Anselmo L S Teng: The economic and financial development of Macao in
the context of growth of China
Keynote speech by Mr Anselmo L S Teng, Chairman of the Monetary Authority of Macao, at
the 19th "Meeting in Lisbon" of Delegations to the IMF/World Bank Annual Meetings 2009
from African Portuguese Speaking Countries and East Timor, Lisbon, 29 September 2009.
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Governor of the Bank of Portugal, Dr. Vitor Constâncio,
Governors of the Central Banks of African Portuguese Speaking Countries and East Timor
Dear delegates,
Ladies and gentlemen,
Introduction
I am honoured to have been invited by Governor Dr. Vitor Constâncio to talk about the
economic and financial development of Macao against a backdrop of the growth of China. I
am very pleased to be in Lisbon again and meet my friends. I met with some of them just 2
weeks ago in Macao in the 12th Conference of Central Banks of Lusophone Jurisdictions on
Human Resources. It is great to see you in Lisbon again.
In this 19th meeting in Lisbon, the topic picked by the convener is a very timely one. When
the world is talking about the emerging markets to be the first batch of economies to stand up
after the devastating financial crisis, I feel good to tell everybody here how Macao is doing
and the way forward.
The economy of China
Despite interruptions, sometimes inflicted by mother nature, the rise of China in the 21st
century does not appear to be impeded. It is the general consensus that China may be the
first economy where we find "green shoots" after the financial tsunami which devastated the
world in late 2008 and early 2009. China was able to score double digit growth in the wake of
the new millennium until last year. The rapid growth took a pause after the outbreak.
However, China was one of the first economies to announce a huge stimulus package
valued at RMB 4 trillion late last year. The stimulus started to take effect when we witnessed
a growth of 6.1% in the first quarter of 2009 followed by 7.9% in the second quarter, making
a growth rate of 7.1% for the first half year.
We have witnessed appreciable increases in manufacturing output, investment in fixed
assets and private sector consumption. It has been made clear that the RMB 4 trillion
stimulus package would be utilised to boost public investment which covers enhancement of
social security, improvement in health care system and rural development. It is worth
mentioning that the financial institutions of China have not been appreciably affected by toxic
assets and hence suffered less from the financial tsunami. As a result, they are in a better
position to extend more liberal credits to enterprises operating in China and finance
construction of substantive infrastructures. In the first six months of 2009, new credits
extended by financial institutions of China exceeded 7 trillion RMB. In international trade,
China has also applied strenuous efforts in the hope that increased international trade can
pull the overall economy out of its doldrums. One of the practical measures adopted by
China in this respect is the currency swap agreements valued at 650 billion RMB concluded
with trading partners like Korea, Hong Kong, Malaysia, Belarus, Indonesia and Argentina. In
fact, China has been making all efforts to alleviate the world economy from the trough.
Judging from 2008 performance, the China economy ranked third in the world.
Despite a drop in exports, other sectors are faring well. In fact power consumption has
started to pick up recently. China has been stockpiling commodities for its recovery. As a
result, world commodity prices have been buoyant which is reflected in the firming of
currencies of commodities producing countries like Australian Dollar, Canadian Dollar, New
Zealand Dollar, Brazilian Real and Russian Rouble. To the envy of car manufactures in the
US, new cars are selling at a rate of more than one million monthly, making the China outlet
the most profitable arm of the GM group. Share prices in China once advanced by 100% in
2009 from its trough in 2008. Many other economies suffering from housing property slump
will be surprised to learn that China is trying to prevent a bubble which can possibly be
formed in the buoyant property market. Ladies and gentlemen, it is highly likely that China
will be the first one to stand up after the financial crisis which has been hurting the world
since late 2008.
The economy of Macao
As we all know, Macao reverted to its Motherland in 1999 when the Macao Special
Administrative Region (MSAR) was established. Under the principle of "one country two
systems", "Macao people governing Macao" and "high degree of autonomy", Macao
continues to have a free hand in managing its well beings. The tourism services industry is
the biggest pillar of the Macao economy. The MSAR Government collects about 70% of its
revenues from this industry. The opening-up of the industry in 2002 gave a forceful impetus
to the Macao economy. Since then, the Macao economy has taken leaps and bounds. We
have witnessed double digit growth for a number of years which culminated in 2008 when we
achieved a per capita GDP of close to USD40,000. At one point, our unemployment rate was
below 3%. Despite the financial tsunami, Macao still achieved an annual growth rate of
13.2%. However, we are not immune to the crisis, negative growth for 2009 appears
inevitable. Nevertheless, we are still able to keep unemployment rate at bay. It is still an
enviable figure of about 3.7%.
The economy of Macao is expected to remain stable and sturdy in the next few years. Macao
has a tiny and open economy which is affected by international economic fluctuations. In
view of its structure and its proximity to China, the economy is more geared to the well
beings of the China economy. As a matter of fact, Macao has benefited from a number of
policies from the Central Government of China. Policies such as "individual traveller
scheme", "closer economic partnership arrangement (CEPA)" have rendered an effective lift
to our economy. Amid the tremendous growth achieved in the past, Macao has taken the
liberty to think about its future positioning and sustainable development. Macao has realized
long time ago that it should diversify from an over reliance on gaming. The concept of MICE
has been adopted. MICE stands for meeting, incentive, conference and exhibition. Parcels of
land have been deployed in constructing hardwares for the MICE concept instead of devoting
to pure gaming. There has been tremendous progress in this respect. It goes without saying
that there is still plenty of room for improvement and hence expansion as our softwares in
this respect are gradually building up. Another area for diversification is the financial sector
which I am going to mention in the latter part of my speech.
Macao came 21st worldwide and 6th in Asia Pacific in the rank of global free economies,
according to the Index of Economic Freedom by Heritage Foundation of the United States.
The outline of the plan for the reform and development of the Pearl River Delta
The National Development and Reform Commission of the State Council of the People's
Republic of China released "The Outline of the Plan for the Reform and Development of the
Pearl River Delta (2008-2020) (the "Outline")" in December 2008. The Outline, which also
covers Macao, will be brought to broader national strategy and long-term development level
of the nation. The gist of the Outline is to turn the Pearl River Delta into one of the world's
most competitive conurbations with a high quality of life. The Outline defines Macao as an
international leisure and tourism destination committed to further diversify its tourism sector.
Based on Macao's UNESCO world-heritage status, the MSAR Government will further
develop "culture tourism" and reinforce tourism-related cooperation with Guangdong
Province of China. Ultimately, Macao will become part of the Pearl River Delta conurbation
which will be a green area providing a high quality of life.
To achieve all these, the Central Government has approved and got going with the
construction of the Hong Kong-Zhuhai-Macao Bridge. Once completed, together with the
comprehensive highway network, one can go from any one township in the conurbation,
which accommodates a population of 50 million, to another in a matter of a couple of hours
by land transport. The Central Government has also noted the constraint on land resource of
Macao which has a total land area of about 30 sq. km. As a start, Macao is authorized to
relocate the University of Macao to an area of about 1 sq. km on the Hengqin Island of
neighbouring Zhuhai city. Ultimately, Macao will extend its area to cover 5 sq. km. of Hengqin
Island. Meanwhile, internal reconstructions keep on going. One of the notable issues is that
all essential spots of Macao will be connected by light rail in a few years. The positioning of
Macao has become clear. By 2020, Macao will be part of a conurbation with an area of about
30,000 sq. km. and a GDP equivalent to that of a medium sized sovereign country.
The financial sector of Macao
In the process of diversification, we have not forgotten the financial sector which accounts for
10% of our GDP. As per the end of June 2009, banks operating in Macao numbered 27 with
aggregate assets of MOP402.8 billion and total deposits of MOP283.1 billion. At the same
time, there were 24 insurance companies earning annual gross premiums of MOP3.46 billion
in 2008. There was a mild downward adjustment in the first half of 2009, in the aftermath of
financial meltdown. In addition, there were 23 financial institutions of other nature. In the past
few years, the financial sector has burgeoned in an unprecedented manner in tandem with
the rapid growth of the Macao economy. All business indicators of the financial institutions
continue to improve; raised profitability, enhanced asset quality, ample liquidity, adequate
capital and highly strengthened resistance to risks. In the process of globalization and its
integration into the Pearl River Delta economy, apart from meeting the demand locally, the
Macao financial sector follows the trend, upgrades itself by servicing the regional economy.
One of the more significant achievements is that there has been a marked increase in RMB
business in Macao while the Macao legal tender, the Pataca, has gained wider circulation
and recognition in the Pearl River Delta. To put it in a nutshell, the Outline has defined that,
under the framework of environmental friendly economic development, each major city in the
region should make full use of its own competitive edge to construct a new economic
development scenario for the region via complementary cooperation and positive interaction.
In this connection, Macao has identified its own positioning in the big picture. The Macao
economy, particularly its financial sector, will certainly emerge with flying colours in the
course and after the implementation of the Outline which is scheduled to be finalized by
2020.
On the other hand, the financial system of Macao is timely and appropriately regulated. The
IMF conducted an assessment of the financial sector supervision and regulation in 2008 of
the Macao SAR. The result was positive and one of the conclusions of the assessment team
was that there is a high level of compliance with Basel core principles. The detailed report is
expected to be published in due course.
Macao as the service platform between China and Portuguese speaking countries
Last, but not the least, I would like to mention how Macao can make the best use of the
legacy arising from its historical connections with Portuguese speaking countries in its
economic and financial development. Macao started to become acquainted with Portuguese
speaking countries more than 400 years ago. Since its return to China in 1999, its tie with
Portuguese speaking countries has further been strengthened. China is the world's factory
and has a population of 1.3 billion. To maintain its functioning, it requires and consumes
huge amount of natural resources. After an endeavour of 30 years, it has built up colossal
foreign exchange reserves of more than USD2.1 trillion. On the other side, the Portuguese
speaking countries are a market of more than 200 million consumers and are endowed with
abundant natural resources. They are in need of consumer products of reasonable price and
capital for further development. All the aforementioned criteria make economic cooperation
between China and Portuguese speaking countries a perfect match. In this connection,
Macao is both capable and willing to be the middleman. Being a special administrative region
of China and having a close tie with Portugal, Macao acts as a platform for trade and
economic services for China and Portuguese speaking countries. Macao is familiar with the
legal system of the Portuguese world while Portuguese is one of its official languages.
Macao can render excellent services to Portuguese speaking countries which are willing to
develop more ramified economic and trading relationship with China.
In 2003, the first Economic and Commercial Cooperation Forum of China and Portuguese
Speaking Countries was held in Macao. In 2006, a ministerial meeting of that Forum held in
Macao delineated fresh plans for new economic and commercial cooperation. The plans take
into consideration the economic development disparities of all participating countries and
emphasize that enhanced cooperation and development should be based on a principle
which will ensure equity and mutual benefit. Macao is endowed with a unique advantage in
this respect arising from its geographical position and historical heritage. All along, it has
always played the leading role of a liaison platform serving the economic and commercial
cooperation between China and Portuguese speaking countries. In fact, the standing
secretariat for the Forum is domiciled in Macao, which has always been endeavouring in the
realization of the various targets set by the Forum.
The Macao financial sector has always been a forerunner in facilitating the economic and
commercial development between China and Portuguese speaking countries. The Macao
financial industry is highly internationalized and open; more than 80% of its assets are
classified as international. The Macao financial sector is equipped with a mature financial
market system, the stability and competitiveness are safeguarded by timely and regulated
financial supervision. Financial institutions of Macao always consider themselves a business
partner of their counterparts in Portuguese speaking countries. In fact, individual Macao
banks have concluded cooperation agreements with banks in Portuguese speaking
countries.
As the regulator, the Monetary Authority of Macao (AMCM) has been playing a leading role
in this respect. In the past, the AMCM has concluded memoranda of understanding with
central banks and insurance regulatory authorities of a number of Portuguese speaking
countries. In 2007 and 2008, the AMCM organized representatives of local financial
institutions to visit Portuguese speaking countries in Africa, Europe and South America to
study the financial industry and explore fresh business opportunities. The AMCM has also
played host to representatives of various financial conferences. In April this year, the
Conference of Central Banks of Portuguese Speaking Countries was held in Macao with the
theme "Establishing a Platform for Financial Co-operation and Promotion of Economic and
Commercial Interaction" and, as I mentioned earlier on, the Conference on Human
Resources was held only two weeks ago.
Future opportunities
Ladies and gentlemen, it is highly expected that China will be the first economy to see "green
shoots" after the devastating financial tsunami. As a special administrative region of China,
Macao will much benefit. I do hope entrepreneurs around the world will grasp the opportunity
to create a situation whereby mutual benefit can be achieved.
Thank you!