The “people’s currency” is the bedrock of Macau’s success, as anyone invested here should know by now. But not for its purchasing power inside Macau. It is rather for its non-convertibility, which has ensured that Macau plays a vital role in helping mainland Chinese turn onshore liquidity into offshore hard-currency assets. But that might be about to change – in a very positive way for the city’s drive to become more than a gaming hub.

We have to wonder why else the head of the Macau Association of Banks, Ip Sio-kai, would have told the Macau Daily Times yesterday that Macau could become an “offshore financial hub”. He specifically said Macau could “gradually turn itself into something similar to the Renminbi circulation hub and distribution center in Hong Kong” and could use its position as a gateway to Portuguese-speaking countries “in order to introduce the Renminbi into these countries”. There were other points, but these are the two key ones to note.

Hmm. Are we about to see a mushrooming of Chinese currency deposits in Macau? How could that benefit the casinos? And why would the holders of these deposits rather have them here than in Hong Kong?

It is hard to know and unwise to speculate on such matters. But if we had to hazard a guess, we would say it is highly unlikely the casinos would ever be allowed to open RMB-denominated tables. Why pass the conversion profit from RMB on a HK$100 chip to them, rather than keeping it in the pocket of the customers? But the banks are a different story. If the mainland authorities have decided that they want to push the use of RMB in Angola, Mozambique, Brazil and other such places, then the value of the casinos to them in this endeavor may actually decline as the banks accept RMB deposits and handle trade and “other” instructions directly with overseas banks themselves. Much of this is happening already, of course, just through the exchange of US dollars. But when you are able to deal in RMB, it’s much less hassle and paperwork. And you don’t have to give a 2.87% cut to anyone.

That said, if this boom in non-casino financial services is to materialize, where are the workers going to come from? It is not only in the construction industry that manpower is lacking. Perhaps this is another reason why the Guangdong-Macau cooperation framework was put into play at the NPC this past weekend. It certainly looks like Hengqin and Macau are going to be joined at the hip once the new U-Mac campus is built and we can all drive our big Benzes over there at 60kph without the need for mainland license plates. Macau needs to expand, both in terms of land and human resources. But it needs to be handled carefully. That’s why people like Ip Sio-kai always use the word “gradually”.

Stay tuned.

Copyright & used with permission from IntelMacau