provided by the Macau, China authorities.
8 The current account was in surplus and grew annually by 7.5% on average during the period 1994-98.
The Monetary Authority of Macau (AMCM) began compiling balance-of-payments data at the end of 1998.
The authorities indicate that, owing to the lack of data for some financial and other variables, the current, capital
and financial accounts can be misleading.Macau, China WT/TPR/S/82
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Table I.5
Exports and imports of services by category, 1993-99
(Pataca million and per cent)
1993 1994 1995 1996 1997 1998 1999
Total exports (P million) 19,754.8 21,676.7 25,128.7 25,908.3 25,226.5 22,696.3 21,477.7
Share in total (%) 100 100 100 100 100 100 100
Gambling 67.6 68.5 66.7 61.4 68.2 64.5 61.1
Accommodation 3.8 3.8 3.7 3.9 3.2 3.3 3.3
Other expenditure of
non-residents in the domesticmarket26.6 25.8 28.0 30.0 22.1 25.2 27.5
Postal and telecommunication
services0.9 0.9 0.9 0.8 0.8 0.9 0.8
Industrial services 1.1 0.9 0.7 0.8 0.9 1.4 1.3
Non-industrial services 0.0 0.0 0.1 3.1 4.8 4.8 6.1
Total imports (P million) 3,593.6 3,715.3 4,031.4 4,220.6 5,012.9 5,055.8 5,423.9
Share in total (%) 100 100 100 100 100 100 100
Household final consumption
expenditure abroad24.0 28.3 30.5 33.8 30.9 33.1 34.3
Government expenditure abroad 4.2 4.6 4.5 3.6 2.9 3.4 3.5
Postal and telecommunication
services7.3 7.6 8.1 7.5 6.5 6.4 5.2
Transport services 10.7 11.5 12.5 11.6 10.4 9.1 8.2
Industrial services 7.4 10.4 11.8 11.9 13.8 12.0 12.0
Non-industrial services 17.9 7.5 4.8 6.7 14.4 16.0 17.3
Insurance and freight 28.6 30.2 27.8 25.0 21.1 19.9 19.4
Source: Information provided by the Macau, China authorities.
(i) Composition of merchandise trade
15. Macau's exports exhibit high product concentration (Table AI.1).  During 1994-99, the shares
of clothing and textiles in total exports increased from 64.4% to 74.2% and from 8.6% to 10.4%
(Chart I.1).  The share of other consumer goods , which was 12% in 1994, declined to about 5.6% in
1999;  machinery and transport equipment increased from 3.5% in 1994 to 4.8% in 1999.
16. Imports are considerably more diversified.  The share of textiles in total imports increased
during the period 1994-98, before declining slightly in 1999 to around 40% (Table AI.2).  Other major
imports include machinery and transport equipment, food, clothing, fuels, and other consumer goods.
(ii) Direction of merchandise trade
17. Macau, China's major export destinations are the United States, the European Union, and
Hong Kong, China (Table AI.3).  During 1994-99, the United States' share of exports increased from
37.2% to 46.9%, while that of the European Union declined slightly, from 32.6% to 30.2%.  Mainland
China's share of Macau's exports also declined, from 12.7% to 9.2% (Chart I.2).
18. The major suppliers of merchandise to Macau, China are Mainland China;
Hong Kong, China;  and Chinese Taipei (Table AI.4).  Reflecting the economic integration of Macau,China with the Mainland, the share of imports from  the Mainland in Macau's total imports increased
from 18.8% in 1994 to 35.6% in 1999.  However, the share from Hong Kong, China has declined
considerably;  the authorities state that this may reflect a decline of Hong Kong's role as the source of
raw materials originally produced in the Mainland, and of semi-manufactures, due possibly to the
relocation of Hong Kong manufacturers to China in the 1990s.WT/TPR/S/82 Trade Policy Review
Page 8
Chart I.1
Product composition of merchandise trade, 1994 and 1999
1994 1999
(a)    Ex ports 
(b)    Imports 
Total: US$2,126.3 million Total: US$2,037.5 million
Export figures for "other" include mining.
Data provided by the authorities of Macau, China.Agriculture
16.4%Mining
5.7%Other semi-
manufactures
8.0%
Other 
consumer 
goods  6.2%Iron & steel
2.1%
Machinery & 
transport equip.
19.7%Chemicals
4.5%Total: US$1,866.1 million Total: US$2,197.5 millionClothing
64.4%
Agriculture
6.0%Agriculture  1.9%
Other consumer goods  
5.6%
Agriculture 
12.1%
Other consumer 
goods   5.8%Mining
6.7%Iron & steel
    0.6%
Textiles
39.4%Other semi-
manuf.
3.7%Chemicals
3.9%Clothing
74.2%
Manufactures
76.5%Other 
manufactures
8.9%
Other  0.1%
Other
 consumer
 goods11.9%Textiles
 8.6%
Manufactures
93.8%Manufactures
97.5%Textiles  
10.4%
Other manufactures 
7.3%
Clothing  
4.2%
Textiles
31.9%Machinery & 
transport equip. 
 17.5%
Clothing
8.3%Other 2.0%
Manufactures
79.3%Other 1.4%Other  0.5%
Note:     
Source:Macau, China WT/TPR/S/82
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Chart I.2
Merchandise trade by main origin and destination, 1994 and 1999
1994(a)    Ex ports 
(b)    Imports
Total: US$2,126.3 million Total: US$2,037.5 million
Source:   Data provided by the authorities of Macau, China.Other East Asia  
2.6%
Hong Kong, China
30.4%
Japan
12.8%Chinese Taipei
6.8%Other East Asia
4.8%
China
18.8%Total: US$1,866.1 million1999
Total: US$2,197.5 millionOther East Asia 
3.5%Other   3.4%
Hong Kong, China
18.1%
Chinese Taipei
9.5%
Japan
6.7%Other East Asia
9.1%
China
35.6%East Asia
73.6%China
12.7%United States
37.2%
Hong Kong, China
11.1%EU(15)
32.6%East Asia
26.5%
Hong Kong, China
6.8%United States
46.9%
EU(15)
30.2%
United States
6.8%United States
5.1%EU15
15.5%
Other 4.2%Other  3.1%EU15
12.9%
East Asia
78.9%Other 3.7%
E. Asia
19.5%
1994 1999China
9.2%WT/TPR/S/82 Trade Policy Review
Page 10
(4) FOREIGN DIRECT INVESTMENT
19. According to a recent survey by the Government9, more than half of the total stock of foreign
direct investment (FDI) into Macau, China up un til 1998 came from Hong Kong, China;  the next
largest source of FDI was Mainland China, fo llowed by France, Singapore, and Portugal.10  About
58% of the inbound FDI went to electricity, gas, and water supply, 20% to manufacturing and 18% to
hotels and tourism (Table I.6).11  No official data on Macau's outbound FDI were available.
Table I.6
Stock of foreign direct investment into Macau, China, 1998(Pataca million)
Total FDIa
(Net book value) (Historical cost)
Country/Territory
Total 3,122.4 6,756.6
Hong Kong, China 1,631.1 3,744.4
China (mainland) 558.7 856.9
France 318.5 738.6
Singapore 294.0 681.8
Portugal 293.2 612.0
Others 27.0 123.0
Sectorsb
Total 3,122.4 6,756.6
Mining and quarrying industries 28.2 48.9
Manufacturing 697.6 1,397.3
Tobacco products 62.6 84.2
Textiles 163.6 352.8
Garments, dressing and dyeing of fur 147.7 283.8
Other non-metallic mineral products 151.1 299.0
Office, accounting and computing machinery 44.7 76.2
Electrical machinery and apparatus n.e.c. 60.6 77.4
Furniture;  manufacturing n.e.c. 14.2 134.7
Electricity, gas and water supply 1,705.0 3,927.4
Hotels and similar 557.0 1,195.3
Air transport 134.5 187.6
n.e.c. Not classified elsewhere.
a Data concern foreign direct investment in industrial, hotel, and air transport subsectors.
b According to the Macau Classification of Economic Activities.
Source: Information provided by the Macau, China authorities.
                                                     
9 IPIM (1998).
10 On a historical cost basis.
11 FDI refers to all investments in Macau, China made by non-resident, direct investors holding 10% or
more of a company's equity capital.  The country of resi dence of the investor refers to:  in the case of the
investor being an individual, the place where the investor  has resided the longest during the period of analysis,
and where the investor is a company or a public entity, the place where the branch office is situated or the place
of production or business (if the company does not carry out any production, e.g. in the case of holding
company, the country of residence then refers to the place of registration of the company).Macau, China WT/TPR/S/82
Page 11
(5) PROSPECTS
20. The Government forecasts growth of 2.4% for 2000, which is considerable lower than that of
Macau's neighbours, including Mainland China and Hong Kong, China.  But, there are some other
positive signs of economic recovery;  the number of visitors between January and September 2000
increased by 24.3% compared with the same period of the previous year, and exports increased by
about 17% in the first eight months of the year, compared with the growth of imports (+8.7% for thesame period).  However, in the first quarter of 2000, the real estate sector was still weak.  In order to
alleviate high unemployment, the Government has, inter alia , been encouraging more public
infrastructure projects, reducing the amount of quotas on foreign workers, and providing additional
employment training and re-training courses.
21. The envisaged recovery of the Hong Kong SAR and several other South-East Asian
economies, the major sources of tourists to Macau, China (Table IV.3), as well as, the strong recent
growth in the United States and the European Union, where most of Macau, China's clothing exports
are directed, also augurs well for economic recovery.  These developments complement the gradual
rebound in consumer spending and corporate activity.  It remains to be seen whether the high real
interest rates prevailing in Macau, China and the rela ted high level of the real effective exchange rate
hinder that recovery.
22. The authorities maintain that China's accession to the WTO would be broadly beneficial,
helping to create more business opportunities in  the MSAR.  Nonetheless, as China is a major
exporter of textiles and clothing, its accession to the WTO appears to pose a major threat to the future
of the Territory's textile and clothing sector, which currently accounts for a lion's share of its
merchandise exports.  China's accession to the WTO, together with the termination in 2004 of the
Agreement on Textiles and Clothing and the conseq uent removal of the long-standing quota system,
may well increase the need for the economy to diversify.