To address challenges of its unbalanced industrial structure, Macao has highlighted the importance of economic diversification, and prioritised modern finance, especially the bond market, as a cornerstone of its strategic transformation. Recent years have witnessed the birth, expansion and maturation of Macao’s bond market, and its progress from isolated breakthroughs to systemic advancement. With fruitful results, the construction of the bond market has enriched Macao’s financial ecosystem, and laid a solid foundation for economic diversification in the future.

Strategic expansion: high-speed growth

In 2020, the Macao SAR government first introduced the concept of ‘modern finance’ in its policy address. Later, in 2022, the ‘one plus four’ appropriate economic diversification strategy was formalised (‘one’ refers to the diversified development of the integrated tourism and leisure industry, and ‘four’ refers to four major industries: health, modern financial services, high technology and finally the convention, exhibition, trade, culture and sports industry.

Today, the financial sector has grown to become the second-largest industry in Macao, with an ecosystem led by banking and insurance, together with bonds, funds and other financial business.

The development of Macao’s bond market dates back to 2018, and in 2021 the Central Securities Depository (CSD) system was implemented. In recent years, the Macao SAR government has undertaken efforts to enhance bond issuance mechanisms, financial infrastructure, supporting laws and regulations, and the collaboration with Chinese Mainland, Hong Kong and other regions.

Nowadays, notable issuers include the Ministry of Finance of China, People’s Government of Guangdong Province, and mainstream financial institutions and enterprises. Bonds in Macao are issued in different currencies, namely in Chinese Yuan, US dollars, Hong Kong dollars and Macau Patacas. By 2024, the total value of publicly offered and listed bonds in Macao reached $100bn.

The construction of the bond market has enriched Macao’s financial ecosystem

As a mainstream local commercial bank and the Chair Institution of the Securities and Funds Industry Association of Macao, ICBC (Macau) plays a pivotal role in the development of Macao’s bond market. The bank serves in multiple capacities including issuer, institutional investor, underwriter, clearing bank, agency bank and trustee administrator, providing comprehensive services that span the entire bond market value chain.

For the past few years, the bank has witnessed important moments of Macao’s bond market, and spearheaded significant transactions. It has executed over $1bn of bond issuance across four consecutive years, making it the most active and diversified bond issuer with the largest scale of issuance among its local peers. It has also pioneered innovative products in offshore bonds, such as ‘Kung Fu Bonds,’ ‘Dim Sum Bonds,’ ‘Lotus Bonds,’ ‘Pearl Bonds’ and ‘Yulan Bonds,’ creating a multi-market and multi-product underwriting portfolio. Leveraging its advantage of a full bank license, ICBC (Macau) makes extensive investment in various bond markets.

Macao’s ascendancy in modern finance is underpinned by its unique geopolitical, institutional and policy advantages.

Geopolitical strength

As a strategic gateway between Chinese Mainland, Portuguese-speaking countries, and the Belt and Road Initiative (BRI) markets, Macao leverages its unique status as a free port, independent tariff zone, and integral part of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). In the context of China’s expanded opening-up policy, this strategic location amplifies Macao’s prominent advantage as a regional hub.

Robust market environment

Macao and its surrounding area boast a sound financial ecosystem and business-friendly climate, characterised by internationally recognised confidentiality standards, with abundant fiscal reserve and social wealth, competitive tax rates (lower than major global financial centres), and an open financial system. Its financial regulatory authority has consistently maintained an open and pragmatic regulatory stance, and supported financial innovation. By the end of 2024, international assets accounted for 83.4 percent of total assets of the banking sector in Macao.

Policy support

The Guangdong-Hong Kong-Macao Greater Bay Area is now a $1.8trn economy, which provides fertile ground for Macao’s financial development. As one of the four centre cities within the Greater Bay Area, Macao stands to gain from the diverse financial service demands and vast market of the area, which propels the growth of its modern financial sector.

Meanwhile, the deep integration between Macao and Hengqin has formed a distinctive mechanism and provided strong support for Macao’s modern financial advancement, through effectively combining Macao’s strength of internal and external connectivity and resource coordination with Hengqin’s capacity for real economy support, financial development and adequate infrastructure. As of the end of 2024, the asset management scale of fund companies in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin has reached $600bn.

Financial interconnectivity

Having successfully established Macao’s bond market ‘from zero to existence,’ it calls for market participants to further explore a pathway ‘from existence to excellence.’ Looking into the future, Macao is equipped to leverage its dual markets at home and abroad by anchoring its strategy in the bond market. Through measures such as broadening and deepening market participation, innovating product and service offerings, and cultivating a dynamic industry system, Macao will be able to enhance its market competitiveness, and achieve the strategic goal of appropriately diversified economic development.

First, Macao will focus on precise management of regional markets, including boosting bond market liquidity, strengthening fintech applications, and introducing more innovative investment products. Particularly in advancing the development of Macao’s secondary bond market, market participants could provide tailored services in areas such as valuation, trading, and funding support, in order to improve liquidity of the bond market.

In addition, Macao will leverage the development of the Greater Bay Area and its role as the platform connecting China and Portuguese-speaking countries as strategic opportunities, and continue to strengthen cooperation and exchanges with financial institutions and industry organisations in Chinese Mainland and Portuguese-speaking countries. Through measures such as cross-border collaboration, resource sharing, and the integration of complementary advantages, Macao aims to achieve synergistic effects and increase the scale of cross-border investment and financing, therefore promoting its bond market across domestic and international spheres.

Last but not least, Macao will align with the global sustainable finance initiatives, and intensify partnerships with regional and international institutions to broaden investor engagement in its bond market. Macao will also explore the application of blockchain and digital currency solutions in the bond market, to optimise cross-border connectivity, elevate total factor productivity, and strike a strategic balance between risk mitigation and growth opportunities.