Tale of Two Cities: Politics in Hong Kong & Macau

Over the past couple of weeks, we would have probably read quite a number of news articles where President Xi visited Macau during the 20th anniversary of its handover to China.

Article: Chinese leader Xi Jinping visits gambling hub Macau as nearby Hong Kong seethes

Article: Xi Jinping visits Macau for handover anniversary as nearby Hong Kong seethes

Article: Has President Xi finally set Macau on the path to shedding its reliance on casinos and becoming a financial hub?

These are just a couple of articles if you missed out reading about it. However, this begs the question, why the stark contrast between Hong Kong and Macau?

In my recent ShareInvestor 2020 Market Outlook Event, I shared some of my thoughts with regards to why there is such a difference between Hong Kong and Macau. I have decided to elaborate it further in this article today; however, do note that these are merely my thoughts from an outsider’s point of view and my understanding of history.

Ideological Differences

Hong Kong and Macau are very similar in certain ways, in which both were ruled under European colonies before being returned to China. However, why are their fates so different now?

Hong Kong has been plagued by close to 6 – 7 months of protests and still counting, while in Macau, things are pretty peaceful. Britain handed Hong Kong back to China in 1997, while Portugal handed Macau over in 1999. Both are currently under the ‘one country, two systems’ principle, allowing them to retain the systems set in place by the previous Government before the handover. We see Hong Kong demanding for more democracy, while the people in Macau seems much less concerned.

Why is this so?

I attribute this largely due to ideological differences resulting in why the relationship between Macau and China being much better than that of Hong Kong and China.

Macau was under Portuguese rule for more than 400 years and it was a failure compared to that of Britain’s rule over Hong Kong. For example, the British responded to the riots in Hong Kong by first violently suppressing protestors and subsequently reformulating their colonial policy. This led to the reforms that created a police force that was once known as ‘Asia’s finest’. Whereas, how the Portuguese handled riots in Macau shows a stark difference. The Portuguese did not reflect on its own approach to colonial governance and instead chose to free themselves from the problem by trying to revert its rule back to China. In many ways, the Portuguese did not leave much of a legacy behind unlike anything seen in Hong Kong’s strong legal system, education, rule of law and other aspects of administration established by the British.

It was only when Macau was handed back over to China did Macau see an improvement in the economy. Macau redistributed its casino licenses in 2002 under Beijing’s guidance, resulting in a huge influx of foreign investments into the Macau economy. This drove the economy to grow nearly 7-folds and to the success Macau enjoys today.

In some way, perhaps this void that the Portuguese left in Macau allowed China to make immediate improvements to the people’s lives. Yet this was different in Hong Kong. The British’s governance was much better, and the Hong Kong people were happy with the British systems set in place and in some ways perhaps even proud of it. Whereas, the Portuguese left nothing of that sort, resulting in the people welcoming China, especially was how under Chinese rule did Macau only start flourishing.

This is probably why it makes it more difficult for China to gain control over Hong Kong as compared to that of Macau and to why we are seeing all these protest in Hong Kong. This is simply due to ideological differences. If history were to serve as a guide, ideological differences we have seen globally have been something difficult to resolve and may be one long drawn out battle.

Feel free to let me know your thoughts below or at info@investingnook.com and if you have any further insights on this!