China to issue yuan bonds in Macau, as the gambling hub targets financial

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China to issue yuan bonds in Macau, as the gambling hub targets financial services in bid to diversify its economy

China will issue 5 billion yuan (US$685 million) worth of sovereign bonds in Macau this month, as it seeks to deepen the financial sector and popularise the use of the yuan currency in its special administrative region.

The issuance of bonds is “an important move by the central government” aimed at supporting Macau in the development of its financial sector and the “appropriate diversification of the economy”, China’s Ministry of Finance said in a statement on Wednesday. Gambling accounted for more than half of Macau’s GDP and contributed to 80 per cent of the government’s revenues, before the pandemic.

It will be the government’s third offshore bond issuance in Macau, after the inaugural 2 billion yuan offering made in 2019, and its 3 billion yuan issue last year. The sale will be launched on September 20.

The move will further strengthen financial cooperation between the Chinese mainland and Macau, providing investors with secure and stable investment options, the government statement said.

Visitors look at buildings mainland China and Macau from Monte Fort in Macau, China. Photo: Bloomberg

Macau has been making efforts to foster its financial services sector, as it aims to diversify its economy and reduce its dependence on gaming. In April, Macau’s Chief Executive Ho Iat Seng told the city’s lawmakers that the city would proactively promote its local bond market, which is still in an early stage of development.

Some 502 billion patacas (US$62 million) worth of bonds were issued in Macau in the first half of this year, according to the exchange.

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“The plan to issue yuan bonds in Macau indicates the commitment of the Central Government to support Macau to diversify its economy and cut down the reliance on gaming,” said Gordon Tsui Luen-on, a director of Hong Kong Securities Association.

“It is also part of the Central government’s plan to boost the internationalisation of the yuan by offering more offshore yuan bonds for international investors to buy. They should be popular with institutional investors who want to increase their holding in yuan assets.”

The Macau offering of the MOF bonds will not affect Hong Kong because the central and regional government and many mainland firms have issued a lot of dim sum bonds in Hong Kong in the past decade, Tsui said.

“Hong Kong and Macau are not competitors, but the two cities can both act as offshore financial centres for China,” he said. “Hong Kong has the advantage as we have a deep capital market and a pool of financial professionals.”