Special Report – “It should be in Macau”… Or not

The Central Government is studying the possibility of establishing a Macau securities exchange market in neighbouring Hengqin. However local authorities are taking a cautious approach to it at this stage.

MB April 2021 Special Report | Financial Hub in the making


According to the latest information known to official Chinese media (November), the China National Development and Reform Commission said, in response to Macau delegates to the Chinese People’s Political Consultative Conference (CPPCC), that Beijing is considering setting up a Macau securities exchange in Hengqin to help develop a financial system in the MSAR with “special features”.

Some days later, state-owned media outlet The Paper reported that the central government was studying the possibility of establishing a Macau securities exchange (the report used the term ‬證券交易所‬, i.e., securities exchange, and not 股票交易所‬, stock exchange) in Hengqin.‬‬‬‬‬‬‬‬

Sounding as though caught off guard, the Secretary for Economy and Finance Lei Wai Nong said: “I still haven’t carefully studied the announcement [made by the commission]. But the core idea is that we’ll have to carefully consider everything concerning Macau’s possible development of a securities exchange market, such as where the market will be located and what the relationship between the Macau exchange and the exchanges in neighbouring regions will be.” Macau Business sent several questions on these topics, to both the Office of the Secretary for Economy and Finance and the Monetary Authority of Macau (AMCM), and the answer was: “The Government has been boosting the development of modern financial services in an orderly manner with the main focus on bond market, financial technology, etc., so as to gradually enrich the varieties of financial business and elevate the relative importance of the resilient financial industry to GDP, bolstering the development of industry diversification with financial services”.

Jacky So, Dean of the Faculty of Business Administration and Chair Professor in Accounting and Finance at the Macau University of Science and Technology, believes establishing the securities market in either Macau or Hengqin “makes a big difference.

“If the purpose is to diversify macroeconomic bases and to be successful by attracting investors from other countries (not just China), Macau is preferable because it is a free port without capital control, etc.” states the pundit, one of the leading finance experts in the MSAR. “In my informal chats with many big investment companies they agreed with me. If they want to invest in China, they can do it through Shanghai SE, Shenzhen SE, etc.”

Professor Jacky So underlines another argument: how can one guarantee this financial hub will contribute to Macau’s GDP if it is located in Hengqin? “It cannot. It should be in Macau,” he tells Macau Business.

The former dean of the Faculty of Business Administration at the University of Macau highlights the fact that older models of stock exchanges, like the New York Stock Exchange, Chicago Mercantile Exchange and Hong Kong Stock Exchange, require physical space for dealers and brokers to trade securities using old methods such as open outcry, hand signalling or notes. However, “now most of them follow the NASDAQ, because of electronic and telecommunication technology. Actually, they are similar to Over-the-Counter trading without a centralized physical location, just phone lines.”

However, if the argument of limited land/space prevails, “one alternative is to use the ‘University of Macau model’: the big business district on Hengqin Island becomes ‘Macau Street’ using Macau laws and regulations! It will be a ‘one stone, two birds’ method, a win-win in the near term and the long term for economic development in both cities!” says Mr So. 

Sérgio Gomes, senior lecturer and a Ph.D. candidate at the Faculty of Business and Law, University of Saint Joseph, goes further: “Due to the obvious limitations of Macao in terms of physical space, the location of such a financial centre would most likely be in Hengqin.”

Rose Lai, Professor in Finance at the Faculty of Business Administration, University of Macau, also highlights that “it is technically different, of course. Hengqin and Macau are under different legal regimes. Unless the further collaboration between Hengqin and Macau – with Hengqin more tilted towards what Macau is currently running with (both political and economic establishment) – materializes, it is not possible that there will be ‘no difference’.”

Professor Lai also speaks about the “almost ‘seamless’ collaboration between the two cities”. “I think,” she says to Macau Business, “even if there is a difference, the gap will be smaller and smaller in time, and people, businesses, and money would flow in more freely. This will happen when a diversification of Macau’s economy is possible.”


“One alternative is to use the ‘University of Macau model’: the big business district on Hengqin Island becomes ‘Macau Street’ using Macau laws and regulations!” – Jacky So

And Adrian Cheung, Professor of Finance at City University of Macau, remarks: “The issue is not about location but about legal system, tax and incentives. What legal system and tax system should be used? Macau’s or the PRC’s? Assuming that Macau’s legal and tax systems will be used in Hengqin, why are businessmen expected to go to Hengqin to set up a new securities market without a provision of incentives?”

During the recent presentation of the Report on the Guangdong–Macau Intensive Cooperation Zone in Hengqin by the Research Center for Macau’s Social and Economic Development, City University of Macau, the issue was addressed by several experts. Lyu Dongjuan, Assistant Professor at the School of Law, stated that “the establishment of the Guangdong–Macau Intensive Cooperation Zone in Hengqin should take into consideration the interface of different jurisdictions in substantive law and procedural law,” suggesting that “a legal protection system for the Intensive Cooperation Zone in Hengqin be formed under the ‘One Country, Two Systems’ framework, the Constitution and Macau’s Basic Law. Also, a multi-mechanism for dispute resolution between the Guangdong–Macau Intensive Cooperation Zone and Macau should be set up and optimized.”

Nick Marro, Economist Intelligence Unit’s lead analyst for China and Macau, tells Macau Business: “If it’s located in Hengqin, we’d likely see this more as a political sign, aimed at integrating Macau with the Mainland.” Economically, says Mr Marro, “we probably wouldn’t see much of a boost. In the absence of any radical shift in Macau’s economic policymaking – or what’s happening in Hong Kong – I’d expect the territory to remain dependent on gambling in the near term. Diversification will likely come through cultivating different types of tourist activities, rather than attracting new types of industry to Macau, such as financial services.”‬‬


The Global Financial Centres Index

The Global Financial Centres Index is a tool considered internationally to assess the quality of all existing financial centres (https://globalfinancialcentres.net/survey/).

The ranking, brought over from London by the Z/Yen Group, does not yet include Macau, but Mike Wardle, its coordinator, admits to Macau Business that “local competition means that you would need to develop some niche specialities to make Macau attractive. However, the number of financial centres in Western Europe, which are close geographically, means that this is not impossible.”

That’s why Mr Wardle understands that “with regards to the creation of a stock exchange, I do think that the closeness of Hong Kong and Shenzhen may be a problem.” The Director of the Z/Yen Group noted there are other places which are thinking of creating a small exchange, for example, Edinburgh in the United Kingdom, “but it is difficult when there are established exchanges already in the country, where investors are used to dealing.”

“So rather than expecting all businesses to look to Macau, it may be worth assessing whether there are particular sectors where this would make more sense than others, either in terms of financial sectors or the industry sector,” he explains to Macau Business, noting that “my knowledge of Macau is insufficient to know which these sectors would be, but some form of specialisation would be necessary to start to build a reputation in financial services.”