Macau Economy

Economy

Macau's well-to-do economy has remained one of the most open in the world since its reversion to China in 1999. Apparel exports and tourism are mainstays of the economy. Although the territory was hit hard by the 1998 Asian financial crisis and the global downturn in 2001, its economy grew 9.5% in 2002 and 15.6% in 2003. During the first three quarters of 2004, Macau registered year-on-year GDP increases of more than 20 percent. A rapid rise in the number of mainland visitors because of China's easing of restrictions on travel, increased public works expenditures, and significant investment inflows associated with the liberalization of Macau's gaming industry drove the recovery. The budget also returned to surplus in 2002 because of the surge in visitors from China and a hike in taxes on gambling profits, which generated about 70% of government revenue. The three companies awarded gambling licenses have pledged to invest $2.2 billion in the territory, which will boost GDP growth. Much of Macau's textile industry may move to the mainland as the Multi-Fiber Agreement is phased out. The territory may have to rely more on gambling and trade-related services to generate growth. Two new casinos were opened by new foreign gambling licensees in 2004; development of new infrastructure and facilities in preparation for Macau's hosting of the 2005 East Asian Games will bolster the construction sector. The Closer Economic Partnership Agreement (CEPA) between Macau and mainland China that came into effect on 1 January 2004 offers many Macau-made products tariff-free access to the mainland, and the range of products covered by CEPA was to be expanded on 1 January 2005.