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. One Country, Two Systems allows Macau broad but limited autonomy in most of its governing and economic activities.


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Understanding Macau SAR, China

Macau thrives as a second gateway for international trade into mainland China, next to Hong Kong, particularly for Portuguese-speaking countries. The service sector; specifically, the tourism and gaming industry, dominates Macau's economy contributing over 90% of GDP output.

The History of Macau

The Portuguese settled in Macau, a small fishing village on the South China Sea at the time, in 1557. By 1887, Macau was under the possession of Portugal. In 1987, Portugal and China signed an agreement for Macau to become an SAR of China and, in 1999, China assumed formal sovereignty of the region. 

Macau is synonymous with gaming and tourism. 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 700,000 residents, Macau is a small city but with a GDP of more than US$ 62 billion, according to the 2018 Index of Economic Freedom. It is one of Asia’s wealthiest areas with a per capita GDP of more than US$ 95,000, and an unemployment rate of 2.7%. The tourism industry brings nearly 30 million visitors, and gaming alone generated over US$ 28 billion in 2015, according to Statistica. 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 and the region exceeding Las Vegas as a gambling destination. Because of casinos, The GDP of Macau was $7 billion in 2002 and reached $55 billion in 2014, 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.