RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/181 
26 March 2007  
 
(07-1169) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
MACAO, CHINA 
 
  
 
This report, prepared for the third Trad e Policy Review of Macao, China, has 
been drawn up by the WTO Secretaria t on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarification from Macao, China on its trade 
policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Mario Kakabadse (tel:  022 739 5172). 
 
Document WT/TPR/G/181 contains the policy statement submitted by 
Macao, China. 
 
 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trad e Policy Review Body on Macao, China. Macao, China WT/TPR/S/181 
 Page iii 
 
 
CONTENTS 
 
    Page 
 
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT REGIME  viii 
 (3) T RADE POLICIES AND PRACTICES  viii 
 (4) S ECTORAL POLICY DEVELOPMENTS  ix 
 (5) O UTLOOK  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) I NTRODUCTION  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (i) Macroeconomic performance 2  (ii) Macroeconomic policies 6 
 (iii) Balance of payments 8 
 (iv) Structural policies 9 
 (3) D
EVELOPMENTS IN MERCHANDISE TRADE  9 
 (i) Composition of merchandise trade 10 
 (ii) Direction of trade 10 
 (4) F OREIGN DIRECT INVESTMENT  13 
 (5) O UTLOOK  14 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 15 
 (1) I NTRODUCTION  15 
 (2) G ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  15 
 (3) T RADE POLICY FORMULATION AND IMPLEMENTATION  17 
 (4) T RADE POLICY OBJECTIVES  21 
 (5) T RADE AGREEMENTS AND ARRANGEMENTS  22 
 (i) Multilateral agreements 22 
 (ii) Regional agreements 23 
 (iii) Bilateral agreements 23 
 (6) T RADE DISPUTES AND CONSULTATIONS  25 
 (7) F OREIGN INVESTMENT REGIME  25 
III. TRADE POLICIES AND PRACTICES BY MEASURE 28 
 (1) I NTRODUCTION  28 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  29 
 (i) Procedures 29  (ii) Customs valuation and rules of origin 30 
 (iii) Tariffs 30 
 (iv) Other charges on imports 31 
 (v) Import licensing, prohibitions, and other restrictions 32 
 (vi) Anti-dumping, countervailing, and safeguard measures 35  (vii) State trading, co untertrade, and cartels 35 WT/TPR/S/181 Trade Policy Review 
Page iv 
 
 
    Page 
 
 (viii) Standards and other technical requirements 35 
 (ix) Trade-related investment measures 38  (x) Government procurement 38 
 (3) M
EASURES AFFECTING EXPORTS  41 
 (i) Procedures and documentation 41  (ii) Export taxes, charges, and levies 41 
 (iii) Export cartels and other arrangements 42 
 (iv) Export prohibitions, restrictions, and licensing 42  (v) Export support 43 
 (vi) Export finance, insurance, and guarantees 43 
  (vii) Export promotion and marketing assistance 43 
 (4) M EASURES AFFECTING PRODUCTION AND TRADE  43 
 (i) Taxation system and tax incentives 43 
 (ii) Non-tax incentives and other forms of assistance 46  (iii) Intellectual property rights protection 49 
 (iv) Competition policy 52 
 (v) Corporate governance 54 
IV. TRADE POLICIES BY SECTOR 55 
 (1) I
NTRODUCTION  55 
 (2) M ANUFACTURING  56 
 (i) Textiles and clothing 57 
 (ii) Industrial diversification 58  (iii) Construction 59 
 (3) S
ERVICES  59 
 (i) Telecommunications 61  (ii) Financial services 64 
 (iii) Transport 68 
 (iv) Tourism 71  (v) Gaming 72 
REFERENCES   77 
APPENDIX TABLES  79 
 
 
 Macao, China WT/TPR/S/181 
 Page v 
 
 
    Page 
CHARTS 
 
I. ECONOMIC ENVIRONMENT 
I.1 Production composition of merchandise trade, 2001 and 2005 11 
I.2 Direction of merchandise trade, 2001 and 2005 12  
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 II.1 Structure of the Secretar iat of Economy and Finance 18 
II.2 Structure of Macao Economic Services 18 
  
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Major features of Macao, China's economy, 2006 2 I.2 Performance of Macao, China's economy, 2000-06 3 
I.3 Resident and non-resident workers, 2003-06 5 
I.4 Government budget and fiscal reserves, 2000-06 7 
I.5 Balance of payments, 2000-05 8 
I.6 Inward direct investment by industry and investors' place of residence, 2001-05 13 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 II.1 Main trade-related legislation in Macao, China 19 
II.2 Selected notifications by Macao, China under WTO Agreements, March 2007 22 
II.3 Macao, China's exports u nder GSP treatment, 2001-05 25 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 III.1 Consumption taxes, 2006 31 
III.2 Responsibility of government bodies for import authorizations, 2001 and 2005 32 
III.3 Import licensing regime, 2005 33 III.4 Accredited laboratories, December 2005 36 
III.5 Government procurement, 2001-05 39 
III.6 Local and foreign procurement contracts, 2001-05 39 III.7 Type of tendering in public sector construction projects, 2003-06 40 
III.8 Regulated exports and governing legislation, 2001 and 2005 42 
III.9 Government account, 2001-06 44 
III.10 Main types of taxation and re lated incentives in Macao, China 44 
III.11 Estimated tax revenues forgone as a result of incentives/exemptions, 2001-05 45 III.12 Subsidies granted, 2001-05 46 
III.13 Violations of intellectual and industrial property rights, 2001-05 51 
 IV. TRADE POLICIES BY SECTOR 
 
IV.1 Production-based GDP at current prices by sector, 2002-05 55 IV.2 Employed population by economic activity, 2003-05 55 
IV.3 Structure of manufacturing industry, 2005 57 
IV.4 Telecommunication market, 1999-05 62 
 
 WT/TPR/S/181 Trade Policy Review 
Page vi 
 
 
    Page 
 
IV.5 Major financial sector indicators, 2001-05 64 
IV.6 Financial institutions, 2001-05 65 IV.7 Total visitor arrivals, by source and method of travel, 2000-06 68 
IV.8 Total exports by means of transport, 2001-05 69 
IV.9 Macao, China visitors receipts, 2000-06 72 IV.10 Investment projects of gaming concessionaires and sub-concessionaires, 2006 74 
IV.11 Gross revenue of concessionaires and share of total gross revenue of games of fortune, 2002-06 75 
IV.12 Overview of gaming in Macao, China, 2002-06 76  
 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1(a) Total merchandise exports by group of products, 1999-05 81 
AI.1(b) Domestic merchandise exports by group of products, 1999-05 82 
AI.1(c) Merchandise re-exports by group of products, 1999-05 83 
AI.2 Merchandise imports by group of products, 1999-05 84 AI.3(a) Total merchandise exports by destination, 1999-05 85 
AI.3(b) Domestic merchandise exports by destination, 1999-05 86 
AI.3(c) Merchandise re-exports by destination, 1999-05 87 AI.4 Merchandise imports by origin, 1999-05 88 
 
  
 
   Macao, China WT/TPR/S/181 
 Page vii 
 
 
SUMMARY OBSERVATIONS 
1. The economy of Macao, China having 
recovered from the Asian financial crisis and subsequently SARS, grew at an average annual rate of 14.5% in the period 2001 to 2005;  in 2006, growth is expected to have 
been well above that average, perhaps close to 
20%.  Growth has been led by a rapid increase in tourism, underpinned by the gaming industry.  While the overall direction of trade and investment policies of the Macao Special 
Administrative Region (SAR) is broadly the 
same as at the time of its previous Review in 2001, great emphasis has been placed since 2002 on the opening of gaming, which now constitutes the cornerstone of the economy of the Macao SAR.  Competition between gaming 
operators has stimulated massive private 
investment in casinos, hotel resorts, and other tourist facilities, and th is is expected to 
continue into the foreseeable future.  In the same period there has been a significant and 
increasing inflow of tourists from the 
Mainland.  The introduction in 2003 of the "Individual Traveller Scheme", which relaxed visa restrictions on travel by Mainland Chinese, has enabled a strong growth in 
tourism to Macao, resulting in the more than 
doubling of visitors to over 22 million between 
2000 and 2006.  
(1) E
CONOMIC ENVIRONMENT  
2. Badly hit by the 1997-98 Asian 
financial crisis, the economy recovered in 2000 in response to external demand  and then slowed as the world economy entered a sharp downturn.  Growth since then has been strong 
with GDP growing by 10.1% in 2002, 
supported by a strong expansion in gaming and tourism.  Except for a temporary decline of 3.1% in the second quarter of 2003, due to the effects of the SARS outbreak, the economy experienced strong growth in the second half 
of that year, partly supported by the 
introduction of the Individual Traveller Scheme, which led to a tourism boom in the latter months of 2003.  The expansion in the tourism sector continued into 2004 as strong 
investments continued to be made in 
infrastructure as well as in casinos and hotels.  The overall result was a very impressive and 
historically high 28% growth of GDP in 2004.  Real GDP growth was more moderate in 2005 at 6.7%.  The inflation rate rose from 1% in 
2004 to 4.4% in 2005, reflecting the overall 
rapid pace of economic growth. 
3. Macao, China's currency, the pataca, 
remains pegged to the Hong Kong dollar and hence indirectly to the U.S. dollar.  This means that interest rates in Macao, China are determined largely by the U.S. Federal 
Reserve, rather than the territory's monetary 
authority.  The Currency Board Arrangement,  which ensures full backing of monetary liabilities, is the underlying monetary mechanism to support the linked rate.  Foreign reserves stood at US$6.7 billion at the end of 
2005 compared with US$3.3 billion at the end 
of 2000, representing approximately nine times the monetary base and covering 11.8 months of the total value of imports of 
goods and services in 2005. 
4. The Basic Law requires the MSAR 
Government to strive to achieve fiscal balance, 
and throughout the period under review, the 
Government has consistently run a budget surplus, mainly on the basis of revenue from the gaming industry.  The fiscal position has benefited from a thriving economy in recent 
years;  income from gaming tripled between 
2001 and 2005. 
5. Macao, China is heavily dependent on 
the external sector. In 2005, exports of goods and services were equivalent to 96% of GDP.  Gaming and related tourism services constitute the core of the economy with gross 
gaming receipts accounting for 49% of GDP 
in 2005 and direct taxes on gaming providing 75% of  government revenue in 2006.  Flows of foreign direct investment into Macao, China more than tripled between 2001 and 2004 and  nearly quadrupled in the recreational and 
gaming sector;  it is expected to increase 
substantially in 2006 and beyond.  Previous foreign investment projects have been dwarfed by recent commitments by foreign investors to develop the gaming, hotels, and conventions 
subsector.  The liberalization of the gaming 
industry, and the competition thereby WT/TPR/S/181 Trade Policy Review 
Page viii 
 
 
unleashed, have played an important role in 
attracting new investments. 
(2) TRADE AND INVESTMENT REGIME  
6. In line with the principle of "one 
country, two systems", the Basic Law, the main constitutional document governing the MSAR, grants it a high degree of autonomy in economic matters including the conduct of 
foreign trade relations.  Macao, China's 
institutional and policy framework has remained largely unchanged during the review period.  The main change in trade policy since 2001 is the implementation in 2004 of a 
free-trade agreement, the Closer Economic 
Partnership Arrangement (CEPA), with Mainland China aimed at developing joint economic prosperity and development through 
liberalization of goods and services trade.  
Macao SAR exports more services than 
merchandise and it is possibly the services sector, and the sale of services to the Pearl River Delta region of neighbouring Guandong 
province, rather than manufacturing, that will make more effective use of preferential access 
to the Chinese market  under CEPA's services 
provisions.  Macao, China's trade and investment regime remains relatively open and, in general, continues to rely on market forces to determine the allocation of resources 
in the manufacturing sector, which however, 
now accounts for only 5% of GDP.  The partial liberalization of the services sector has played a key role in government efforts to diversify the economy by attracting foreign investment and maintaining an investor-friendly environment.  
(3) T
RADE POLICIES AND PRACTICES  
7. Restrictions at the border are few. 
Imports enter the Region duty-free although 
the scope of Macao, China's bindings remains limited.  Nearly 70% of Macao, China's tariff lines have not been b ound although it seems 
that there are plans to progressively expand their coverage.  Tariff lines are bound at a 
zero rate, and this, together with 
Macao, China's status as a free port under the Basic Law,  would appear to exclude increases in applied rates for bound tariff lines as well as those that are unbound.  Although 
consumption taxes are levied on imports and 
domestically produced goods alike, they fall disproportionately on imports since there is 
little or no domestic production of these goods.  
Steps in trade facilita tion have focused on the 
introduction of electronic customs clearance and documentation procedures.  The few non-tariff border measures include import 
licensing and prohibitions aimed at ensuring 
security as well as protecting public health and the environment.  Correspondingly, there are virtually no government controls on exports other than export licensing and restrictions maintained for implementing UN 
sanctions.  Licensing  arrangements under the 
WTO Agreement on Textiles and Clothing were eliminated at the end of 2004.  
Macao, China has no legal instrument protecting domestic producers from the entry 
of dumped or subsidized  products nor is there 
any legislation on safeguards. 
8. In 2001, optical-media piracy 
constituted a serious problem for the authorities.  During the review period, Macao, China has made a number of improvements in reinforcing protection of 
intellectual property rights.  It has tightened 
controls over optical disc manufacturing and stepped up street-level IPR enforcement.  Also, Macao, China's courts have implemented an expedited prosecution system that allows a suspect to be brought to trial expeditiously.  It 
appears that as a result of such enforcement 
actions, virtually all illicit optical disc manufacturers in Macao, China have been 
shut down. 
9. Macao, China, which is not a party to 
the GPA, has not made any significant changes to its legislation on government 
procurement since 2001, but it has taken steps 
to simplify procedures and enhance transparency in order to attract more bids.  However, in the construction sector, open tendering has accounted for less than 10% of tenders during the period under review. 
10. Macao, China's tax system is 
characterized by a low overall level of 
taxation and a pronounced reliance on direct Macao, China WT/TPR/S/181 
 Page ix 
 
 
taxes, in particular those derived from gaming, 
which account for three quarters of government revenue.  As in 2001, most direct taxes, including those on profits and 
employment income, are levied at low rates, 
which helps to make Macao, China attractive to domestic and foreign investors.  At the same time, the tax system is the main instrument used to assist production and trade with 
various tax incentives for projects that 
promote industrial diversification, create employment, foster technological development, and encourage exports.  The Government has also increased funds for small and 
medium-sized enterprises. 
11. Policy-making seems unnecessarily 
opaque in several areas, such as government 
procurement, use of tax incentives, and the 
allocation of government-owned land, a potentially important policy instrument given the scarcity of land in Macao, China.  Also, 
there appears to be a lack of transparency in 
policy and decision-making in a number of 
services subsectors. 
12. Although Macao, China has no 
comprehensive competition policy, the 1999 Commercial Code lays down general rules to protect economic freedom and curb business practices that restrain competition.  At the 
sectoral level, the most important economic 
policy action taken during the review period to open up competition has been the liberalization of the gaming sector after the private monopoly officially came to an end in 2002.  In the telecommunications sector the 
mobile phone market has been liberalized.  
However, other key services, such as basic telecom, electricity, water, and transport continue to be provided by private companies with exclusive rights under government concessions. 
(4) S
ECTORAL POLICY DEVELOPMENTS   
13. Over the past two decades, Macao has 
been transformed from a manufacturing centre 
into a predominantly services-oriented 
economy, which now re lies heavily on gaming 
and related tourism earnings.  The services sector accounts for almost 90% of GDP and 75% of  total employment.  The Government 
expects this trend to continue, owing to heavy investments in resort and entertainment projects and related infrastructural 
development, which are transforming 
Macao SAR into the world's leading gaming destination.  Gaming and tourism are set to remain the basis of economic growth;  to attract higher-end tourists, the authorities are 
encouraging the development of non-gambling 
attractions, building the image of a stable society, and continuing to manage gambling liberalization in an orderly manner.  In this respect, legislation passed in 2006 is an important step in establishing an effective anti-money laundering regime. 
14. At the time of Macao, China's previous 
Review, in 2001, it was suggested that 
competition in several services markets – 
provided by private companies with exclusive rights under government concessions – could be improved.  In par ticular, gaming services 
were a private monopoly.  By liberalizing 
gaming ownership and granting licences to three bidders in 2002 (subsequently expanded to include three further sub-concessions), the Macao SAR authorities introduced competition 
and injected new dynamism into the sector, 
with positive spill-over effects on the rest of the economy.  Casino magnates from Hong Kong, China, the United States, and Australia are leading the gaming industry towards growth as their companies compete 
for market share.  Consumers, including 
gamblers, convention goers, and tourists, are increasingly able to choose from a bigger variety of mass-market games, shows and entertainment, and hotels and restaurants.  
The massive investment under way in hotels, 
resorts, and casinos has led to Macao outstripping Las Vegas in terms of casino 
gaming revenues for 2006. 
15. The authorities have also partially 
liberalized the telecommunications sector, opening up mobile communications and 
internet services to competition.  The 
competitiveness of other key services, such as 
basic telecommunications, electricity, water, and  transport, where there have been WT/TPR/S/181 Trade Policy Review 
Page x 
 
 
monopoly restraints on competition, are being 
severely tested by the frenetic pace of construction of new resort and casino projects, the requisite infrastructural development, and the large and increasing influx of visitors. 
16. The manufacturing sector's declining 
share of GDP was 4.3% in 2005 although it 
still accounts for around 15% of employment, indicating lagging productivity with respect to the rest of the economy.  In response to the decline of manufacturing, dominated by 
textiles and clothing, and the abolition of 
textiles quotas in 2005, the authorities are trying to use the resources and opportunities offered by the Closer Economic Partnership Agreement (CEPA) with Mainland China;  they are encouraging manufacturers to bring 
new industries into the newly established 
Macao-Zhuhai Transborder Industrial Park to expand the narrow base of the existing manufacturing structure.  The objective is to attract higher-end m anufacturing production 
in order to take the advantage of the tariff 
concessions under the CEPA to access the larger Mainland Chinese market.  
Agriculture's importance is negligible and no official information on its contribution to Macao SAR's GDP is published. 
17. In part to hedge against the risk of 
demand not keeping pace with supply in the 
tourism sector, the Government has taken measures to encourage the diversification of the economy.  It introduced a number of incentive schemes for industrial sectors, including the introduction of a guaranteed 
loan scheme to small and medium-sized 
enterprises, as well as fiscal incentives for the 
corporate sector as a whole.  
(5) O
UTLOOK  
18. The economy again grew rapidly in 
2006, at some 15.4% in the past three quarters of the year and subsequently accelerating, for an expected annual rate of close to 20%.  Services exports remained the main driving force of the territory's economy.  As large 
construction projects come on stream, the opening of brand-name casinos, hotel resorts, and other tourism-related facilities are 
expected to be strong tourist attractions.  
Visitor arrivals have continued to increase along with the wider implementation of Mainland China's Individual Traveller Scheme and, as of May 2006, covers residents from 
44 Chinese cities among the highest in terms 
of annual income and consumption expenditure.  The inflation rate is expected to have edged up to over 6%, and the unemployment rate to have dropped further to below 4% as new jobs were created by new 
large hotels and casinos and related services.  
For 2007, the authorities expect economic growth to continue in the 12-15% range on the basis of strong capital formation and growth 
in services exports. 
19. The main thrust of economic policy in 
the years after 2006 will be to ensure the 
smooth progress of gambling sector 
liberalization in coordination with the healthy development of other sectors.  As was made clear in the MSAR Chief Executive's Policy Address for 2007, the gaming industry is only 
one constitutive element in the tourism sector, 
which is not focused on pursuing a path of unilateral development based on gaming.  The high dependence on gaming and tourism poses risks to economic stability.  The tourism sector tends to be highly sensitive and vulnerable to 
external shocks, such as avian flu or other 
epidemics;  adverse performance in the MSAR's main tourism markets;  or shifts in overseas interest in casino investment.  The Government is therefore prudently pursuing 
efforts to diversify the economy in general and 
the tourism market in particular.  Regarding the latter, the many new private investment projects have the potential to turn Macao, China's economy from a day-trip market heavily dependent on gaming revenues 
to a more diversified family resort and 
business-conference destination.