By Andre Gunawan and Tech in Asia

OPINION – Macau should leverage the Wealth Management Connect Scheme as part of its economic diversification

*By Oriol Caudevilla

Macau’s future focus will be on finance.  

The Special Administrative Region is trying to diversify its economy by creating a new stock exchange (a NASDAQ-like market denominated in yuan, facilitating fundraising by technology companies from the Bay Area economic hub) and embracing both the Belt and Road Initiative (which offers many opportunities to Macau given its belonging to the Portuguese-speaking world) as well as the Greater Bay Area (GBA) project. 

Furthermore, the fact that China will start its Digital Yuan tests soon in Macau is a clear sign of the importance of the former Portuguese colony in the present and future of China. Another interesting initiative is the development of ‘enclave economies´: Macau could exploit the infrastructure of several bases built in the Guangdong Province, such as the cooperation demonstration zone located in Zhongshan, or the Traditional Chinese Medicine Science and Technology Industrial Park in Hengqin.

Falling revenues from gaming and tourism amid slowing growth on the mainland have prompted Macau to lessen its dependence on gambling. This trend had already started even before COVID-19, but the current pandemic is undoubtedly accelerating it. 

One of the opportunities that Macau should grasp is the Wealth Management Connect Scheme, an initiative that is part of the GBA blueprint.

The GBA, which has a combined population of over 69 million people and a GDP of around US$1.5 trillion, offers a myriad of diverse opportunities for Macau. 

As per the 11 chapters of this project, each of the cities will play an important role based on its respective strength. For example, Hong Kong will play a key part as a financial center, while Shenzhen will leverage its technological prowess, where cutting-edge technology companies like Huawei and Tencent are domiciled. 

Regarding Macau, the idea is to leverage its current strengths to link Mainland China with the Portuguese-speaking countries, the EU and the Association of South-East Asian Nations (ASEAN). This will firmly establish Macau as a platform for international exchange, while leveraging its current world-class tourism and leisure strengths, while its economy is diversified via the potential new stock exchange and similar initiatives that I mentioned before.

On June 29, 2020, the People’s Bank of China (PBOC), the Hong Kong Monetary Authority (HKMA), and the Monetary Authority of Macau (AMCM) jointly published an announcement on the launch of the cross-boundary wealth management connect pilot scheme.

The Wealth Management Connect Scheme will allow Macau residents to buy onshore wealth management products sold by Chinese banks, while Bay Area residents can invest in products sold by Macau´s banks. 

The scheme will greatly boost the assets under management over the next decade, with global private banks and big players likely to tap into the Bay Area opportunities, according to a Bloomberg Intelligence report.

Unlike Macau, Hong Kong has a stock exchange (the fourth single largest stock market in the world) and has had previous “connect schemes”: the Stock Connect and the Bond Connect Schemes. The Stock Connect scheme was launched in November 2014, bringing together the Hong Kong, Shanghai and Shenzhen stock exchanges, allowing international, Hong Kong and mainland investors to trade securities across the three markets through the trading and clearing facilities of each exchange, while the Bond Connect was launched in 2017, now covering over 2,000 eligible equities and bonds in Shanghai, Shenzhen and Hong Kong.

The introduction of Wealth Management Connect is another important measure to facilitate cross-boundary investment by individual residents in the GBA, and strengthen the financial corporation between mainland China, Hong Kong and Macau, which will promote the opening-up of the financial markets in Mainland China.

To sum up, given the current tense economic situation, the new Wealth Management Connect plan could not have come at a more opportune time, as it is destined to enrich the Bay Area before long, and will definitely help Macau´s plans to diversify its economy and shift the focus towards finance.

*The author holds an MBA and a doctorate in Hong Kong real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company and he has given seminars at HKU on Shadow Banking in China and at several universities in Macau on China´s new digital yuan. He is currently a member of the Blockchain, Digital Banking and Greater Bay Area Committees at the Fintech Association of Hong Kong (FTAHK).