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Diplomacy in Action

Macau (12/20/09)


December 20, 2009

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For the most current version of this Note, see Background Notes A-Z.

PROFILE

Geography
Area: 29.2 square kilometers total, with 9.3 sq. km. on a peninsula connected to China and the southern islands of Taipa (6.7 sq. km.), Coloane (7.6 sq. km.), and Co Tai (5.6 sq. km., reclaimed land between Taipa and Coloane) linked by bridge and causeway. Terrain: Coastline is flat, inland is hilly and rocky.
Climate: Tropical monsoon; cool and humid in winter, hot and rainy from spring through summer.

People
Population (third quarter 2009): 541,200.
Population growth rate (third quarter 2008): 4.8%.
Ethnic groups: Chinese, Macanese (mixed heritage), Portuguese, others.
Religions: Buddhist 17%, Roman Catholic 7%, Christian 2%.
Languages: Chinese, Portuguese.
Education: Literacy--91.3%.
Health: Infant mortality rate--3.2/1,000.
Work force: Manufacturing--6.8%; construction--11.4%; wholesale and retail trade, hotels and restaurants--25.5%; financial intermediation, real estate, and related business activities--9.7%; public administration, other community, social and personal services, including gaming--30.2%; transport, storage and communications--5.4%.

Government
Type: Special Administrative Region (SAR) of the People's Republic of China since December 20, 1999 with its own constitution-like charter (the Basic Law).
Branches: Executive--President of the People's Republic of China (head of state), chief executive (head of government) selected in 2009; Executive Council (cabinet). Legislative--Legislative Assembly, returned by a combination of direct and indirect elections and appointments by the chief executive. Judicial--Independent judicial system with a high court (the Court of Final Appeal).

Economy
GDP (2008): $21.5 billion.
GDP real growth rate (2008): 13.2%.
Per capita GDP (2008): $39,130.
Agriculture: Products--rice and vegetables; most foodstuffs and water are imported.
Industry: Types--tourism, gambling, clothing, textiles, electronics, toys, footwear, construction, and real estate development.
Trade (2008): Exports--$2.0 billion f.o.b.: textiles and clothing, manufactured goods (especially toys, footwear and machinery and mechanical appliances). Major markets--U.S. 39.9%, Hong Kong 19.7%, mainland China 12.3%, EU 9.9%. Imports--$5.4 billion: consumer goods, foodstuffs, fuels, and raw materials. Major suppliers--mainland China 39.3%, Hong Kong 10.1%, EU 16.5%, U.S. 5.5%, Taiwan 3.3%, Japan 8.5%.

PEOPLE
Macau's resident population is 94.3% Chinese, primarily Cantonese and some Hakka, both from nearby Guangdong Province. The remainder are of Portuguese or mixed Chinese-Portuguese ancestry. English is spoken in tourist areas. Macau has 10 higher education institutions, including the University of Macau; 74.3% of the University of Macau's 6,608 students are local and 25.7% from overseas. Macau is home to approximately 77,000 foreign workers, who account for almost 25% of Macau’s total workforce.

HISTORY
Chinese records of Macau date back to the establishment in 1152 of Xiangshan County under which Macau was administered, though it remained unpopulated through most of the next century. Portuguese traders began using Macau as a staging port as early as 1516, making it the oldest European settlement in the Far East. In 1557, the Chinese agreed to a Portuguese settlement in Macau but did not recognize Portuguese sovereignty. Initially, the Portuguese developed Macau's port as a trading post for China-Japan trade and as a staging port on the long voyage from Lisbon to Nagasaki. When Chinese officials banned direct trade with Japan in 1547, Macau's Portuguese traders carried goods between the two countries.

The first Portuguese governor was appointed to Macau in 1680, but the Chinese continued to assert their authority, collecting land and customs taxes. Portugal continued to pay rent to China until 1849, when the Portuguese abolished the Chinese customs house and declared Macau's "independence." On March 26, 1887, the Manchu government acknowledged the Portuguese right of "perpetual occupation." The Manchu-Portuguese agreement, known as the Protocol of Lisbon, was signed with the condition that Portugal would never surrender Macau to a third party without China's permission.

When the Chinese communists came to power in 1949, they declared the Protocol of Lisbon to be invalid as an "unequal treaty" imposed by foreigners on China. However, Beijing was not ready to settle the treaty question, requesting maintenance of "the status quo" until a more appropriate time. Riots broke out in 1966 when pro-communist Chinese elements and the Macau police clashed. Through intervention by some of Macau's leading "patriotic" Chinese business clans, an agreement was reached which met local protestor demands and restored order under the Portuguese administration, but was widely seen as effectively ceding actual power to China. Portugal tried in 1966 (after the riots) and again in 1974 (following the fall of the Salazar dictatorship) to return Macau to Chinese sovereignty. China, still emerging from the internal turmoil of the Cultural Revolution, declined to accept.

Portugal and China established diplomatic relations in 1979. A year later, Gen. Melo Egidio became the first Governor of Macau to visit the People’s Republic of China. The visit underscored both parties' interest in finding a mutually agreeable solution to Macau's status. In 1979, Portugal and China agreed to regard Macau as "a Chinese territory under temporary Portuguese administration." Handover negotiations began in 1985, a year after the U.K. and China reached agreement that Hong Kong would return to China in 1997. The result was a 1987 agreement returning Macau to Chinese sovereignty as a Special Administrative Region (SAR) of China on December 20, 1999.

GOVERNMENT AND POLITICAL CONDITIONS
The chief executive is appointed by China's central government after selection by an election committee, whose members are nominated by corporate bodies. The chief executive appears before a cabinet, the Executive Council (Exco), of between seven and eleven members. The latest Exco, which took office on December 20, 2009, has 10 members. The term of office of the chief executive is five years, and no individual may serve for more than two consecutive terms. The chief executive has strong policymaking and executive powers similar to those of a president. These powers are, however, limited from above by the central government in Beijing, to whom the chief executive reports directly, and from below (to a more limited extent) by the legislature. Fernando Chui Sai-on, formerly Macau's Secretary for Social Affairs and Culture, was elected in 2009, and took office on December 20.

The legislative organ of the territory is the Legislative Assembly, a 29-member body of 12 directly elected members, 10 indirectly elected members representing four interest groups: 1) employers; 2) labor; 3) professionals; and 4) charity, culture, education and sports; and seven members appointed by the chief executive. The Legislative Assembly is responsible for general lawmaking, including taxation, the passing of the budget, and socioeconomic legislation. In the last election, held in September 2009, a pro-democracy group won an additional seat (increasing to three), a democratic-leaning representative of Macau's civil servants union was re-elected, and traditional and pro-establishment candidates held on to the remaining seats. The city of Macau and the islands of Taipa and Coloane each had a municipal council until January 1, 2002, when the Civic and Municipal Bureau was formally established to replace the two municipal councils.

The legal system is based largely on Portuguese law. The territory has its own independent judicial system, with a high court. Judges are selected by a committee and appointed by the chief executive. Foreign judges may serve on the courts. In July 1999 the chief executive appointed a seven-person committee to select judges for the SAR. Twenty-four judges were recommended by the committee and were then appointed by Mr. Ho. Macau has three courts: the Court of the First Instance, the Court of the Second Instance, and the Court of Final Appeal, Macau's highest court. Sam Hou Fai is the President (Chief Justice) of the Court of Final Appeal.

Principal Government Officials
Chief Executive--Fernando Chui Sai-on
Secretary of Administration and Justice--Florinda da Rosa Silva Chan
Secretary of Economy and Finance--Francis Tam Pak Yuen
Secretary of Security--Cheong Kuoc Va
Secretary of Social Affairs and Culture--Cheong U
Secretary of Transport and Public Works--Lau Sio Io

ECONOMY
Macau's economy is now based primarily on tourism, specifically casino gambling. The global financial crisis, combined with restrictions imposed by the People’s Republic of China that limited Chinese visitors to Macau, caused Macau to experience its first economic contraction since the gaming sector was opened to foreign investment in 2002. However, accelerating Chinese economic growth and relaxation of Chinese exit visa restrictions boosted Macau’s growth back into positive territory in the third quarter of 2009. Textile and garment manufacturing, once mainstays of the Macau economy, have virtually vanished and efforts to diversify the economy have had limited success. Through the first 10 months of 2009, Macau’s exports dropped by more than 50%, with exports to the U.S. falling by 80%. Macau is heavily dependent on imports of all kinds, and although imports have dropped by 20%, the trade deficit through the first 10 months of 2009 increased to U.S. $2.9 billion. Gaming alone contributed almost 70% of GDP through the first three quarters of 2009. The opening of the formerly monopolized gambling sector in 2002 has led to significant new investment in casinos, hotels, and related facilities. In the first 10 months of 2009, tourist arrivals fell by 7.1% from the same period in 2008, though visitors appear to be coming to Macau in increasing numbers once again. Mainland Chinese tourists accounted for just over 50% of all tourist arrivals to Macau, with Hong Kong tourists accounting for 32% and Taiwan visitors about 6%.

Macau depends on mainland China for most of its food, fresh water, and energy imports. The European Union and Hong Kong are the main suppliers of raw materials and capital goods.

In the last few years virtually all of Macau's manufacturing operations (mainly textiles and garments) have moved across the border to mainland China. Mainland competition, along with the 2005 end of Multi-Fiber Arrangement (MFA) quotas, which had provided a near guarantee of export markets, have meant the end of Macau's low-end mass production of textiles. While still accounting for almost 30% of Macau’s total exports, textile and clothing exports amounted to less than U.S. $1 million in the first 10 months of 2009. For future growth, Macau is betting heavily on becoming a regional center for gaming, tourism, conventions, and corporate incentive travel; foreign and local investors have massively expanded the casino, hotel, and restaurant sectors. U.S. investment has played a leading role in the development of Macau’s gaming and entertainment sector. According to Macau Government statistics, U.S. direct investment in Macau totaled U.S. $2.2 billion at the end of 2008, making the U.S. Macau’s second-largest source of foreign direct investment after Hong Kong (U.S. $4.0 billion). Direct investment in Macau from mainland China (U.S. $1.2 billion) has been concentrated in the financial sector.

FOREIGN RELATIONS
Macau's foreign relations and defense are the responsibility of China. China has, however, granted Macau considerable autonomy in economic and commercial relations. Macau is a separate customs territory and economic entity separate from the rest of China and is able to enter into international agreements on its own behalf in commercial and economic matters. Macau participates as a member of the Egmont Group.

U.S.-MACAU RELATIONS
The U.S. Government has no offices in Macau. U.S. interests are represented by the U.S. Consulate General in Hong Kong. U.S. policy toward Macau reflects our support for Macau autonomy under the “One Country, Two Systems” framework established in Macau’s Basic Law. The U.S. promotes trade and investment in Macau; supports broadening law enforcement cooperation; works to bolster academic, educational, and cultural links; supports official U.S. visitors to Macau; and serves the growing numbers of U.S. citizen residents and visitors in Macau. U.S. residents in Macau are estimated at over 3,000. There are over 30 U.S. firms doing business in Macau.

Principal U.S. Officials
Consul General--vacant
Deputy Principal Officer--Christopher J. Marut

The American Consulate General is located at: 26 Garden Road, Hong Kong; tel. 011-852-2523-9011, 011-852-2841-2211 (American Citizen Services); FAX 011-852-2845-4845 (consular), 001-852-2845-1598 (general).
 



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