Macau SAR, China: Overview, History, and Examples

What Is Macau SAR, China?

Macau is a special administrative region (SAR) of greater China that operates under the One Country, Two Systems principle. Similar to Hong Kong, this policy allows Macau broad but limited autonomy in most of its governing and economic activities. Its currency is called the Macanese pataca (MOP). The region's population is estimated to be about 645,000.

Understanding Macau SAR, China

Macau thrives as a second gateway for international trade into mainland China particularly for Portuguese-speaking countries, located on the country's south coast next to Hong Kong. The service sector, specifically the tourism and gaming industry, dominates Macau's economy contributing over 90% of GDP output. From a financial standpoint, some investors also know Macau as a tax haven. About 645,000 people call Macau home—most of whom are Chinese.

Under the Basic Law of Macau SAR, Macau is given a considerable degree of economic autonomy, although policies are ultimately controlled by the central government in Beijing. It is prohibited to advocate secession from China, and candidates who fail to uphold the basic law may be disqualified from office.

Macau's government consists of an elected chief executive, and a 33-member legislative assembly, which is chosen like Hong Kong's governing body. Fourteen members of the assembly are directly elected, 12 are chosen indirectly by important influence groups, and seven are appointed by the region's chief executive.

The chief executive is indirectly elected, through a 400-person election council chosen from different professional constituencies. After the election, the chief executive is officially appointed by the central government, giving Beijing the final say in the region's government. The chief executive serves for five years and can be re-elected for a second term.

History of Macau SAR, China

In 1557, the Portuguese settled in Macau, then a small fishing village on the South China Sea. In 1887, the Friendship and Trade Treaty between Portugal and China was signed, but the ownership of Macao was in dispute and remained that way until 1987. In 1987, Portugal and China signed an agreement for Macau to become a SAR of China and, in 1999, China assumed formal sovereignty of the region.

Macau is synonymous with gaming and tourism, with one of the highest volume gambling centers in the world. Like Hong Kong, Macau is a free port city with no tariffs or quotas. Macau has a free market economy with very low taxation, and its currency trades freely in the open market. With less than 700,000 residents, Macau's per capita GDP was $69,384, as of 2023. and an unemployment rate of 2.5% as of the March/May 2024 period.

Its top trading partners are Hong Kong and mainland China, but trade with Europe and America, particularly Portuguese-speaking nations, is also important. Chinese and Portuguese are the official languages, and Cantonese is the primary language.

Economy of Macau SAR

The region's economy is largely supported by its casinos and entertainment industry, making tourism a major source of Macau's income. Between January and May 2024, Macau received 14.17 million tourist visits, a 50% increase over the previous year, according to the Macau Government Tourism Office.

Foreign casinos were first allowed in Macau in 2002, and the industry exploded with the region exceeding Las Vegas as a gambling destination. The region's governing body assumed a greater degree of power and control over the gambling industry with the passage of the Gaming Reform Bill in June 2022. Under the bill, certain regulations changed, including:

• The increase of gaming taxes to 40%
• A drop in the gaming license renewal for casino operators from 20 years to 10 years

Mainland China's government introduced anti-corruption measures, clamping down on capital outflows and money laundering, with measures that impacted the region's gaming industry.

Macau's gross domestic product (GDP) was $7 billion in 2002 and reached $55 billion in 2019. This dropped by about half during the COVID-19 pandemic and has since risen back up to $47 billion in 2023, according to the World Bank data.

The Bottom Line

Like Hong Kong, Macau is a special administrative region of China. Although it falls under China's jurisdiction, it remains autonomous both politically and economically. It is commonly referred to as the Las Vegas of Asia because of its gaming and gambling industry. This sector, along with tourism, is a great driver for the region's economy.