Macau, Hong Kong and the Chinese Dance of Time

Macau and Hong Kong have much in common.  Both are former colonies that have been reclaimed by China.  In 1997, Hong Kong left the shelter of the United Kingdom and submitted to the authority of China.  Macau was transferred from Portuguese control to China in December of 1999.  In the process, both cities became unique governmental entities – Special Administrative Regions of China – with autonomous legal and economic systems.  Hong Kong is a banking, finance and technology center.  Macau’s economy is famously founded on casino gambling.  China embraced the concept of special regions under the slogan: “One Country, Two Systems.” The commercial activity of both cities is important to China’s economy.

The cities may have a common foundation, but in the years since the colonial era ended, Hong Kong and Macau have taken different paths.  Hong Kong has never fully embraced Communist China and its legislature continually resists Chinese laws and authority.  Macau on the other hand seems quite content to be part of the one country with its communist government.  China recognizes the difference in attitudes of the two cities.  On his last visit to the region, Chinese president Xi Jinping, praised Macau and its leaders for the city’s progress in integrating into the greater China identity and embracing the communist party’s vision of the future. In contrast, Xi has issued veiled threats to Hong Kong, telling the city’s citizens they must get aboard the Chinese train.

Hong Kong is undoubtedly frustrating for the Chinese; Hong Kongers act as if they are still citizens of the British Empire and show no inclination of wanting to become more “Chinese.”  Xi would like Hong Kong to begin acting like Macau and has told its citizens exactly that.  The difference between the two cities in their acceptance of the one country, two systems concept was a mystery until on July 21st, Reuters published an article entitled: China reaps payoff from hand-picked team placed in Macau.  The Reuters article described a group of 40 young Chinese trained in leadership and sent to Macau in the early 1990s, long before the transition in 1999.  Those young people were placed in key government departments and today hold important positions of power.  Besides the leadership cadre, over half of the population of Macau has immigrated to the city from China in the last two decades.  The leaders in Hong Kong were not born or trained in China and its residents are not recent immigrants.  Their loyalties are to democracy, a free economy, a free press and independence.  They easily take to the streets to protest and demand independence.  .

The article explains why it has been so easy for China to rule by suggestion in Macau.  There is no opposition; the government and the citizens want to please China.  The governing of Macau includes regulation of the casinos.  The changes in casino operations that fit China’s goals are written into regulations and enforced.  Thus, the casinos are falling in line with President Xi’s plan to make Macau an international destination and to limit or eliminate any dependence on a few VIP gamblers from China.  When the casino licenses come up for review, we can assume the most important factors to be considered will be those that fit the Chinese global plan; amenities and policies meant to attract as many people as possible.   Xi’s China has grand plans for its place in the world’s economy and power structure.  It is building a new silk road to connect China, the Middle East, Africa and Europe and Xi wants Macau to be an active participant.  China is also creating a mega-region that will include Macau.  It will be the 12th largest economy in the world and Macau is expected to be a key player.  The casinos are important in both roles because they will help diversify the region’s economy and drive large numbers of tourists and foreign currency into the region and by extension into China.  They have already invested between $10 and $20 billion in building resorts to meet those goals.

China’s government is well-known for its long term planning.  Its plan for Macau and the casinos is part of a strategy that began over 25 years ago.  It started before the negotiated transfer of power, before the one country, two systems concept, before casinos were fully legalized and before foreign companies were encouraged to apply for licenses.  That was long before any of us had heard of the new Silk Road or a new regional designation in China.  The Chinese are famous for their long-term world view; after all they have been living in the same place for at least 5,000 years.  As the situation in Macau has matured, it has been increasingly obvious that the foreign casino operators are not aware of the exact nature of China’s plan for Macau and its casinos.  But until the article by Reuters, I would never have guessed just how long-term and well thought-out the strategy is.  In fact, without the contrast between Macau and Hong Kong, one might still not believe the strategy existed.  However, when you see Hong Kong constantly striving to be something of its own invention and not a puppet for the Chinese, while Macau does exactly the opposite, it is clear that the foundation China started to build in Macau with those 40 young people has been very effective.  Its casino policies are also proving to be successful.  Macau generates more casino revenue than any other gaming jurisdiction in the world.  And although there was a drastic downturn in gaming revenues after President Xi cracked down on graft and corruption in 2012, the revenue is again growing at double digit rates and is almost back to the pre-crackdown levels.  One word of caution, conditions are about to change again. The crackdown was an outgrowth of the 18th National Congress of the Communist Party of China.  The 19th Congress is set for later this year and Xi is promising a dramatic new direction for China.  It is certain that both Macau and Hong Kong will have assigned roles in the new dance routine.


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