Macau is one of the world’s richest cities, with the highest GDP per capita by purchasing power parity as of 2013, according to the World Bank. It became the world’s largest gambling centre in 2006, with the economy heavily dependent on gambling and tourism, as well as manufacturing. Cantonese people from Hong Kong and Guangdong, in addition to the recent mainland tourism from Mandarin-speaking regions, have boosted the economy of Macau significantly. According to The World Factbook, Macau has the second highest life expectancy in the world. Moreover, it is one of only a few regions in Asia with a “very high Human Development Index“, ranking 25th as of 2011.
The Chinese government assumed formal sovereignty over Macau on 20 December 1999. The economy since then has continued to prosper with the sustained growth of tourism from mainland China and the construction of new casinos.
The Sino-Portuguese Joint Declaration and the Basic Law, Macau’s constitution promulgated by China’s National People’s Congress in 1993, specify that Macau’s social and economic system, lifestyle, rights, and freedoms are to remain unchanged for at least 50 years after the transfer of sovereignty to China in 1999. Under the principle of “one country, two systems”, Macau enjoys a high degree of autonomy in all areas except in defence and foreign affairs. Macau officials, rather than PRC officials, run Macau through the exercise of separate executive, legislative, and judicial powers, as well as the right to final adjudication. Macau maintains its own separate currency, customs territory, immigration and border controls, and police force.
Macau is situated 60 kilometres (37 mi) southwest of Hong Kong and 145 kilometres (90 mi) from Guangzhou. It also has 41 kilometres (25 mi) of coastline, yet only 310 metres (1,000 ft) of land border with Guangdong. It consists of the Macau Peninsula itself and the islands of Taipa and Coloane, which are now connected by landfill forming Cotai. The peninsula is formed by the Zhu Jiang (Pearl River) estuary on the east and the Xi Jiang (West River) on the west. It borders the Zhuhai Special Economic Zone in mainland China. The main border crossing between Macau and China is known as the Portas do Cerco (Barrier Gate) on the Macau side, and the Gongbei Port of Entry on the Zhuhai side.
Macau Peninsula was originally an island, but a connecting sandbar gradually turned into a narrow isthmus, thus changing Macau into a peninsula. Land reclamation in the 17th century transformed Macau into a peninsula with generally flat terrain, though numerous steep hills still mark the original land mass. Alto de Coloane is the highest point in Macau, with an altitude of 170.6 metres (559.7 ft). With a dense urban environment, Macau has no arable land, pastures, forest, or woodland.
Macau’s economy is based largely on tourism. Other chief economic activities in Macau are export-geared textile and garment manufacturing, banking and other financial services. The clothing industry has provided about three quarters of export earnings, and the gaming, tourism and hospitality industry is estimated to contribute more than 50% of Macau’s GDP, and 70% of Macau government revenue.
Macau is a founding member of the WTO and has maintained sound economic and trade relations with more than 120 countries and regions, with European Union and Portuguese-speaking countries in particular; Macau is also a member of the IMF. The World Bank classifies Macau as a high income economy and the GDP per capita of the region in 2006 was US$28,436. After the Handover in 1999, there has been a rapid rise in the number of mainland visitors due to China’s easing of travel restrictions. Together with the liberalization of Macau’s gaming industry in 2001 that induces significant investment inflows, the average growth rate of the economy between 2001 and 2006 was approximately 13.1% annually.
In a World Tourism Organization report of international tourism for 2006, Macau ranked 21st in the number of tourists and 24th in terms of tourism receipts. From 9.1 million visitors in 2000, arrivals to Macau has grown to 18.7 million visitors in 2005 and 22 million visitors in 2006, with over 50% of the arrivals coming from mainland China and another 30% from Hong Kong.
Starting in 1962, the gambling industry had been operated under a government-issued monopoly license by Stanley Ho‘s Sociedade de Turismo e Diversões de Macau. The monopoly ended in 2002 and several casino owners from Las Vegas attempted to enter the market. With the opening of the Sands Macao, in 2004 and Wynn Macau in 2006, gambling revenues from Macau’s casinos were greatly prosperous. In 2007, Venetian Macau, at the time the second (now seventh) largest building in the world by floor space, opened its doors to the public, followed by MGM Grand Macau. Numerous other hotel casinos, including Galaxy Cotai Megaresort, opened in 2011, and plans for a $3.9 billion complex that will be known as Lisboa Palace is expected to be completed by 2017.
In 2002, the Macau government ended the monopoly system and six casino operating concessions and subconcessions are granted to Sociedade de Turismo e Diversões de Macau, Wynn Resorts, Las Vegas Sands, Galaxy Entertainment Group, the partnership of MGM Mirage and Pansy Ho (daughter of Stanley Ho), and the partnership of Melco and Publishing and Broadcasting Limited (PBL). Today, there are 16 casinos operated by the STDM, and they are still crucial in the casino industry in Macau, but in 2004, the opening of the Sands Macau ushered in the new era. Gambling revenue has made Macau the world’s top casino market, surpassing Las Vegas.
In the early 2010s, Macau also ramped up show and entertainments in addition to gambling business, including the famous show House of Dancing Water, concerts, industry trade shows and international art crossovers.
Macau is an offshore financial centre, a tax haven, and a free port with no foreign exchange control regimes. The Monetary Authority of Macau regulates offshore finance, while the Macau Trade and Investment Promotion Institute provides services for investment in Macau. In 2007, Moody’s Investors Service upgraded Macau’s foreign and local currency government issuer ratings to ‘Aa3’ from ‘A1’, citing its government’s solid finances as a large net creditor. The rating agency also upgraded Macau’s foreign currency bank deposit ceiling to ‘Aa3’ from ‘A1’.
As prescribed by the Macau Basic Law, the government follows the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strives to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product. All the financial revenues of the Macau Special Administrative Region shall be managed and controlled by the Region itself and shall not be handed over to the Central People’s Government. The Central People’s Government shall not levy any taxes in the Macau Special Administrative Region.
Gambling tourism is Macau’s biggest source of revenue, making up about 50% of the economy. Visitors are made up largely of Chinese nationals from the mainland and Hong Kong. With the entry of large foreign casinos from Las Vegas and Australia, Macau overtook the Las Vegas Strip in gaming revenues in 2007.
Until Western-style casino games were introduced in the 20th century, only Chinese games were played, the most popular being Fan-Tan. Generally, gambling in Macau can be divided into one of four categories: casino games, greyhound racing, sports betting, and lotteries. At the present time, Macau does not license online gaming operations.
In an attempt to generate revenues for the government, gambling in Macau was legalised around 1850. In the late 19th century, the government introduced a licensing system for the fantan houses (Chinese gambling houses). It is reported that over 200 gambling houses were required to pay gambling rent to the government. The second casino monopoly concession was granted to the Tai Heng Company in 1937. The company was, however, too conservative to fully exploit the economic potential of gambling. The industry saw a major breakthrough in 1962 when the government granted the Sociedade de Turismo e Diversões de Macau (STDM), a syndicate jointly formed by Hong Kong and Macau businessmen, the monopoly rights to all forms of gambling. The STDM introduced western-style games and modernised the marine transport between Macau and Hong Kong, bringing millions of gamblers from Hong Kong every year. The license was extended in 1986 for another 15 years but expired at the end of 2001.
In 2002, the Macau government ended the monopoly system and 3 (later 6) casino operating concessions (and subconcessions) were granted to Sociedade de Jogos de Macau (SJM, an 80% owned subsidiary of STDM), Wynn Resorts, Las Vegas Sands, Galaxy Entertainment Group, the partnership of MGM Mirage and Pansy Ho Chiu-king, and the partnership of Melco and PBL. Today, there are 16 casinos operated by the STDM, and they are still crucial in the casino industry in Macau, but in 2004, the opening of the Sands Macau ushered in the new era.
The so-called “Monte Carlo of the Orient”, Macau’s economy relies heavily on gambling. Nowadays, the gambling industry generates over 40% of the GDP of Macau. Since the early 1960s, around 50% of Macau’s official revenue has been driven by gambling. The percentage remained steady until the late 1990s. In 1998, 44.5% of total government revenue was produced by the direct tax on gambling. Then there was a 9.1% decrease in 1999, probably due to internet gaming. After the handover of the Macau from Portugal to China, the SAR released gambling licenses to other companies in order to eliminate the monopoly played by the STDM. In 2002, the government signed concession contracts with two Macau gaming companies, Wynn Resort Ltd. and Galaxy Casino. This opened the gambling market for competition and increased government tax revenue significantly. It also attracted more tourists to Macau. At this moment, according to official statistics, gambling taxes form 70% of Macau’s government income.
However, the gambling industry is also a source of instability in the Macau economy, as the nature of gambling business is not susceptible to technological advancement or productivity growth. The gambling business is still dependent on the prosperity of other Asian economies, especially that of Hong Kong.
Macau has 33 casinos, of which the biggest is The Venetian Macau. Twenty-three casinos are located on the Macau Peninsula and ten on Taipa Island. They all operate under a government franchise and under a common set of rules.
Poker was introduced only in August 2007, in an electronic table format at Galaxy Starworld casino. The first live poker tournament was the Asia Pacific Poker Tour Macau event in November 2007. Shortly thereafter, in January 2008, the government of Macau published the official rules for Texas hold ’em poker games in Macau. In February 2008, Grand Lisboa Casino added the first live-dealer cash game tables. In May 2008, ‘PokerStars Macau’ opened at Grand Waldo Casino. In November 2008, Texas Holdem’ Poker opened at Wynn Macau. ‘PokerStars Macau’ moved to a new location at the Grand Lisboa Casino in March 2009. Today, Wynn Macau, StarWorld, and the Venetian offer live-dealer cash game poker tables.
Gambling has been legal in Macau since around 1850. There was a licensing system for gambling houses until 1863. Beginning in 1934, casinos’ ownership and operation was centralised; through private negotiations, some franchises monopolised the operation right of all the casinos. The casino industry was controlled by the STDM monopoly for 39 years, but this changed in 2001 when casino licenses were offered to other casino operators, including American companies such as Las Vegas Sands (Sheldon Adelson) and Wynn Resorts. On 18 May 2004, the Sands Macau casino opened near the Macau Ferry Terminal.