What part will the neighboring Hengqin island play in the Greater Bay Area dream as Macau wagers on diversification?

Beijing’s plan for the Greater Bay Area development zone, which includes nine cities in the Guangdong province of southern China as well as Hong Kong and Macau, aspires to build an economic powerhouse by the year 2035 that can compete with comparable areas like Tokyo and San Francisco.
In Hengqin, a tiny island that is part of the mainland Chinese city of Zhuhai and has been designated a special zone to assist Macau’s economy evolve beyond a dependence on gambling, however, visiting diplomats have recently voiced concerns about how the plan’s technical goals might play out there.

Liu Xianfa, the Chinese foreign ministry commissioner in Macau, told more than 30 diplomats and business representatives at a lunch in Hengqin on May 9 that Macau was located in the region “with the greatest economic dynamism and the highest-level opening-up in China.” Central government officials have frequently praised the prospects of Macau-Hengqin cooperation.
A “clear will to change the classical economic paradigm of Macau” exists, according to Guilherme Campos, international business advising manager of Dezan Shira & Associates’ Shenzhen office. Macau switched from Portuguese to Chinese rule in December 1999. If this goal is accomplished, it will serve as an example of successful integration between Macau and the mainland portion of the Greater Bay Area, something that is currently taking place on a larger scale between Hong Kong and Shenzhen, he added.

The in-depth collaboration zone idea, according to Alexandre Leitao, the Portuguese consul general in Macau and Hong Kong, was “completely new” and “a challenge in itself.”
One of the major obstacles to the zone’s development, according to Rui Pedro Cunha, president of the Macau European Chamber of Commerce, would be getting individuals to move to Hengqin.
He said that Hengqin had what Macau and Hong Kong lacked – ample room and the chance to start from scratch. “The most important step now is to try to create a critical mass of people living and working here,” he said.
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The Portuguese ambassador to China, Paulo Nascimento, said that businesspeople who understand Portuguese were still waiting for more specific information about the merger of Macau and Hengqin.
He said on the sidelines of a global talent forum hosted by the China-Asean Greater Bay Area Cooperation Centre in Macau on May 11. “Businesses and businessmen here and elsewhere are going to look into conditions to evaluate whether they are going to commit themselves, for instance, the judicial framework – what kind of law is going to be applied?” He said that the fact that Macau and the mainland had distinct legal systems would make it more difficult to reach agreements. “It’s a wait-and-see approach in the sense that we should not make any rush decisions or positions without understanding what is at stake,” he said.
The only region in China where casinos are permitted to operate legally is Macau, which has a totally different economic foundation than the Pearl River Delta industrial hubs of Dongguan, Huizhou, Foshan, and Zhuhai as well as the global financial powerhouse of Hong Kong. According to official data, the gaming and junket industries contributed 352 billion patacas at their height in 2014, accounting for up to 90% of Macau’s GNP in the early 2010s.
Despite being severely affected by the Covid-19 epidemic, it nonetheless contributed 42.8 billion patacas ($5.3 billion) or around 25% of Macau’s GDP in 2017. Additionally, it contributed 20% of the city’s employment.
The Hengqin cooperation zone is intended to advance high-end manufacturing, traditional Chinese medicine, and scientific and technical research as a part of efforts to diversify the economy.
According to Lao Keng Chong, head of the Macau Innovation Development Association, “overall, Macau has been well prepared to diversify its economy in terms of policy planning and making, as well as in concrete actions.”
Lao said that while “the effect is not obvious at this stage,” the merger of Macau and Hengqin will serve as a role model for businesses to utilize Macau as their administrative hub and Hengqin as their industrial hinterland.
From a casino mecca to an innovation powerhouse, Macau is focusing on tech, especially AI, as of May 10, 2023.

Hengqin-Macau joint development would unquestionably provide international companies one more way to access the Chinese market, he added.
The Conference Board study group highlighted the adoption of regulations to attract talent and ease foreign investment in sectors such advanced manufacturing, traditional Chinese medicine, financial services, and e-commerce when the Hengqin cooperation zone was formed in 2021.
In addition to the implementation of tax deductions for enterprises and a streamlined customs declaration process for incoming products, several novel cross-border financial management policies are anticipated to be established, with the secure and efficient movement of internet data assured.
In order to facilitate future collaboration in new areas like renewable energy, economic sustainability, and the health sector, the Macau Trade and Investment Promotion Institute and AICEP Portugal Global signed a memorandum of cooperation in Lisbon in April.While lusophone investors will undoubtedly be interested in the possibility of investing in Hengqin due to the city’s historical, cultural, and economic ties to Macau, the facilities and preferential policies will ultimately determine whether they choose to do so, according to Alfredo Montufar-Helu, director of The Conference Board’s China Centre for Economics and Business.
In contrast, “do they perceive opportunities to create and capitalize on comparative advantages that can enable them to enter and/or expand their business in China, and globally?”
The alignment between Macau and Hengqin, according to Pamela Chan, an associate director at Taipa Village Destination, a company that owns commercial buildings in Macau and Hengqin, is crucial for luring in global enterprises.
“Both governments should further streamline regulations and procedures, offering incentives for businesses to open up shop, and fostering a culture of innovation and collaboration,” she added. This would help to establish a business-friendly climate that promotes investment and entrepreneurship.With a regulatory mandate that the six major casino concessionaires contribute 90% of new investment in non-gaming activities, Chan said Macau was working to diversify its economy.
However, she said, “diversification will take time since gaming is still the primary market feeder. “Since January of this year, border controls have been loosened, which bodes well for the economic recovery, especially in tourist arrivals and gross gaming revenue, which have also recovered to at least 50% of the pre-pandemic level.”
The preparedness of the special administrative region for economic diversification, according to Tim Simpson, an associate professor of communications at the University of Macau, is “the million-dollar question”.
He said that Macau was under pressure to stop depending on gaming. “On the other side, Macau’s distinct edge is gaming. That is its strength. Gambling-related tourism will always be a part of it since it is Macau’s specialty.
The combination of Macau and Hengqin, according to Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank with its headquarters in Guangzhou, the provincial capital, makes it the bay area free-trade zone with the strongest growth potential, surpassing Qianhai in Shenzhen and Nansha in Guangzhou.Hengqin will attract foreign investment if the Macau-Hengqin model is successful, he said, since it offers benefits of a free-trade zone that Shenzhen and Shanghai do not.
But naturally, Macau and Hengqin cannot quickly catch up to the strength in the high-tech industry that Shenzhen and Shanghai now possess.
Shenzhen, home to internet services provider Tencent, electric car manufacturer BYD, IT giant Huawei Technologies, and drone manufacturer DJI, posted first-quarter GDP growth of 6.5%, outpacing both Shanghai and the national average of 4.5%.
The Macau-Hengqin integration model, according to Ricardo Siu, an associate professor of business and economics at the University of Macau, was developed “specifically under consideration of the contextual settings in Macau” to support the sustainability of the city’s social and economic development.

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