Hengqin reboot: How China’s bold bet aims to bind Macau closer to the mainland

Key Concepts:

• Macau's economic diversification (reducing reliance on gaming)
• Hengqin's role as a conduit between China and foreign investment
• Urbanization rate in China
• Soft infrastructure vs. hard infrastructure
• Integration of Macau into the Greater Bay Area
• Preferential tax rates in Hengqin
• Economic distribution across China
• Digital and green economy
• Traditional Chinese Medicine (TCM) and related industries

1. Macau's Economic Diversification and Hengqin's Role:

• Macau aims to reduce its reliance on gaming from 80% of its GDP to around 40% by 2028.
• The urgency to diversify Macau's economy accelerated during the pandemic due to a significant drop in tourism and gaming revenue.
• Hengqin is seen as crucial infrastructure space for Macau to explore new engines of growth.
• Semiconductor firms are exploring opportunities in Macau due to its proximity to talent and its potential to serve as a conduit between China and foreign investment.
• "The island's proximity to Macau talent really does give them greater greater access to uh the project speaking world" - Deborah Wong, CNA

2. Urbanization and Infrastructure in China:

• China aims for 75% urbanization by 2035.
• China has made significant progress in urbanization, increasing from 56% in 2015 to approximately 67% currently.
• There are two significant changes in urbanization: population decline and adequate living space.
• Future development will focus on "soft infrastructure" (services) rather than "hard infrastructure" (physical structures).
• Soft infrastructure includes public services like 5G and community services.
• "Instead of the the hard infrastructure I will envisage an increase of soft infrastructure. It means that you are not going to buy spaces you are going to buy more services in your space" - Puan Ming, Guangjo Institute of Greater Bay Area.

3. Challenges and Attractions of Hengqin:

• Hengqin appears quiet with empty streets, and taxi drivers report slow business due to a lack of residents.
• Companies requiring access to supply chains in Guangdong may prefer inland cities like Guangzhou.
• Hengqin primarily serves the residents of Macau and aims to integrate Macau into the Greater Bay Area.
• Proximity to Macau is a significant advantage for some.
• Lack of amenities is a concern for potential residents.
• Preferential tax rates are a potential incentive for people to move to Hengqin.

4. Government's Role in Economic Distribution and Priorities:

• The central government aims to even out economic distribution across different provinces.
• There is a shift towards investing in the tech sector, including 5G, automation, new energy, and electric vehicles, instead of traditional infrastructure.
• Hengqin is expected to be a model for the development of digital and green economies in Chinese cities.
• "In the future I think China will invest more in in in the tech sector including 5G automation of cars, automation of driving, uh new energy, uh electronic vehicles and sort of that and I think this will be the future for the uh industries as developed in Hunching"- Puan Ming, Guangjo Institute of Greater Bay Area.

5. Cost of Living and Attractiveness of Hengqin:

• Compared to Hong Kong or Macau, Hengqin has a relatively low cost of living.
• However, compared to other mainland Chinese cities, real estate prices in Hengqin are relatively high.
• The Macau government encourages Macau residents to move to Hengqin.

6. Focus on TCM, Tech, Culture, and Tourism:

• Hengqin focuses on Traditional Chinese Medicine (TCM), tech, culture, and tourism as new industries.
• These sectors connect to other industries such as biotech and medical services.
• Investment in TCM leads to investment in biotech and medical industries.
• Authorities in Hengqin and Macau are working to attract businesses and investment in these four industries.
• In addition to these industries, Hengqin is developing other industries such as medical services, biotech, EV and other electric services.
• "when you mention TCM tech culture tourism it connected to other uh industries for example uh for TCM it connected to biotech medical services. So when you invest in TCM, you're actually investing uh on the other biotech and medical industries in Hunching"- Puan Ming, Guangjo Institute of Greater Bay Area.

7. Synthesis/Conclusion:

Hengqin is positioned as a key area for Macau's economic diversification and integration into the Greater Bay Area. While facing challenges such as low population density and amenity shortages, Hengqin benefits from preferential tax rates and government support for developing digital and green economies centered around TCM, technology, culture, and tourism. The region is transitioning from a focus on hard infrastructure to soft infrastructure and aiming to attract businesses and residents from Macau with its relatively lower cost of living compared to Macau and Hong Kong. The success of Hengqin will depend on its ability to create a thriving environment for these emerging industries and provide the necessary amenities to attract and retain residents.