RMB to remain main currency in Hengqin in-depth cooperation zone

The Renminbi (RMB) will remain the main currency in use at the future Guangdong Macau In-depth Cooperation Zone in Hengqin, Secretary for Economy and Finance Lei Wai Nong indicated today (Tuesday).

The Secretary made the remarks at a special press conference held today (Tuesday) concerning the sectors concerning the future cooperation zone under his purview.

“When we consume in Mainland China of course RMB will be the currency. If Macau residents use mobile payment platforms we are communicating with mainland authorities so they can choose the currency to pay just like when mainland tourists come to Macau and they can also choose what currency to use when they make mobile payments. However, if Macau residents choose to pay in MOP, of course, there will be a currency conversion,” the Secretary said today (Tuesday).

According to DSEDT Director Tai Kin Ip, the Renminbi clearing centre in Macau has an advantage in providing fast services by having direct access to the China National Advanced Payment System, with two banks in Macau directly participating in the Cross-Border Interbank Payment System providing coverage of the compensation network of Renminbi.

This policy would then contribute to extending the dimension of centralized treasury management of the Renminbi in the Macau offshore market, attracting more international capital to be invested in Renminbi assets through Macau.

“Apart from the ease in cross border capital movement sees will also have easing of financing, we want the development of the financial sector through joint cooperation with Hengqin, via not just banking or insurance but also other financial activities, such as wealth management,” Lei noted.

The plan for the joint Hengqin development also expresses that the area will support cross-border Renminbi settlement in the Cooperation Zone and encourage and support domestic and foreign investors to use Renminbi for venture investment and related investment trading activities.

The future commission in charge of the zone will also encourage social capitals to set up multi-currency venture capital funds or private equity investment funds in accordance with market-oriented principles, to attract foreign capitals to increase their investment in high technology businesses and innovative ventures.

Concerning wages, the currency used will vary according to where the employer is based, with Lei indicating as an example, that public workers of Macau dispatched to work in Henqgin will receive in MOP since their labour contracts were established under Macau jurisdiction.

The Macau Economic and Technologic Development Bureau (DSEDT) also revealed the exact income tax brackets to be imposed in Hengqin and benefits for Macau residents.

Taking into consideration a worker with RMB2 million (MOP2.4 million/US$310,475) in annual income, a mainland worker would be taxed at a maximum of 45 per cent, highly qualified workers urgently needed would be taxed at 15 per cent, with Macau residents benefitting from the lowest income tax ceiling at 12 per cent.

According to Hengqin authorities information at the moment there are 7,000 Macau residents living in the area, with more than 6,000 Macau license vehicles authorised to drive in Hengqin and with more than 300 Macau companies having set offices in the area.

Hengqin’s GDP reached RMB40.7 billion by the end of 2020 with almost RMB350 billion in investment landing in the area since 2009.

Secretary Lei underlined today that the “freer” movement of people, capital and goods will be one of the “guidelines” for economic success on the island to be managed with Guangdong with the 106 square kilometres cooperation zone – almost three times the size of Macau – to be essential to combat the dependence of the gaming industry, which it currently represents 55.5 per cent of GDP and 80 per cent of the SAR’s revenues.

“During the pandemic, we witnessed the weakness of the Macau economy for depending on only one industry, so we want to have provided more opportunities. we have the word ‘new’, a new home, new industries. The main purpose of the zone is the diversification of Macau’s economy by allowing better circulation of people, goods and capital with favourable tax policies for investors and workers,” Lei added.

According to Lei, some work positions on the island will be reserved for young Macau residents wanting to work in the gab or in the cooperation zone.

“We also have 600 projects related to youth entrepreneurship in Hengqin, and some tax benefits to support the development of young people”

The Secretary informed that four national banks currently operate in the cooperation zone, with three of them having branches in Macau.

Local bank BNU also currently operates a branch on the island with the government representative revealing another local bank is planning to set up a branch in the area.

The corporate income tax rate to be collected in Hengqin will also be reduced to 15 per cent.

With Chief Executive Ho Iat Seng having already hinted a stock exchange will likely not be established in Henqgin, Secretary Lei complemented that by saying that such plan was “not put it aside but it was also not urgent”.

“We need to see what are the advantages and how we can have a larger effect in the is in-depth cooperation. It is a different cooperation zone from what you see in other regions. Macau is an offshore market, a customs separate entity like Zhuhai and we can complement them,” he added.

“We have an offshore market and direct finance via bonds and we want to introduce RMB transactions so companies have better financing channels […] maybe some bonds will be issued in Guangdong and Macau. I would ask for more financial institutions to carry out bonds issues in the region”

The initiative is intended to strengthen Macau’s integration into China and to counteract limitations and constraints on space and resources, with the development of industries in areas such as health, finance, cutting-edge technology, tourism, culture and sports.

Questioned how commercial disputes involving Macau or overseas investors in Henqgin would be resolved Lei indicated that there will be a mediation system and legal mechanisms able to solve them in a “free and transparent business environment”