Keywords

1.1 Background of the Guangdong–Macao In-Depth Cooperation Zone in Hengqin

The plan to develop Hengqin via the cooperation of Guangdong Province and Macao is a strategic decision to help Macao exceed its bottleneck of city development and economic diversification. Historically, Macao has developed much faster than Hengqin in terms of infrastructure, population growth and economy. After years of rapid growth, Macao is seeking new directions to improve the wellbeing of its citizens and create opportunities for future generations. Adjacent to Macao, Hengqin is a desirable place for Macao to extend its future development.

The development of the Guangdong–Macao In-Depth Cooperation Zone in Hengqin is part of a more extensive regional development plan for the GBA. In 2019, the General Office of the State Council of the People’s Republic of China (PRC) promulgated the Outline Development Plan for the Guangdong–Hong Kong–Macao Greater Bay Area (hereafter called the GBA Outline Plan). The GBA Outline Plan’s scope focuses on SARs of Hong Kong and Macao and nine cities (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing) in Guangdong, south of China, commonly known as Pearl River Delta. The GBA has a total land area of more than 56,000 km2, with a population of more than 86  million, and a combined GDP of more than US$1.9  trillion in 2021 (Statistics of the Guangdong–Hong Kong–Macao Greater Bay Area, 2021). As one of the most economically open and active regions in China, the GBA holds a strategic position in the overall development of the country. The GBA Outline Plan is a strategic proposal to further strengthen the practice of ‘One Country, Two Systems’ in the region and to incorporate Hong Kong and Macao into the overall development of the country. By leveraging the advantages of Guangdong, Hong Kong and Macao, the wellbeing of citizens in the region could be improved, whilst also maintaining the long-term prosperity and stability of Hong Kong and Macao.

Since the handover of Hong Kong and Macao, the exchange and cooperation of the mainland and the SARs has deepened and continued to strengthen. The GBA has developed rapidly and possesses the fundamentals for developing into a first-class bay area in the world. The GBA is at the forefront of China’s economic openness and innovations, and it plays a key role in the One Belt, One Road Initiative. The GBA has one of the most comprehensive transportation systems in the country. With Hong Kong’s international shipping centre, world-class ports in Guangzhou and Shenzhen and influential aviation hubs in the area, a highly convenient and modernised transportation network is shaped.

The economic development of the GBA is in a leading position in the country, benefiting from a complete industry chain and economically solid support amongst the cities in the region. With a highly advanced service sector in Hong Kong and Macao and the respective industrial strengths of the Pearl River Delta nine cities, the GBA cities have formed a strategic alliance in innovative industries focusing on modern manufacturing and service as the backbone of the region’s development. The GBA is one region that successfully develops trendy and innovative initiatives by means of government support policies and measures. In addition, it has a strong base of research institutes with a solid track record of transforming research findings into industrial use.

Hong Kong is an international finance, shipping, commerce and aviation centre, with a high degree of international exchange and a well-developed commercial network worldwide. Meanwhile, Macao is a world-class tourism and leisure centre continuing to develop as a bridge between China and Lusophone countries. Together with the Pearl Delta nine cities, Hong Kong and Macao are regions with the country’s highest degree of freedom and openness to the world and have significant functions and roles in developing the GBA.

The exchange and cooperation amongst Hong Kong, Macao and Pearl River Delta nine cities is steadily increasing. A multi-level and comprehensive cooperation has been established, and remarkable results are achieved in infrastructure development, financial service, innovative technology, education, tourism, environment protection, social services and other areas.

The GBA Outline Plan clearly defines the role of Macao and its strategic development focus in the long term, which is to develop Macao as a world leisure travel centre, a commerce service platform between China and Lusophone countries, to facilitate proper diversification of the economy and create a multi-cultural exchange platform. Within the framework of the GBA Outline Plan, the State Council of the PRC promulgated The General Plan for Construction of the Guangdong–Macao In-Depth Cooperation Zone in Hengqin (‘Hengqin General Plan’) in 2021, which lists the roles and directions of Hengqin Island to meet the overall goal of the GBA plan. The Hengqin General Plan is a major catalyst to overcome Macao’s development limitations, which provides effective measures to ensure Macao’s long-term prosperity and success by integrating the development of Macao and Hengqin into the GBA Outline Plan.

Hengqin is an island located in the south of Guangdong Province, which is the largest island amongst Zhuhai’s 146 islands. Geographically, Hengqin is adjacent to Macao and Zhuhai and located at the west of Pearl River Estuary, east of Macao, north of Zhuhai free tax zone and connected to Modaomen Channel in the west. Hengqin Island has an area of 106 km2 (Border Crossing, 2021), an equivalent of 3.6 times of Macao’s land area. Hengqin is connected to Macao through Lotus Bridge and connected to Zhuhai through Hengqin Bridge. Until 2020, Hengqin has a population of more than 53,000 people (Hengqin New Territory Seventh National Population Census, 2021). In 2021, the Guangdong–Macao In-Depth Cooperation Zone was established under the jurisdiction of both Macao SAR and Guangdong Provincial Government.

Hengqin Island mainly consists of Dahengqin and Xiaohengqin, which are connected by means of land reclamation. The highest elevation of Hengqin is 457.7 m at Nobui Shan (Zhuhai Hengqin New Territory, 2022), the second tallest mountain in Zhuhai. Spanning Hengqin Island from east to west is Tinmuk River, the largest river in the island, with an average width of 60 m and 80 kms. Hengqin Island is within the subtropical monsoon climate zone, with moderate climate throughout the year. Hengqin Island has a long coastline with plenty of forests. It is an eco-friendly island with various travel attractions and is famous for its oysters’ production.

Before Macao opened its port in 1553, residents in Macao made a living by fishing, which shared the same economical patterns of smallholder economy in the nearby regions. Foreign merchant ships would park at Macao to trade every summer, which attracts Chinese merchants, hawkers and porters to the ports. However, trade activities were not active during other times of the year.

The early development of Macao’s economy results from its unique geographic location and Ming Dynasty’s customs policy and the entrepreneurship spirit of the Portuguese (Fei, 1988). Macao is only a mere a hundred kilometres away from Guangzhou, and vessels could reach Guangzhou and various ports of Guangdong directly. Outgoing vessels could reach other parts of the world directly. In terms of land transportation, Macao’s road network could reach the whole Guangdong Province. With its convenience in transportation, Macao had a unique geographical advantage between Mainland China and the West. Besides, Ming’s government occasionally restricted mainly Chinese merchants to trade overseas, in which Portuguese merchants filled in the commerce gap between China and the West through Macao. Agricultural crops and handcraft products were exported to the West through this channel, which allowed Macao to be a central hub of the international trade network.

In the late sixteenth century, the Portuguese merchants in Macao established a few major international trade routes, which allowed Macao to be a transfer hub in the international trade network. Through Macao, Portuguese merchants traded goods between China and trading hubs, such as Manila, India, Europe and Japan. Between 1580 and 1590, Portuguese merchants made a good fortune by trading goods, mainly silk and silver (Huang, 1995). By trading in Macao, both Macao and Portuguese merchants have accumulated vast amounts of wealth, which laid a solid foundation for Macao’s development. The wellbeing of residents has improved along with decades of prosperity of Macao’s economy. At the same time, trade activity also provided Macao the necessary resources and financial support for its urban development and construction, which accelerated its pace to transform itself from a simple port to an international trade hub.

Most of the expenses used in developing Macao’s infrastructure, utilities and charity are donated or taxed from Portuguese merchants during that time. The Portuguese built Western-style hospitals, roadways, ports and other infrastructures, which shaped Macao as a Western city in the east. By treating Macao as a platform, the Portuguese dominated maritime trade in East Asia from 1557 to 1641. Macao became the largest portal to trade in China and its economy rapidly developed. The Portuguese made a fortune by using Macao as a transit port in East Asia. However, the Portuguese could not maintain its dominance in the area as various major maritime trade routes were occupied by the Dutch in the seventeenth century. In addition, the Chinese government has restricted Portuguese merchants from trading in Guangdong, which has affected Macao’s advantage as a transit port (Yuan, 1988).

In the Ching Dynasty, Macao’s foreign trade declined considerably despite Ching Dynasty’s leaders offering Macao trade advantages, such as taxation based on vessel size similar to the Ming Dynasty (Yuan, 1988). In 1727, China opened up its ports for foreign trade, which led Macao’s foreign trade to a decline. However, the Ching Dynasty’s leaders later reverted its policies in 1757, in which only Guangzhou and Macao ports were opened for foreign trades. As a result, Macao’s foreign trade was revived (Yuan, 1988). In 1802, the Portuguese government passed a law to offer Portuguese merchants the permit to import opium through Macao. After the First Opium War, Britain was committed to developing Hong Kong to replace Macao as a main transit port in the area, and Macao’s advantages in transit vanished.

In 1847, Portugal allowed legal gambling in Macao. Since 1872, the gaming industry has started to become a vital part of Macao’s economy, and Macao is well known as the ‘Monte Carlo of the East’ (Ho, 2011). The financial industry was not well developed in the early days. In 1902, Banco Nacional Ultramarino, S.A. opened the first bank in Macao. In the Republic of China era, the fishery industry became a major industry in Macao’s economy. In 1921, as much as 60,000 people relied on fishing to make a living, and the population declined to 20,000 people in 1940 (Yuan, 1988). Part of the fishery products are used for exports and accounted for a significant part of the total exports, which accounted for 26.4% of total exports in 1930. Meanwhile, the three traditional handicraft products, which included joss sticks, matches and firecrackers, also contributed to a large part of Macao’s economy, accounting for 37.8% of total exports in 1930. Limited by Macao’s geographic nature of shallow harbour, Macao lost its advantages as a transit port after Hong Kong opened its transit port. Although foreign trade activity has declined sharply, Macao’s import and export trade, especially food trading with Hong Kong and mainland remained active.

Amongst all the industries, only the gaming industry remained strong. Gaming is prohibited in most of the countries worldwide, including Mainland China. However, gaming remained legal in Macao due to its unique history and position. In the early days of gaming developing, Macao lacked central supervision of the gaming industry. In 1930, Hou Hing Company obtained the franchise to operate casinos in Macao and built the first Western-style casino in the greater area of China (Studies on the Moderate Economic Diversification of Macao, 2020). In 1937, Tai Hing Gaming Company was established and obtained Macao’s gaming franchise licence, and it paid 1.8 million patacas of tax every year, which is the main income source of Macao’s government.

In the Republic of China period, foreign exports of Macao had totally depraved. The gaming industry became the single most important centre of Macao’s economy. After World War II and the establishment of the PRC, people who fled from the mainland during the war started returning to China, and the population of Macao went on decline.

Development of other industries are lagging behind during the prosperous development of the gaming industry. In the 1950s, joss sticks, matches and firecrackers handicraft making were three traditional industries. In 1957, Portugal passed a bill to allow Macao’s products to be imported to Portugal area tax free, which attracted plenty of merchants who invested in Macao.

In 1962, the company established by Stanley Ho won the licence to operate the gaming franchise in Macao. According to the contract, his company should invest at least three million patacas and pay a tax of more than 3 million patacas to the government every year from 1962 to 1964. Part of the tax was used for charity, in which most were used for Macao’s economic development, including world-class casinos, hotels and transportation infrastructure, to attract people from Hong Kong to visit Macao (Yuan, 1988).

The gaming industry is the main income stream of the Macao government. The gaming tax increased progressively from 6.9 million patacas in 1975 to 71 million patacas in 1980, and it contributed to more than 25% of the government’s total tax income (Hong Kong & Macao Economy, 1986).

Early modern industry of Macao is the textile industry, in which textile exports contributed to 19% of exports in 1958 and increased to 71.6% in 1969, fishery industry dropped to 9.2%, and the three traditional handicraft (joss sticks, matches and firecrackers) industries only contributed 7% (Hong Kong & Macao, 1986).

The economy of Macao picked up the pace in the 1970s. In 1971, some developed industrial countries offered exemptions to various developing countries. Macao was listed as one of the beneficial regions, which led to a blossom of Macao industrial development. In 1976, the European market was Macao’s largest export market, accounting for 64.1% of Macao’s industrial export. As a result of international trade protectionism, Hong Kong exports were subjected to various restrictions worldwide, and hence, many Hong Kong investors opened factories in Macao to avoid such restrictions. There were 949 modernised factories in 1972 and increased to 1037 factories in 1974. Macao industrial production had reached into a new stage (Yuan, 1988).

In the 1980s, Macao economy grew at a rapid pace. Textile, electronics, toys and artificial flowers account for 91% of export products. The increase in exports benefited from Macao’s free market policy and the low-income tax of only 15%, which is 2.5% lower than that of Hong Kong. In addition, the labour cost of Macao was 20–35% lower than that of Hong Kong. Lower living and production costs helped Macao to stay competitive in the international market. In the 1990s, the growth of industries slowed down. Most products exported to western Europe and North America are textile products.

Macao tourism also stimulates the gaming industry and vice versa. The number of tourists increased from 4 million in 1982 to 4.5 million in 1985, and tourism profits were second to the gaming industry. After the handover of Macao in 1999 and Macao’s historic region listed in the UNESCO World Heritage Site in 2005, Macao has attracted tourists from around the world, especially Mainland China. Most of the tourists are from Mainland China, Hong Kong and Taiwan (Xinhua Net, 2016).

After the Macao handover in 1999, Macao fully utilised its unique position to facilitate the Chinese–Portuguese commerce exchange and service platform, to deepen the trade cooperation between China and Portuguese-speaking countries. In 2004, Macao and China had a mutual Closer Economic Partnership Arrangement, which allowed products produced in Macao to be imported into China without tax. With different factors and policies that are beneficial to Macao’s development, Macao’s economy developed rapidly. However, gaming remains the dominant industry in Macao which supports Macao social and economic development.

According to the development plan proposed by the Macao government, the ‘Five-Year Plan for Economic and Social Development (2021–2025)’ proposed to build Macao as ‘one centre, one platform’, namely a World Centre of Tourism and Leisure and a Commercial and Trade Co-operation Service Platform between China and Portuguese-speaking countries. The government is eager to develop Macao as a portal to bring tourists from around the world and helps Macao corporations to grow and extend its business outside Macao.

Hengqin Island is the largest island of Zhuhai adjacent to Macao and has long been a key focus development area. In the 1990s, Hengqin Island was included into the economic zone of Zhuhai, and the Zhuhai Economic Development Zone was established. In 1992, Guangdong government confirmed it would develop Hengqin as a critical development area. After the handover of Macao, Hengqin Island became the bridgehead of the cooperation between Guangdong and Macao.

The Hengqin development area started in 1992. Originally, the area of Hengqin was only 48 km2. Amongst the current 106 km2 of land, more than 60% are manmade in the 1980s and 1990s by means of land reclamation. As one of the islands of Zhuhai, there were very few residents in Hengqin. Most residents made a living by fishing, agriculture and small-scale commerce. There was rarely any industrial and city construction in Hengqin at that time.

In 1992, Guangdgong Provincial Government released the ‘proposal to enhance openness’. According to the proposal, Hengqin, western Zhuhai, Guangzhou Nansha, and Huizhou Daya Bay were selected as the four key open areas. The development of Hengqin was brought to discussion, and the ‘Zhuhai Hengqin Economic Development Management Council’ was established as a means of attracting foreign investment and development. By 2003, there were 908 enterprises, with approximately 1.3 billion RMB of capital invested in Hengqin. At the same time, telecommunications and power supply network infrastructure were built to meet the needs of the businesses in Hengqin. Infrastructures, such as bridges, roadways and border gates, were also simultaneously built. Foreign investors were attracted to start business in Hengqin as infrastructure improved. Various resorts and parks were built subsequently by foreign investors to attract visitors. In 2004, Guangdong and Macao leaders had discussed developing Hengqin as an international, diverse, open leisure area and as an extension to Macao’s leading industry. However, the direction was changed back and forth before any of the plans had ever come into reality. In 2005, Guangdong designated Hengqin as ‘Pearl River Delta Economic Hengqin Cooperation Zone’, utilising Hengqin as a platform for development. The position of Hengqin was to cooperate with Hong Kong and Macao, servicing Zhuhai, and act as an example of an innovative region to the mainland. At the same time, the ‘Outline Plan of Hengqin Development’ was finished. In 2006, the Guangdong government passed the ‘Outline Plan of Hengqin Development’. After a few years in 2008, the development of Hengqin was still in its early stage. Most early investments focused on travel and leisure projects. The ‘11th Five-Year Plan’ stated that Hengqin should focus on developing modern service and high-end manufacturing sectors. In 2009, the ‘Hengqin Overall Plan’ stated Hengqin’s development goal, to systematically and scientifically develop Hengqin’s industry, which should be in harmony with the environment. By developing characteristic and compact development, the functions of subareas of Hengqin could be completely utilised (Liu & Un, 2010). In 2012, the first amusement park in Hengqin, the Chimelong Ocean Kingdom opened its doors to the public. Located in the south of Hengqin Island, it has a footprint of more than 3 million square metres. It includes a convention centre, an aquarium, hotels and an amusement park. In the same year, the first deal of land bided by Macao’s corporation was completed. The property included a shopping mall, restaurants and leisure and entertainment facilities, with a footprint of 150,000 m2, covering an investment capital of 1600 million RMB. In 2021, the Hengqin General Plan clearly stated the four new industries for Hengqin development, which focused on growing scientific and technological R&D and high-end manufacturing industries, such as traditional Chinese medicine, the culture, tourism, convention and exhibition industry, commerce and trade, and modern financial sectors.

1.2 Significance of Hengqin’s Development and Its Foundation of Success

The decision to develop Hengqin is a critical step of the GBA Outline Plan, which helps Macao to incorporate into the strategic overall plan at a national level. The development of the Zhuhai–Macao Cooperation Zone is an innovative and ambitious step which is of great importance to the future of Macao and Zhuhai. Both Hengqin and Macao have solid foundations and strengths in various aspects to ensure the success of the Hengqin Cooperation Zone.

Macao has a land area of only 33 m2 and is the smallest region amongst the GBA’s cities. With a population density of 19,737 people per square kilometres of land area (World Bank Data, 2021), Macao is one of the most densely populated regions in the world. The scarce land has greatly limited the room of Macao’s development and the wellbeing of residents. In 2009, the General Office of the State Council of the PRC approved Macao’s proposed plan to perform land reclamation of 3.6 km2 of land (Macao Government Information Bureau, 2009), which accounts for approximately 10% of land area in Macao to help relieve Macao’s land shortage problem.

Hengqin has a land area of 106 km2, which is only about one-ninth of Zhuhai’s area, but it is already three times the area of Macao. For years, Macao land development has faced the challenges of land shortage, which has led to the diverse and mixed-use nature of existing land development in Macao. To improve the wellbeing of Macao residents, more land for development is urgently needed. By developing the Guangdong–Macao In-Depth Cooperation Zone, Macao could utilise the vast underdeveloped land of Hengqin to relieve its stress on land demand. By easing the customs clearance procedures, creating more room and eco-friendly environment, Hengqin could attract more Macao residents to relocate to Hengqin for bigger, better living conditions and quality of life. With more population, Hengqin could also benefit from more human and business activity at the same time.

Economically, Macao has a long history and rich experience in the gaming industry. Since the handover of Macao, the economy has undergone an explosive growth period in which the gaming revenue increased from MOP 55 billion in 2001 to MOP 446 billion in 2019. During the same period, the GDP per capita increased from MOP 127,015 to MOP 350,445, respectively (Macao Statistics & Census Service, 2022), which ranks as one of the highest GDP per capita worldwide. In the past 20 years, the development and growth of the gaming industry in Macao is unprecedented in any part of the world. However, other industries, even those affiliated with gaming, such as hospitality, catering and convention, could not keep up with the rapid growth of the gaming industry. In terms of economic contribution, the gaming industry became a major income source of Macao’s economy, whilst GDP contribution of other industries are shrinking. Since 2001, the Macao government has promoted economic diversification by means of financial and policy support (Hou, 2006). In contrast to the growth of gaming development, the progress of economic diversification is not satisfactory despite tremendous efforts by the Macao government. The two key factors that hinder Macao’s diversifications are the lack of land and human resources. By means of the in-depth cooperation between Guangdong Province and Macao, Hengqin is fertile ground to supplement the weakness of Macao to cultivate and diversify its industries.

Hengqin, mainland and Macao could supplement each other and form a strong alliance to form a mutual relationship with competitive edge in developing innovative industries. With the abundance of land Hengqin has, labour resources of Mainland China, capital and talents from Macao, Hengqin and Macao could supplement each other via in-depth cooperation.

Different from Pudong New District in Shanghai and Binhai New District in Tianjin, which are solely running on a ‘one country system’. Meanwhile, the Hengqin Cooperation Zone has the advantages of being adjacent to Hong Kong and Macao, which are running in ‘One Country, Two Systems’ mode, and serve as connection hubs to international countries. Hence, Hengqin could enjoy the benefits of accessing the resources of Guangdong Province and Mainland China and the strong international ties of Hong Kong and Macao with other countries. The measures and policies used in the cooperation zone are one of its kind in the history of the nation and have a demonstration effect in terms of increased openness, innovation and mixed management in other regions in the country.

1.3 Key Cooperation Areas in the Guangdong–Macao In-Depth Cooperation Zone

With the release of the Hengqin Development Overall Plan, The Outline Development Plan for the Guangdong–Hong Kong–Macao GBA and the Guangdong–Macao In-Depth Cooperation Zone in Hengqin Overall Plan, Hengqin has undergone a drastic change and rapid development in the past decade. Hengqin is developed from a small town with thousands of populations to a developed city, supported by world-class infrastructure and facilities. In addition, various innovative and breakthrough policies were also imposed to provide further convenience and advantages to Macao residents to live and work in Hengqin, further attracting foreign capital to do business in Hengqin. With the improvement in infrastructure and policy complement, the willingness to work and reside in Hengqin increased over years.

The Hong Kong–Zhuhai–Macao Bridge (HZMB) is a 55 km bridge-tunnel connecting Hong Kong, Macao and Zhuhai, which reduced the travel time from Hong Kong to Macao from three hours to half an hour, and has allowed these three regions to stay within a one-hour living circle (Gabinete para o Desenvolvimento de Infraestruturas, 2017). HZMB has connected strategic development cities in Mainland China, Hong Kong and Macao. Given the convenience of transportation in the region, more international travellers are expected to visit Hengqin and Macao and become world-class travel destinations. By improving transportation infrastructure, more cooperation and exchange amongst Mainland China, Hong Kong and Macao are expected.

The customs clearance policy is a key part of Hengqin cooperation zone development. Easing of customs clearance will greatly encourage the cooperation and exchange of Macao citizens between Hengqin and Macao. By exploring the gradual easing of customs clearance of people and goods between Hengqin and Macao, the merging of the Hengqin Cooperation Zone will move at a faster pace than ever. In 2021, a flyover between University of Macau (UM)-Hengqin campus and Hengqin port area is proposed and currently under construction, aiming to provide another connection gateway to Hengqin from Macao (Government Information Bureau of the Macao SAR, 2022). In Phase 2 of the Hengqin–Macao port expansion, the number of car lanes will greatly increase to 30 lands, which would greatly reduce the car clearance time to approximately one minute per car and provide great convenience to drivers commuting between Hengqin and Macao (Exmoo News, 2022).

In addition, the light rail transit extension of Macao and Hengqin is under construction to connect the LRT Taipa line to Hengqin. In the future, the Hengqin line will connect with the Zhuhai light rail and the high-speed railway network connecting the whole country.

The construction of the UM campus in Hengqin gained the approval of the central government in 2009 and started operation in 2013. The UM Hengqin campus was a new attempt of governance in the Hengqin area, in which part of Hengqin is rented to Macao for the construction and operation of UM under Macao’s jurisdiction. The UM area is separated from Hengqin’s justification by port walls and connected to Macao through an underground tunnel. The location of UM is next to Huandao East Road, across from Hengqin port gate. It has an area of 1.09 kms, a total building area of 820,000 m2.

The UM-Hengqin campus accommodates more than 12,000 local and international students (University of Macau Registry, 2022). The university is currently a Top 250 university in the world. It is currently home to three state key laboratories: Laboratory of Analog and Mixed-Signal VLSI, Laboratory of Quality Research in Chinese Medicine and Laboratory in the Internet of Things for Smart City. It is one of the fastest growing young universities in Asia, which ranks 26th in young university ranking (Times Higher Education, 2022).

Not only has the university campus’ construction helped Macao’s higher education development, it has also given significant meaning and long-term effects and even helped deepen the higher education cooperation amongst Mainland China, Hong Kong and Macao. As Macao has lacked the talents and land for higher education development, the campus is a big step forward in Macao’s higher education, the construction of the university is a breakthrough in Hengqin–Macao cooperation and an innovative move which accentuates the strengths of the ‘One Country, Two Systems’ policy. In summary, the university has strong guidance in Macao’s diversification and expansion and a significant milestone in Hengqin–Macao cooperation.

The Macao New Neighbourhood Project is a residential neighbourhood project located in the east of Hengqin’s Cooperation Zone Central Avenue. It is developed by the Macau Urban Renewal Limited, a company fully owned by the Macao government. The project would provide 4000 residential units with a land area of 190,000 km2, with a total floor area of 620,000 km2. The whole project plan comes with retail, education, transportation, medical facilities and community service hubs and is expected to be completed by 2023 (Macau Urban Renewal Limited, 2022). The Overall Plan stated to support Zhuhai and Macao cooperation in building a comprehensive community to support senior healthcare, residential, education, medical service, in which Macao’s medical and social coverage system directly could be applied. The project aims to provide the necessary support and convenience for Macao citizens to learn, work, do businesses and live in the GBA. The project consists of 27 buildings, 20–26 storeys high and will be constructed in environmentally friendly methods, such as precasting technology. Approximately 80% of all the units are two-bedroom apartments with areas of approximately 90 m2. The three-bedroom apartments account for 20% of the units, with areas from 100 to 120 m2 (Macau Urban Renewal Limited, 2022). The project is six minutes away from the port gate. For the ease of transportation, the project includes approximately 4000 car parks, and residents are qualified to apply for the driving permit to drive in and out of Hengqin. In addition, shuttle buses service will be provided when residents move in in the future. The Macao New Neighbourhood Project is a pioneer project to help Macao citizens to improve living conditions and wellbeing, via the cooperation between Guangdong Province and Macao government. Macao citizens could live, work and enjoy the facilities of the Macao New Neighbourhood, whilst retaining their lifestyle, as the Macao’s social and medical coverage will be applied in the neighbourhood for the ease of Macao’s citizens.

Macao and Hengqin have their own social policies. The General Plan gives the local government the authoritative power to develop its own policies, including administration, society management and economic management, to build rules and policies that comply with the country’s law. The goal is to build policies and rules that are advantageous and suitable for the development of Zhuhai and Macao. Zhuhai is one of the earliest economic zones in China and has its regional law establishment rights. Through 30 years of open development, Zhuhai has established its market economy and system. However, much of its governance is affected by past traditions and local practice. Meanwhile, Macao was under Portuguese governance. Under the ‘One Country, Two Systems’ establishment after the Handover, Macao kept its own social, economic and law system, with a more comprehensive market economy. Not only is Macao a free-trade zone, with tax exemptions and low transaction cost, it also has a long history of international trade and cultural exchange with other countries. By means of the treaty relationships with other countries, Macao could help Zhuhai and Hengqin to enhance trade relationships with other countries. Although Macao is a city with small trade volumes, its friendly relationships with other countries, especially European countries are essential to the regional development of the Guangdong–Macao In-Depth Cooperation Zone.

The General Plan for Construction of the Guangdong–Macao In-Depth Cooperation Zone in Hengqin proposed a new governance structure of the cooperation zone. The Guangdong Province and Macao government would each send representatives to form a management committee. Under the committee, a cooperation zone execution committee is established. Guangdong Province would also establish organisations to help manage and maintain order of the Area. The Hengqin–Macao Port is a key infrastructure construction in the cooperation and exchange between Hengqin and Macao. Hengqin will be implementing an innovative customs clearance policy that is unprecedented in China. The keys of this policy include the following: (1) the port between Macao and Hengqin is defined as ‘first line’, and the port between Hengqin Bridge and other parts of Mainland China is defined as ‘second line’; (2) the port control will implement ‘co-location arrangement’ policy; and (3) provide convenience to Macao citizens travelling between Hengqin and Macao.

The General Plan proposed the idea of ‘manage by zones in innovative modes’ to build the Hengqin port. The port between Hengqin and Macao will be classified as ‘first-line control’ where port inspections and clearance will be eased, whilst the ports between Hengqin and mainland are classified as ‘second-line control’, which is mainly for the customs clearance for customs clearance of exports, inspections, taxation and other monitoring functions. The function of exports clearance and inspections are moved from the ‘first line’ to the ‘second line’. The new customs clearance greatly increased the convenience of people going in and out of Hengqin (State Council of the People’s Republic of China, 2021).

The financial market of the cooperation zone will be highly opened to increase the convenience of capital flow and attract more investment in the cooperation zone. The capital is free to import, export and exchange for investment in the area. In addition, new external debt management policies in the area will be explored. Policies will be established to improve the convenience of investment entering the market of the cooperation zone. In addition, the cooperation zone will be a testing point to establish cross-port mutual exchange of Internet data.

The cooperation zone also allowed professionals in finance, architecture, city planning and design, etc. from Macao and other countries to work in Hengqin. The experience and qualifications from outside Mainland China are also recognised. The committee would also promote Macao entrepreneurs to enjoy the same privilege and supporting policies from both Guangdong province and Macao, to invest and start business in the cooperation zone.

For qualified firms stationed in the cooperation zone, a business tax reduction of 15% is offered, which would be beneficial to industries contributing to diversify Macao’s economy. For the four key industries in the cooperation zone (tourism, modern service, high-technology enterprise and Chinese medicine), business income tax is exempted from the income earned outside the cooperation zone. For products without imported goods or with import goods lower than 30% of composition, the import tax could be exempted and imported to Mainland China through the ‘second-line’ port.

For foreign high-end talents or talents on-demand working in the cooperation zone, personal income tax exceeding 15% could be exempted. In addition, personal income tax exceeding Macao’s tax would be exempted for Macao citizens working in the cooperation zone.

1.4 Challenges to the Development of the Hengqin–Macao Cooperation Zone

The Overall Plan has positioned Hengqin Cooperation Zone to be a centre of four new innovative industries, which included high-end manufacturing, Chinese medicine, travel and modern finance industries. Although Hengqin and Macao have their strengths in these areas, the difference between Hengqin and Macao in various aspects also poses several challenges. Most of these challenges resulted from different historical backgrounds Hengqin and Macao have. The Guangdong–Macao in-depth cooperation is a breakthrough proposal driven by the Central government to help overcome the challenges in various aspects to ensure the continued prosperity of Macao in the future.

Given the different policies of Mainland China and Macao, many of the developments are hindered. Gaming is the main industry in Macao, but it is prohibited in Mainland China. The difference in policies has affected the development of Guangdong–Macao cooperation. In addition, Macao economy is based on capitalism, whereas the mainland economy is based on communism. From the objective perspective, the difference in systems has prohibited flow and exchange of capital from both places. To overcome these challenges, both places would need to pay a heavy cost on politics, social and economy. In addition, the citizens from the two cities have lived and grown up with very different cultures, traditions and values. As the objectives and perspectives are very different, the laws, city planning and law making are conducted based on their own perspectives and local practice. Not only this has created a single minded situation, Zhuhai citizens would have a mentality of supporting Macao instead of benefiting from this partnership.

Throughout the development history of Hengqin, it has undergone various changes in development overall plan and management authority. Before the release of The General Plan for Construction of the Guangdong–Macao In-Depth Cooperation Zone in Hengqin in 2021, Hengqin was mainly developed by the Zhuhai government. After the General Plan was released, the cooperation zone was jointly governed and managed by the Guangdong Province and Macao government. Over the years, Hengqin development has undergone various changes in development directions and the change in management authorities. In order for the cooperation zone to develop prosperously and successfully, Hengqin development would require a consistent long-term plan, with in-depth cooperation between the Guangdong Province and Macao government.

Mainland has a strict capital control policy, which restricts the flow of capital in and out of the country, whilst Macao allows free flow of capital. The difference in policies create inconvenience for investors and business owners to do business in the cooperation zone. Openness is critical for the development of the modern finance industry, which requires a high degree of freedom in capital movement. On the basis of the successful experience of world’s largest financial markets, such as New York, London and Tokyo, etc., the free flow of capital is a key element in a mature and developed financial market to help develop the modern finance industry in Hengqin, the government bodies of Guangdong Province and Macao should cooperate to allow a higher degree of financial freedom in the cooperation zone and provide more incentives for investors and companies to do businesses in Hengqin.

Differences in taxation between mainland and Macao are also barriers to developing the cooperation zone. In general, the mainland has higher corporate and personal income taxes than Macao. To attract business and individuals, Hengqin’s Management Committee announced that tax incentives will be provided to firms and individuals doing business and working in Hengqin. Although the incentives greatly decreased the corporate and individual income taxes in Hengqin, the tax is still higher than that of Macao. The difference in tax may lower the interests of Macao’s cooperates and individuals to relocate to Hengqin.

To facilitate the development of the cooperation zone, the financial market and capital control policy of Hengqin should be aligned between Hengqin and Macao, to provide more freedom and convenient policies to encourage entrepreneurship and stimulate business activity.

Difference in regulations between mainland and Macao may also slow the development of the cooperation zone. The regulations of industry, such as Chinese medicine, are vastly different in mainland regulations compared with Macao regulations. For example, the new Macao’s ‘Chinese Medicine Registration Law’ stated that the approval and registration of Chinese medicine in Macao recognises Chinese medicine that are approved based on other countries’ standards. Meanwhile, Mainland China imposes strict regulations on the safety and quality of Chinese medicine, such as requiring extensive toxicology and clinical trials, to meet the local standards of Chinese medicine approval and registration. To help support industry development in the cooperation zone, the difference in regulations across the four key developing industries should be minimised.

With a relatively small population, both Hengqin and Macao development are limited by lack of human resources and talents. For industries, such as technology and high-end manufacturing, high-skilled labour and professional expertise are amongst the key elements of success. Considering the goal of developing a high-end manufacturing industry, the cooperation zone would require a large number of skilled workers. As Hengqin and Macao are not surrounded with cities with strong high-end manufacturing industries and skilled workers, there is a shortage of skilled workers and talents around the area. Although Hengqin and Macao both have incentives to attract talents and skilled workers to work in Hengqin, the progress of talent attraction to Hengqin is unsatisfactory. On top of financial subsidies, other incentives, such as job opportunities, healthcare, family support, and other factors, should be considered to attract talents to the cooperation zone.

With the release of the Greater Bay Area Overall Plan and the General Plan for Hengqin Cooperation Zone, the cooperation of Guangdong Province and Macao to develop Hengqin will provide valuable opportunities to transform the area. For Macao, the development of Hengqin is critical to its transformation from an economy highly relying on the gaming industry to a diverse economy with multiple high-value modern industries. Although Hengqin has come a long way in terms of its infrastructure and policy development, plenty of challenges still need to be addressed in developing the cooperation zone into a desirable area for Macao residents to reside and work. The continued prosperity of Guangdong Province and Macao would require a highly collaborative and strategic management from both parties.