Beijing is hoping to encourage foreign investors to use Macao as a base for investing in mainland Chinese start-ups and other projects with a new scheme launching next month.
The plan, China’s latest attempt to promote the city’s financial services, follows the launch of a master plan in September allowing Macao to govern the economic affairs of neighbouring Hengqin.
From 29 January, the Qualified Foreign Limited Partnership (QFLP) pilot scheme will allow foreign investors to set up funds in the Macao-Hengqin zone and raise money from both domestic and foreign investors, according to the joint management committee of Macao and Hengqin.
“The new scheme represents an important step supporting the development of Macao’s financial services industry,” the committee said.
The QFLP scheme is the latest policy put forward by Beijing to diversify Macao from a casino hub into a financial centre. It follows the proposal for setting up a stock exchange in Macao announced in 2019, and the introduction last September of the Wealth Management Connect scheme, which allows cross border investment in the Greater Bay Area.
The gaming industry contributed over half of the city’s US$54 billion gross domestic product before the outbreak of Covid-19 and generated 80 per cent of the local government’s tax revenue. An 80 per cent drop in gambling revenue last year cut the city’s GDP in half.
To attract more investors, Macao and Hengqin will not institute capital requirements or restrictions on foreign ownership. Funds set up under the QFLP scheme will let foreign investors buy shares in start-ups and other unlisted companies, as well as to take part in private placements by listed companies, private equity and venture capital products. The QFLP system was introduced in 2010 and is among a number of investment schemes used by China to attract foreign capital and to open up its financial markets. The Macao-Henqin zone will be the 11th city in China to introduce the programme.
“This will be a positive move for Macao, as the new scheme will attract investors from Hong Kong and elsewhere to tap opportunities in the Greater Bay Area,” Louis Tse Ming-kwong, managing director of Hong Kong-based broker Wealthy Securities, told the South China Morning Post.
The development of Macao’s financial services sector will not affect Hong Kong, which is a developed financial centre already, he added. “Rather, the new scheme in Macao may offer new opportunities for Hong Kong fund companies and investors.”