Hong Kong is a former British colony that was returned to China in the mid-1990s. Everyone has heard of Hong Kong, as it is also one of the world’s most important financial centers. Hong Kong is also one of two so-called special administrative regions of China. In other words, these are provinces that enjoy the highest possible level of autonomy within the People’s Republic of China. So, Hong Kong is one — but what’s the other? The other is located just about 60 kilometers west of Hong Kong. That is where the city of Macau is.
Macau is also a former colony, but Portuguese. In fact, Macau was leased to Portugal as a trading port as far back as 1557 during the Ming dynasty. Macau remained under Portuguese control until 1999, when — under a similar agreement to that of Hong Kong — it was handed back to China.
And just like Hong Kong, Macau operates under the principle of “one country, two systems,” meaning it has a separate political authority and economic system from the rest of China. This means, among other things, that it has multiple political parties and elections, while the rest of China (except for Hong Kong) is permanently governed by the Communist Party of China.
Here is where some similarities with Hong Kong end. To begin with, Macau is significantly smaller than Hong Kong — it has around 600,000 residents, while Hong Kong has over 7 million.
Furthermore, as one might expect, the fact that Macau was under Portuguese rule and Hong Kong under British rule can still be felt and seen today. The unique blend of Portuguese and Chinese architecture in the city of Macau earned it a spot on the UNESCO World Heritage list in 2005.
And if Hong Kong is known for its financial center (among other things we associate with it), what is Macau known for? Primarily, for its numerous casinos — which is why it’s often referred to as the “Las Vegas of the East.” That’s right — Macau is a major Chinese tourist destination, or more precisely — a gambling tourist destination!
Anyone familiar with gambling knows that “the house always wins,” so it’s no surprise that Macau is the city with the highest per capita income in the world, and also ranks near the top globally in terms of GDP per capita. Life is good in the city — and long: according to current data, Macau has the fourth-longest life expectancy in the world.
As expected, the entire area of Macau is highly urbanized, and two-thirds of its total surface area is reclaimed land — previously ocean.
You’ve probably heard of Las Vegas far more often than Macau — which makes sense, given the many popular films set in the American city often dubbed “Sin City.” But sin certainly isn’t lacking in China’s equivalent, and when it comes to gambling as an industry, Macau is actually seven times larger than Las Vegas!
But how did this even happen? Did China simply take over Macau from Portugal in 1999 and decide to turn it into a gambling haven? That’s what we’ll explore today.
The story of Macau is really the story of China’s rise and globalization. Unsurprisingly, Macau is the only territory in all of China (including Hong Kong) where gambling is legal.
Of course, gambling in Macau is not a Chinese “invention” — the gambling industry was first introduced by the Portuguese back in the 19th century, specifically in 1849. At that time, gambling in Macau was quite different from Western-style casinos — the games were mostly of Chinese origin. Only later, in the 20th century, did the Western gambling style arrive.
When China took over Macau in 1999, it was a city rife with violent crime — it still needed to be “put in order.” The Chinese transformed the casinos into “VIP casinos,” with special rooms and premium services designed to attract a wealthy clientele.
By 2007, Macau had surpassed Las Vegas in gambling revenue, and according to 2013 data, 66% of gamblers were “high rollers.”
Clearly, Macau has brought — and continues to bring — significant tax revenue to China. About 80% of all tax revenue collected in Macau comes from the gambling industry. The business expanded significantly when foreign companies were allowed to lease licenses for casino operations. A curious fact: until 2001, there was only one gambling company operating in the city — the Portuguese STDM (Sociedade de Turismo e Diversões de Macau).
At the beginning of the century, large companies from Australia and the United States entered Macau, including some that operate in Las Vegas. Foreign capital invested massively in luxury hotels and new casinos.
However, the peak of profits was in 2014. What happened? What happened was that Chinese President Xi Jinping launched numerous actions to combat corruption, and this was, as expected, quite felt in Macau. Namely, the Chinese central authorities realized that big gamblers do not come to Macau just to gamble. Yes, they would come to those luxurious “VIP rooms” and leave a lot of money there, but it turns out that they did not come just to “lose” money, or rather, they did, with premeditation! How? That money was actually used as a bribe to obtain certain market and economic privileges elsewhere in China.
President Jinping’s anti-corruption campaign has significantly reduced income. In 2014, the Chinese authorities received over 20 billion USD from taxes in Macau, and in 2017, this amount fell to 15.7 billion USD.
But that is not the only problem. Namely, when word got out that Macau was no longer “safe” (for suspicious actors!), the popularity of other gambling destinations in Asia such as Singapore or Manila began to grow.
Then, in an attempt to attract as many tourists to Macau as possible, the Chinese authorities had a large 55-kilometer-long bridge built between Hong Kong and Macau.
With over 21 thousand people per square kilometer, Macau is the most densely populated part of the world. The vast majority of the inhabitants are Chinese, but there are also some Filipinos (4.6%), Vietnamese (2.4%) and Portuguese (1.8%).
As expected, the pandemic has caused considerable financial damage to the city, as has China’s current policy of putting cities on lockdown in the event of a virus outbreak. But these are temporary conditions, and Macau will surely soon be what it was before the pandemic – a glittering place where foreigners (and increasingly Chinese themselves) will leave their money, especially those who have so much that they themselves no longer know what to do with it. In fact, Macau has existed only for them for decades, and this symbiosis will continue, but at the same time it will also be a symbol of China’s economic rise, just as Las Vegas was once a symbol of America’s.
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