What Is Macau SAR, China?

Macau, like Hong Kong, is a special administrative region (SAR) of greater China that operates under the “One Country, Two Systems” principle. Similar to Hong Kong, the One Country, Two Systems allows Macau broad but limited autonomy in most of its governing and economic activities. Its currency is called the Macanese pataca (MOP).

Key Takeaways

  • Macau, also known as Macao, is a small, special administrative region (SAR) of China that operates under the "One Country, Two Systems" principle.
  • A wealthy region, Macau is known as the "Las Vegas of Asia" and rakes in more than US$50 billion in GDP, largely fueled by the tourism, gaming, and service industries.
  • Macau is also known to many investors as a tax haven.

Understanding Macau SAR, China

Macau thrives as a second gateway for international trade into mainland China particularly for Portuguese-speaking countries, located on the country's south coast next to Hong Kong. The service sector, specifically, the tourism and gaming industry, dominates Macau's economy contributing over 90% of GDP output. From a financial standpoint, a lot of investors also know Macau as a tax haven.

The History of Macau

In 1557, the Portuguese settled in Macau, then a small fishing village on the South China Sea. By 1887, Macau was under the possession of Portugal. While things remained relatively stable for the next 100 years, in 1987, Portugal and China signed an agreement for Macau to become a SAR of China and, in 1999, China assumed formal sovereignty of the region. 

Macau is synonymous with gaming and tourism--in fact, Macau is the highest volume gambling center in the world. Like Hong Kong, Macau is a free port city with no tariffs or quotas. Macau has a free market economy with very low taxation, and its currency trades freely in the open market. With less than 700,000 residents, Macau is a small city but had a gross domestic product of $54.17 billion in 2019, according to the Statistics and Census Bureau. It is one of Asia’s wealthiest areas with a per capita GDP of $80,400 and a very low unemployment rate of 1.9%. In 2018, Macau's tourism and hotel industries brought in a record 35.8 million tourists, with casinos bringing in $37.5 billion. Its top trading partners are Hong Kong and mainland China, but trade with Europe and America, particularly Portuguese-speaking nations, is also important. Chinese and Portuguese are the official languages, and Cantonese is the primary language.

Macau's Gaming Industry

Macau is reminiscent of Las Vegas because of its tourism and gaming industry. The region's GDP has been supported largely by its casinos and entertainment industry. Foreign casinos were first allowed in Macau in 2003, and the industry exploded with the region exceeding Las Vegas as a gambling destination. Largely because of casinos, the GDP of Macau was $7 billion in 2002 and reached $55.1 billion in 2018, according to World Bank statistics.

However, Simon Lewis of Time magazine reported in 2016 that the economy had shrunk by more than 20% after a crackdown by the Chinese President Xi Jinping on corruption and money laundering. When China tightened rules on money exiting the mainland, Macau’s tax base, which was largely made up of casino revenues, began to disappear, and the economy has suffered as a result. Still, Macau is looked to