Analysis  of the Current Status and Development  Recommendations  for Green Finance in Macau

Fan Wei1, Liang Gang2,3, Wang Zheng2, Wu Meng4 

(1.      Nanning       Economic      and      Technological Development Zone, Nanning, Guangxi, 530031

2. Haikou University of Economics, Haikou, Hainan, 571132

3.   Post  –  doctoral   Research  Station,   Institute  of Industrial  Economics,  Chinese  Academy  of  Social Sciences, Beijing, 100000

4.  Guangxi   University  of   Finance  and   Economics, Nanning, Guangxi, 530001)

Abstract: Green finance refers to a financial development strategy that implements environmental protection and energy conservation policies in the financial sector, promotes the transformation of economic development models and industrial restructuring through financial operations, and achieves sustainable financial development. The development of green finance in Macao is still in its early stages, facing challenges such as insufficient infrastructure, lack of data, and an imperfect regulatory system. Based on Macao’s current economic development situation, this paper analyzes the foundation for green finance development in Macao and the problems encountered in the process, and proposes corresponding recommendations.

I. The Economic Structure of Macao
The economic structure of Macao exhibits relatively distinct characteristics. In terms of the composition of output value across the three major industries, the primary sector is essentially negligible, accounting for only about 1% of Macao’s gross domestic product (GDP), primarily consisting of fisheries. The secondary sector is relatively weak, contributing approximately one-third of Macao’s GDP, with an underdeveloped industrial base and incomplete industrial categories. Among all industrial enterprises, textile, garment, and leather production firms account for about half. The manufacturing sector is dominated by the textile and garment industry, which operates under a labor-intensive and export-oriented development model, with most products

exported to the United States and Europe. The tertiary sector is relatively developed, maintaining a specific gravity of around 95% of the local GDP. Within this sector, the tourism and gambling industry is world-renowned, while commerce, finance, real estate, postal services, telecommunications, and other industries are also well-developed.

Data source : Statistics and Census Bureau of Macao

Figure  1:  Macao’s  Gross  Domestic  Product  and  Three Major Industries from 2012 to 2023

II. Macao’s Leading Industries

Macao’s economy heavily relies on the gambling industry, which currently accounts for over 40% of Macao’s gross domestic product.

As the only legal gambling destination in China, Macau’s gaming revenue has already surpassed that of the famous American gambling city Las Vegas by sevenfold. The tourism industry driven by the gaming sector is also one of Macau’s leading industries. Macau is also the city with the highest GDP per capita in China, with a gross local product of 403.3 billion Macau patacas in 2024 and a per capita GDP of 588,000 Macau patacas. This small city, covering an area of 28 square kilometers with a population of 600,000, saw its per capita wealth soar to rank second globally in 2024, second only to Luxembourg, due to the substantial surge in gaming revenue.

III. Achievements of Green Finance in Macao

(I) The types of participating entities in the Macao financial market are becoming increasingly diverse.
In 2021, the financial industry became the second – largest industry in Macao, accounting for 15.4% of the total value – added of all industries1. The Macao financial market has gradually shifted from being dominated by the banking

sector to a co – existence of multiple business forms, covering major sectors such as the bond market, wealth management, and financial leasing. The diversified development trend has injected new vitality into the Macao economy, reduced its dependence on a single industry, and promoted sustainable economic development. The ecosystem of Macao’s financial institutions is becoming increasingly rich. [1] Since 2019, new institutions have been established in multiple sectors including banks, securities firms, funds, financial leasing companies, and financial asset exchanges. As of the first half of 2024, there were a total of 101 financial institutions licensed to operate in Macao, an increase of 14 compared to 2019. The entry of new institutions has enriched the Macao financial ecosystem and provided more options and services for investors and enterprises.
(II) Macao investors have more diversified investment channels.
In recent years, the investment awareness of Macao residents has been continuously increasing, and their investment channels have become more diversified. At the end of 2023, the market value of Macao residents’ securities investments was 1.1 trillion patacas, mainly in long – term bonds. The Chinese mainland, the United States, and Hong Kong, China were the top three destinations for securities investment. Macao institutional investors invest in the mainland through channels such as direct access to the inter – bank bond market via the “Global Connect”, the “Bond Connect”, as well as through Qualified Foreign Institutional Investors (QFII), Renminbi
Qualified Foreign Institutional Investors (RQFII), and Qualified Foreign Limited Partnerships (QFLP). Macao individual investors not only indirectly invest in domestic and overseas markets through various products but also purchase mainland wealth management products through the Cross – border Wealth Management Connect, achieving investment in multiple markets in the mainland and internationally. The flow of funds is closely related to regional development issues. In 2018, Macao contributed 20 billion RMB to establish the Guangdong – Macao Cooperation and Development Fund with Guangdong Province, mainly investing in infrastructure and key projects in Guangdong Province. In 2024, Guangdong and Macao jointly established the Hengqin Guangdong – Macao Development Investment Co., Ltd., focusing on investing in Hengqin and the real economy, which helps promote the moderately diversified development of the Macao economy. [2]

(III) The legal and institutional system of Macao’s finance is gradually being improved.
To adapt to the development trend of modern finance and meet the requirements of the plan, Macao has compared and analyzed the legal systems of major global financial centers and judicial jurisdictions based on market conditions, and has started to revise a series of legal systems related to bonds, investments, trusts, etc. It has also incorporated industry practices and suggestions and gradually formed a system that includes laws, regulations, guidelines, and industry norms. [3] In terms of laws and regulations, Macao promulgated the “Trust Law” (Law No. 15/2022) of the Special Administrative Region in 2022; in 2023, it revised the legal system of the financial system, promoted the legislation of the “Securities Law” of the Macao Special Administrative Region and the revision of the investment fund ordinance, and issued a series of guidelines to regulate various sectors such as issuance, information disclosure, underwriting, trustee management, registration and settlement, and registration. In terms of industry norms, the Macao Central Securities Depository and Clearing Co., Ltd. (MCSD) has issued procedures and methods for bond registration and settlement, and the China (Macao) Financial Assets Exchange Co., Ltd. (MOX) has issued rules for bond listing, etc., regulating the market operation from multiple dimensions. The continuously improving financial legal system provides strong support for the healthy development of the Macao financial market and enhances the transparency and standardization of the market. [4]

(IV) The pattern of the Macao bond market has initially emerged.
After the implementation of the registration system in the Macao bond market in 2023, the primary market has been gradually improved, covering a broader group of investors. Macao’s financial infrastructure has actively strengthened cooperation with its counterparts in the Chinese mainland, Hong Kong, China, and Luxembourg, etc., and accelerated the inter – connectivity between the Macao bond market and other markets. For example, MCSD will be directly connected to the Central Moneymarkets Unit (CMU) in Hong Kong, China. The development of the bond market has broadened the financing channels for Macao enterprises and provided more investment options for investors.
IV. Difficulties in Macau’s Development
(1) Single economic structure and over – reliance on the

gaming industry, with insufficient development space and impetus for other industries. Macau hopes to become a tourist – centric city. However, in a sense, its tourism industry is driven by the gaming industry and cannot form an independent industry. In fact, without the support of a large economic system, it is quite difficult to develop tourism in Macau, which is lacking in both natural and cultural tourism resources.
(2) Bottlenecks in spatial development. Macau is one of the regions with the highest population density in the world. The continuous population growth severely tests its limited urban space, revealing problems such as insufficient local land resources, backward in – island infrastructure, and a shortage of green spaces and coastal open spaces. It faces multiple challenges in sustainable urban development and requires an overall improvement in the human settlement and ecological environment. Currently, the Central Government has provided support for the development of Hengqin Island to Macau, which can, to some extent, alleviate the shortage of land resources in Macau. However, it will take a long time for Hengqin Island to reach the development level of Macau’s main urban area today.
(3) The contradiction between the internationalization of capital and the localization of tourists in the leading industry. Through the opening of operating rights, Macau’s gaming industry has introduced international capital, achieving the internationalization of gaming – industry capital. At the same time, the gaming industry has become increasingly dependent on mainland tourists, and the proportion of mainland tourists has been rising. At the beginning of the handover, mainland tourists accounted for less than a quarter of all tourists in Macau. Since the implementation of the Individual Visit Scheme, both the total number and the proportion of mainland tourists have continued to increase. In 2024, mainland tourists accounted for 70.11%, an increase of 28.6% compared with 2023; Hong Kong tourists accounted for 20.55%, a decrease of 0.2% compared with 2023; and tourists from other countries accounted for 6.93%, an increase of 66% year – on – year.
(4) Macau lacks a capital market. Its financial industry mainly consists of the banking sector, without foreign exchange, securities, futures, or gold markets. Financial transactions are conducted through Hong Kong, and the development of offshore financial services is insufficient. Therefore, the development of green finance in Macau also faces the problem of a lack of a capital market. Both Hong Kong and Macau are ideal locations for developing

offshore financial services. In particular, the circulation of foreign currencies in Macau far exceeds that of the Macau Pataca. The local banks are less competitive than foreign banks, which is a weakness of the local financial industry but an advantageous condition for developing offshore financial services. [5]

V. Design of Green Financial Products in Macau
In February 2019, the National Development and Reform Commission and the Macau Special Administrative Region Government signed the “Arrangement between the National Development and Reform Commission and the Macau Special Administrative Region Government on Supporting Macau’s Full Participation in and Contribution to the Belt and Road Initiative”, supporting Macau to study the establishment of a green finance platform and a RMB – denominated securities market. In recent years, Macau has vigorously developed characteristic finance and financial leasing, which can support the development of green finance on this basis. While improving its own green finance infrastructure, Macau should be orderly connected with cities in the Greater Bay Area to promote the construction of green finance in the Greater Bay Area and the inter – connectivity of the green finance markets with Portuguese – speaking countries. [5] The design of green financial products is as follows:
(1) China – Portuguese – speaking Countries Carbon Emission Rights Exchange
The so – called “carbon emission trading” means setting a total greenhouse gas emission limit for each enterprise. The part of emissions below the limit can be sold on the carbon trading market. Conversely, if an enterprise’s carbon emissions exceed the quota, it has to buy the extra allowances. As China is still a developing country and does not bear legally binding obligations to control greenhouse gas emissions, the carbon emission exchanges in the Chinese mainland promote voluntary emission reduction, and the demand is quite limited. In promoting carbon emission rights trading, the European Union is at the forefront of the world. Countries such as Portugal in the EU have a long – standing trading history and have accumulated certain experience, which can also serve as a reference for the carbon emission rights exchanges in the Chinese mainland. If the China – Portuguese – speaking Countries Carbon Emission Rights Exchange is successfully launched, it will promote the demand for carbon emission rights trading in the Chinese mainland to a certain extent. [6]
(2) China – Portuguese – speaking Countries Green

Finance Information Exchange Center
In March 2019, the “Pan – Pearl River Delta 9 + 2 Provinces and Regions Business Exchange Group” organized by the Macau Special Administrative Region Government visited Portugal, conducting in – depth exchanges with local financial, environmental protection institutions, and banks on topics such as environmental protection and green finance. They had in – depth exchanges with relevant Portuguese departments and institutions on effective practices in the fields of green finance and environmental protection work and explored the future direction of sustainable development. As a country with relatively high – level development in the field of green finance, Portugal’s various measures, policies, and products are worthy of our learning and reference. With other Portuguese – speaking developing countries, our development levels of green finance are similar, and we can jointly discuss the current difficulties and pool our wisdom to make the development of green finance faster and more efficient. On March 28, 2019, at the Macau International Environmental Co – operation and Development Forum and Exhibition held in Macau, the participating countries were not limited to Portuguese – speaking countries but also included some non – Portuguese – speaking countries. This event promoted the exchange and cooperation of the regional green economy and advanced the green development of Macau.
(3) Green financial leasing
The leased equipment is mainly related to green industries such as clean energy, energy conservation and environmental protection, and circular economy to solve problems such as lack of technology and equipment. Lessees are not limited to local enterprises in Macau but also include enterprises in the Guangdong – Hong Kong – Macao region, so as to promote the construction of green finance in the Greater Bay Area. As a city connecting the Chinese mainland and the international community, Macau can more easily obtain advanced foreign equipment. For example, the Green Leasing Development Community established in Shanghai in 2019 is a model of green financial leasing. [7]

(4) Green gambling
There are two forms of green gambling. One form is a gambling product where the bookmaker uses a portion of the profits for environmental protection. For example, led by the government, attracting domestic and foreign funds to act as the bookmaker, taking the average PM2.5 content in the air in Macau the next day as the target, allowing people to guess and buy in which range the average PM2.5

content in Macau the next day will be. If the guess is correct, they will make a profit; if not, they will suffer a loss. A fixed period of time is set, and a portion of the profits is distributed to shareholders in proportion, and the remaining part is used for environmental protection, green energy, pollution prevention and control, etc. In addition to PM2.5, polluting gases such as SO2 and NO1 can also be used as targets, or ordinary targets can be used directly but the profits are used for green development. The other form is that the Macau government uses a portion of the annual fiscal revenue from the gambling industry for environmental governance. As the only place in China where gambling is legal, Macau has a large market demand and high profits for green gambling, and 40% of Macau’s annual fiscal revenue comes from the gambling industry.
(5) Credit for marine plastic pollution control
As an island, the ocean is a very important issue in Macau and is also one of the more polluted areas, with plastic pollution being relatively serious. Most of the plastics flowing into the ocean are non – biodegradable, so they cannot be recycled. Coupled with the high cost of plastic recycling, financial institutions can design a green credit product called “Marine Plastic Pollution Control” to reduce the loan interest for enterprises in marine plastic pollution control projects, enabling local commercial enterprises and social groups in Macau to purchase and replace treatment products and equipment, so as to improve their treatment capacity, introduce environmental protection technologies and equipment, and further promote the treatment work and the development of the environmental protection industry.
(6) River pollution control fund
The river pollution control fund is a fund product whose main purpose is to control industrial wastewater and solid waste flowing in from the industrial zones in the Pearl River Delta. The main sources of funds are the contributions from the governments of cities in the Guangdong – Hong Kong – Macao region and the high – pollution and high – emission enterprises in the Pearl River Delta industrial zones. The funds are used for industries closely related to river pollution control, such as improving management technology and protecting water resources. Macau is located at the lower reaches of the Pearl River estuary and at the lower end of the Pearl River Delta industrial zone. Various pollutants from the industrial zone flow to Macau with the water, which is also one of the sources of pollutants in Macau. Compared with plastics, industrial wastewater and solid waste contain more

recyclable elements.

VI. Suggestions on the development ideas of green finance in Macau
The Outline Development Plan for the Guangdong – Hong Kong – Macao Greater Bay Area positions Macau as follows: to build a world center for tourism and leisure, a service platform for business and trade cooperation between China and Portuguese – speaking countries, to promote the moderate and diversified development of the economy, and to create an exchange and cooperation base with Chinese culture as the mainstream and a coexistence of diverse cultures. In recent years, Macau has vigorously developed characteristic finance, mainly including wealth management, the RMB clearing center for China – Portuguese – speaking countries, and financial leasing. Among them, wealth management and the RMB clearing center for China – Portuguese – speaking countries can be closely combined with the bond market to meet the financial needs of a large number of issuers and investors at different stages; the financial leasing market can give full play to the advantage of resource pooling to provide liquidity support for the trading of financial leasing assets and products. Therefore, it is recommended to build Macau into a characteristic demonstration center for green finance in the Guangdong – Hong Kong – Macao Greater Bay Area. The specific functional design is as follows:
(1) A demonstration platform for green finance exchange between China and Portuguese – speaking countries
Macau has a century – long historical origin with Portugal, so it has a natural special affection and close connection with Portuguese – speaking countries. Building a green finance demonstration platform for Portuguese – speaking countries in Macau has a solid foundation. Based on this exchange and demonstration platform, it is possible to explore the establishment of a China – Portuguese – speaking countries carbon emission trading exchange, a China – Portuguese – speaking countries green credit trading center, and a China – Portuguese – speaking countries green finance information exchange center, and hold regular China – Portuguese – speaking countries green finance forums to promote Chinese green industries to go global to Portuguese – speaking countries and attract green resources from Portuguese – speaking countries. Based on this platform, strengthen green finance cooperation with Portuguese – speaking countries and sign relevant green finance reciprocal policies. This can not only strengthen the connection between China and

Portuguese – speaking countries in green finance but also enhance national friendship and is also a beneficial practice in response to the Belt and Road Initiative.
(2) Green Financial Leasing Center
Judging from domestic trends and international experience, the financial leasing industry is still in a period of rapid development. The proportion of financial leasing business in the national economy, especially in fixed – asset investment, is increasing. Financial leasing is an effective link between industry and finance. It is the business form most closely integrated with the real economy. Its characteristic of integrating equipment leasing and financing enables it to play an important role in promoting industrial innovation and upgrading, broadening corporate financing channels, promoting social investment, and adjusting the economic structure, which is of great significance for the financial sector to “move from the virtual to the real”. According to the calculation of the central bank, during the ” 13th Five – Year Plan” period (2015 – 2020), China’s annual investment in the green field will reach 2.9 trillion yuan, of which about 2 trillion yuan needs leasing support from green finance. This has brought huge impetus to the green leasing market. The transformation and upgrading, equipment manufacturing, and product application of green industries represented by clean energy, energy conservation and environmental protection, and circular economy are highly consistent with the industry attributes of financial leasing. The green leasing market, which has a geographical advantage, has broad development prospects. For financial leasing companies to focus on the green field is not only a key point for business innovation but also can effectively support China’s green finance cause and provide strong support for the transformation of the energy structure.
On September 23, 2017, the first green leasing development community in China was officially established in Shanghai. Nearly 50 financial leasing companies such as CDB Leasing, Industrial Bank Financial Leasing, and Hengxin Financial Leasing, and more than 60 financial leasing companies such as XCMG Leasing were among the first – batch members of the community. This is an important achievement of the implementation of green finance in the leasing industry. Macau can learn from this model to build a green leasing development community in the Guangdong – Hong Kong – Macao Greater Bay Area and jointly issue a common declaration. At the same time, it is recommended that the Macau Special Administrative Region Government initiate the establishment of a

dedicated Macau Green Financial Leasing Company as the main initiator of the Greater Bay Area Green Leasing Development Community. Coordinate and promote the establishment of a cooperation mechanism of communication, collaboration, mutual assistance, and mutual trust among community members, so that the community can play an important role in promoting the development of green leasing in the entire Guangdong – Hong Kong – Macao Greater Bay Area.

(3) Green Asset Wealth Management Service Center
After all, green finance is still in its infancy as a whole. There is a lack of wealth – management products in the market for direct investment in the green economy. The launch of green asset wealth – management products is the specific implementation of this business model that combines meaning with profit. It not only provides investors with a channel for wealth – management investment, but more importantly, it can attract more investors to pay attention to and participate in the development of the green industry through green wealth – management products, and jointly support environmental protection and ecological civilization construction. An example in this regard is: In September 2016, Industrial Bank issued its first – phase “Wanlibao – Green Finance” wealth – management product for individual investors. The term is 5 years, with a 3 – month investment cycle for open subscription and redemption. The initial establishment scale was 2 billion yuan. The funds raised by this wealth – management product are mainly invested in green environmental protection projects and green bonds. The investment targets all belong to the green environmental protection assets that are key – supported by regulatory documents such as the No. 39 announcement and attachments of the People’s Bank of China on green financial bonds and the green credit statistics system of the China Banking Regulatory Commission. Since its establishment, the product has been operating stably. Due to its environmental protection concept and good return expectations, it has been increasingly recognized by investors. The current reference annualized net return rate for customers in the investment cycle is 4.3%. On November 30, 2016, when it was first opened for subscription and redemption, more than 10 billion yuan of wealth – management funds were raised in just six days, which was well – received by investors. Therefore, Macau can also follow this model to design and issue green asset wealth – management products. This allows ordinary investors to preserve and increase their wealth through

investing in financial products while participating in supporting the development of the green industry in the Guangdong – Hong Kong – Macao Greater Bay Area, and guiding wealth – management funds to flow into the green finance field. Moreover, Macau has rich overseas Chinese resources. The overseas Chinese community has a large amount of personal wealth, and in recent years, the awareness of patriotism, asset repatriation, and environmental protection among overseas Chinese has been continuously strengthened. Creating green wealth – management products for overseas Chinese will also have broad market space and development opportunities.

(4) Green Lottery Trading Market
Macau has a developed gambling industry, and major casinos attract a large number of gamblers every year. Macau can refer to the model of welfare lotteries, give full play to its position as a gambling center, and establish a green lottery trading market. The money from lottery purchases will be used for green environmental protection industries and ecological protection public welfare undertakings. China Welfare Lottery started in 1987 with the purpose of “uniting people from all walks of life who are enthusiastic about social welfare undertakings, carrying forward the socialist humanitarian spirit, raising social welfare funds, and establishing welfare undertakings for the disabled, the elderly, and orphans, and helping those in need”, that is, “supporting the elderly, assisting the disabled, rescuing orphans, and relieving the poor”. Subsequently, the China Welfare Lottery Issuing Center was established as the issuing agency. Currently, the types of China Welfare Lottery include: Scratch – off tickets, Double – Color Ball, 3D, local welfare lotteries, Seven – Joy Lottery, 35 – out – of – 7, 29 – out – of – 7, Oriental 6 + 1, East China 15 – out – of – 5, and New 3D. Macau can also refer to this to establish a green lottery issuing center. With the purpose of raising ecological and environmental protection funds, establishing environmental protection, ecological civilization, and beautiful China welfare undertakings, and helping poor areas to control pollution, it can issue green lotteries in the Guangdong – Hong Kong – Macao Greater Bay Area and even across the country, and then expand to the Portuguese – speaking countries’ markets, and further build an internationally influential green lottery trading market. This can greatly improve the long – standing negative moral image of Macau’s gambling industry. While developing green finance, it can also raise funds for environmental protection, which benefits the present generation and has far – reaching merits for future

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