Has Hong Kong’s drawn-out political turmoil with no sign of abating dismayed Beijing and pushed policymakers to instead bank on the other former European territory of Macau as a safer place to build on the nation’s economic and financial initiatives?
Recent news about a new bourse in Macau has given some credence to that conjecture. It was reported by mainland papers that a draft plan to launch the Macau Stock Exchange, the fourth such exchange in China following those in Hong Kong, Shanghai and Shenzhen, had been submitted to the central authorities for deliberation.
He Xiaojun, the director of Guangdong’s provincial financial affairs bureau, told a forum last weekend in Guangzhou that the new Macau platform would be “modeled after the Nasdaq for offshore renminbi,” according to the Security Times.
He revealed that he was commissioned by the government of Macau to make a package of proposals for a new bourse in the former Portuguese enclave while he was the head of the Shenzhen municipal government’s finance office in 2018. He added that a formal announcement could be expected by the end of this year, as Beijing doles out more policy blessings on the 20th anniversary of Macau’s handover.
He also alluded to Hong Kong’s “protests of attrition” in his talk and hinted that Hong Kong should shed its sense of entitlement as Beijing had more than one city of focus to press on with its regional integration and development masterplan, known as the Greater Bay Area, that would include Hong Kong, Macau, Guangzhou and Shenzhen.
In the thick of Hong Kong’s anti-China extradition rallies, Beijing also gazetted a policy paper in August to turn the southern tech hub of Shenzhen into a “model city” demonstrating the superiority of China’s socialist system and shoot the boomtown into the same league as San Francisco, Tokyo and New York in overall competitiveness by the middle of the century.
Now the creation of a brand-new trading house in Macau tailor-made for offshore renminbi as well as the internationalization of the Chinese yuan may contract unfavorably with the Hong Kong Exchanges and Clearing, which was just rebuffed by the London Stock Exchange after an unsolicited acquisition bid in September.
The proposed offshore yuan-denominated “Nasdaq” in the adjoining sister city now connected by a 55-kilometer bridge and tunnel megastructure could also be a tacit warning that Hong Kong’s guaranteed predominance may come to an end. Four-month-long protests have apparently dented Beijing’s faith in the city as well as its pull as a stable, pre-eminent financial hub.
By comparison, Macau has always been in Beijing’s good books, a role model telling the unruly Hong Kong that democracy and autonomy has to happen and exist on Beijing’s terms. Over the years the gaming capital has also been diversifying away from revenue from the high-rollers that continue to descend upon the tiny territory in droves.
Observers say Macau can leverage its language and cultural affinity with Portugal, Brazil, Namibia, Angola and other Portuguese-speaking countries to develop renminbi settlement in trade and investment.
Hong Kong papers also quote Macau’s Monetary Authority as saying that a feasibility study had been continuing into the establishment of a securities exchange, in a bid to stake out the differences between the new platform and incumbent financial centers in the Greater Bay Area to serve the country’s diversified needs.
That said, Macau faces a strenuous task to poach business from Hong Kong and other leading offshore renminbi hubs including Singapore and London, despite its ambitions and China’s wealth of support.
The city’s minuscule economy, a legal system inherited from the Portuguese and continental European laws as well as the lack of a talent pool and a functioning listing and regulatory regime that takes decades to establish and evolve all mean a new bourse is far more complicated to build than a casino.