Hengqin, the special economic zone opposite Macau’s Cotai casino district, has been turned into a bold new experiment. Macau will essentially take over the daily management of the zone from Zhuhai, but will have to consult the provincial government on major policies.
The zone will be jointly managed by a committee, but Macau will be in the driver’s seat: This is clear from the fact that Macau will appoint the Executive Deputy Director of the zone’s management committee. Although Macau’s CE and Guangdong’s governor will be co-heads, the EDD will run the show on a daily basis. The language of the announcement makes it seem like this is a JV, but really this is Macau’s project.
There is much talk about diversification, with hi-tech industries, including manufacturing, and financial services being given lots of ink. But tourism is still the key. The plan makes no mention of the gaming concessionaires, and the tourism section calls it “cultural tourism”. But make no mistake, what this means in practice is that SMEs will get subsidies to pursue tech ideas, most of which will flop, and the banks will be able to build up some wealth management products in Hengqin, but the only projects that will actually make money will be in tourism, and so they will get the lion’s share of attention and resources.
This will take time, however: No one should expect a press release on the casinos being given a role in Hengqin before the concessions are renewed next year. The deadline for getting the management committee fully functional is only 2024. The goal for integration to be fully realised is only 2035.
The best part of the plan is the new visa policies, which should kick in ASAP. The committee will control policy on Hengqin’s so-called “first line” of border control, which means the massive Hengqin Port. This doesn’t change the actual controls: mainlanders will still need visas to cross over. But policy on the frequency and ease of cross-border visas issued within Hengqin will be decided by the committee. The masterplan specifically mentions MICE event attendees in Hengqin being able to get special visas to visit Macau. This could be extended to leisure visitors. Chimelong, the Ocean Kingdom theme park in Hengqin, attracted 10m annual visitors pre-pandemic, and very few of them crossed over to Macau. Allowing them easy access will give Macau an instant boost once the recovery cranks up a few gears.
Another key goal is to build up the zone’s population, which could happen quickly once the new tax policies are implemented. This will likely result in tens of thousands of new mainland residents (and future frequent gamblers) coming to work in the Hengqin office buildings that are currently standing empty. There are already plenty of apartment blocks in Hengqin, but a building boom is still likely in the coming years. The target for Hengqin is to grow to the same size as Macau, around 600k-700k. The committee will achieve this by offering companies and individuals unbeatable tax rates in line with Macau’s.
No one should get too excited about cross-border fund rules, however. They won’t really matter: Financial institutions in Hengqin will be treated the same way they are in Macau, ie, it will still be hard for a mainland person or entity to move funds from a mainland account into a Hengqin account. But the size of the offshore Renminbi market will surely grow as the population increases.
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