Report on Macao’s Modern Financial Sector Development and Alignment with Sustainable Development Goals

This report outlines the strategic initiatives undertaken by Macao to diversify its economy through the development of a modern financial sector, with a specific focus on its bond market. The analysis highlights the alignment of these efforts with the United Nations Sustainable Development Goals (SDGs).

Strategic Economic Diversification and Alignment with SDG 8

To address the challenges of an unbalanced industrial structure, Macao has implemented a strategic economic diversification plan. This initiative is in direct support of SDG 8: Decent Work and Economic Growth, by fostering sustainable and inclusive economic development.

The “One Plus Four” Strategy

The government’s “one plus four” economic diversification strategy is the cornerstone of this transformation. It aims to supplement the integrated tourism and leisure industry with four major emerging sectors:

• Health and wellness
• Modern financial services
• High technology
• Convention, exhibition, trade, culture, and sports

As a result of this strategy, the financial sector has emerged as the second-largest industry in Macao, creating a more resilient economic foundation and promoting sustainable growth.

Building Resilient Infrastructure and Fostering Innovation (SDG 9)

The development of Macao’s bond market is a critical component of building resilient financial infrastructure and fostering innovation, directly contributing to SDG 9: Industry, Innovation, and Infrastructure.

Bond Market Growth and Milestones

The bond market has progressed from isolated initiatives to a phase of systemic advancement. Key developments include:

1. The implementation of the Central Securities Depository (CSD) system in 2021.
2. Enhancements to bond issuance mechanisms, supporting laws, and financial infrastructure.
3. The total value of publicly offered and listed bonds reaching $100 billion by 2024.

Issuers now include prominent entities such as the Ministry of Finance of China and the People’s Government of Guangdong Province, with bonds issued in multiple currencies.

The Role of Key Financial Institutions

ICBC (Macau) has played a pivotal role in this development, acting as an issuer, investor, underwriter, and clearing bank. The institution has spearheaded financial innovation by pioneering products such as ‘Kung Fu Bonds,’ ‘Dim Sum Bonds,’ and ‘Lotus Bonds,’ thereby enriching Macao’s financial ecosystem and supporting the objectives of SDG 9.

Leveraging Global Partnerships for Sustainable Development (SDG 17)

Macao’s success is underpinned by its unique geopolitical advantages and its commitment to fostering cross-border collaboration, which aligns with SDG 17: Partnerships for the Goals.

Geopolitical and Institutional Strengths (SDG 16)

Macao’s strategic advantages create a favorable environment for sustainable finance:

• Strategic Location: A gateway between Mainland China, Portuguese-speaking countries, and Belt and Road Initiative (BRI) markets.
• Robust Institutional Framework: A sound financial ecosystem characterized by a pragmatic regulatory authority, an open financial system, and competitive tax rates, which supports the development of strong and accountable institutions as per SDG 16: Peace, Justice, and Strong Institutions. By the end of 2024, international assets constituted 83.4 percent of the banking sector’s total assets.

The Greater Bay Area (GBA) and Hengqin Integration

The deep integration between Macao and Hengqin provides powerful support for modern financial advancement. This partnership combines Macao’s global connectivity with Hengqin’s capacity for real economy support, creating a synergistic effect that propels regional growth. The asset management scale of fund companies in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin reached $600 billion, demonstrating the success of this regional partnership model.

Future Outlook: Advancing Sustainable Finance and Cross-Border Connectivity

Looking forward, Macao aims to transition its bond market “from existence to excellence” by focusing on market competitiveness and aligning with global sustainability mandates.

Enhancing Market Competitiveness and Innovation

Future strategies will concentrate on strengthening the financial ecosystem through:

• Boosting bond market liquidity through tailored services in valuation and trading.
• Strengthening the application of financial technology (Fintech).
• Introducing more innovative investment and financing products.

Commitment to Global Sustainable Finance Initiatives

Macao is committed to aligning its financial market with global sustainability efforts. This includes:

1. Intensifying partnerships with regional and international institutions to promote green and sustainable finance, directly supporting SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action).
2. Strengthening cooperation with financial institutions in Mainland China and Portuguese-speaking countries to increase the scale of cross-border sustainable investment.
3. Exploring the application of blockchain and digital currency solutions to optimize cross-border connectivity and elevate productivity, further advancing the innovation targets of SDG 9.

SDGs Addressed in the Article

SDG 8: Decent Work and Economic Growth

• The article focuses on Macao’s strategy to address its “unbalanced industrial structure” through “economic diversification.” This directly connects to promoting sustained, inclusive, and sustainable economic growth by moving away from reliance on a single industry. The development of “modern finance” as the “second-largest industry” is a core theme.

SDG 9: Industry, Innovation and Infrastructure

• The article details the development of Macao’s financial infrastructure, including the establishment of a bond market, the implementation of the “Central Securities Depository (CSD) system,” and the enhancement of “supporting laws and regulations.” It also highlights the role of innovation through “fintech applications” and exploring “blockchain and digital currency solutions.”

SDG 17: Partnerships for the Goals

• The article repeatedly emphasizes the importance of collaboration and partnerships. It highlights Macao’s role as a “strategic gateway” connecting the “Chinese Mainland, Portuguese-speaking countries, and the Belt and Road Initiative (BRI) markets.” It also discusses collaboration within the “Guangdong-Hong Kong-Macao Greater Bay Area (GBA)” and partnerships with “regional and international institutions” to achieve its financial goals.

Specific SDG Targets Identified

Targets under SDG 8: Decent Work and Economic Growth

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation. The article’s central theme is Macao’s “‘one plus four’ appropriate economic diversification strategy,” which aims to develop four major industries (health, modern financial services, high technology, and convention/exhibition) to reduce reliance on tourism and leisure.

Targets under SDG 9: Industry, Innovation and Infrastructure

• Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development. The article describes the creation and maturation of Macao’s bond market and the implementation of the “Central Securities Depository (CSD) system” as foundational “financial infrastructure” to support its new economic strategy.
• Target 9.b: Support domestic technology development, research and innovation. The article mentions Macao’s intent to strengthen “fintech applications” and explore “the application of blockchain and digital currency solutions in the bond market” to enhance productivity and connectivity.

Targets under SDG 17: Partnerships for the Goals

• Target 17.3: Mobilize additional financial resources for developing countries from multiple sources. By positioning itself as a financial hub connecting China with Portuguese-speaking countries and BRI markets, Macao facilitates cross-border investment and financing, as evidenced by the issuance of bonds in multiple currencies and for various international entities.
• Target 17.17: Encourage and promote effective public, public-private and civil society partnerships. The article describes the collaboration between the Macao SAR government, financial institutions like ICBC (Macau), and industry organizations to build the bond market. It also mentions plans to intensify “partnerships with regional and international institutions to broaden investor engagement.”

Indicators for Measuring Progress

Indicators for Target 8.2 (Economic Diversification)

• Share of the financial sector in the economy: The article states that the financial sector has grown to become the “second-largest industry in Macao,” which is a direct indicator of successful diversification away from a single dominant industry.

Indicators for Target 9.1 (Financial Infrastructure)

• Value of listed financial instruments: The article provides a clear metric: “By 2024, the total value of publicly offered and listed bonds in Macao reached $100bn.” This quantifies the scale and growth of the financial infrastructure.

Indicators for Target 17.3 & 17.17 (Partnerships and Financial Mobilization)

• Scale of cross-border investment: The article notes that the “asset management scale of fund companies in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin has reached $600bn,” indicating the financial magnitude of this specific partnership.
• Level of international financial integration: The article states that “international assets accounted for 83.4 percent of total assets of the banking sector in Macao,” which serves as a clear indicator of the depth of its integration with global financial markets.

Summary of SDGs, Targets, and Indicators

Source: worldfinance.com