Cities 75 (2018) 72–80

Contents lists available at ScienceDirect

Cities
journal homepage: www.elsevier.com/locate/cities

Economic growth and development in Macau (1999–2016): The role of the T

booming gaming industry
⁎
Mingjie Shenga, Chaolin Gub,
a
School of Architecture, Tianjin University, Nankai District, Tianjin 300072, China
b
School of Architecture, Tsinghua University, Haidian District, Beijing 100084, China

A R T I C L E I N F O A B S T R A C T

Keywords: In 2018, Macau will celebrate the 20th anniversary of its return to China. The past few years have witnessed
Macau brilliant economic achievements as well as a structural shift toward a gaming-industry dominated economy.
Casino gaming Following so many years of rapid growth, it is essential to take stock of both the benefits and costs of gaming
Booming sector industry development. Accordingly, this paper analyzes the evolution of Macau's gaming industry between 1999
Economic development
and 2016, and evaluates the industry's effects on local economic growth and urban development. As the paper
shows, Macau has exhibited many of the symptoms typically associated with booming sectors in small econo-
mies, and has witnessed the similar effects widely experienced by western casino cities. However, Macau is also
faced with some unique challenges, regarding its geographic location, size constraints, and political factors.
These findings illustrate the difficulties that have accompanied Macau's economic achievements, but also call
attention to opportunities in the next phase of Macau's development.

1. Introduction
In 2018, Macau will celebrate the 20th anniversary of its return to
China. The years since Macau's handover to Chinese authorities on
December 20, 1999 have witnessed remarkable economic achieve-
ments. Despite periods of instability in the international economy, in-
cluding fallout from the Asian Financial Crisis and the U.S. Subprime
Mortgage Crisis, Macau maintained a rapid pace of growth and man-
aged to build upon its strengths. Between 1999 and 2016, Macau's
Gross Domestic Product (GDP) soared from MOP1 51,872 million (USD
6458 million) to MOP 362,265 million (USD 45,103 million), reflecting
an annualized growth rate of 12%. In 2016, Macau's GDP per capita
reached MOP 560,913 (USD 70,160), among the highest in the world.
In addition to the fast pace of economic growth, Macau is also suc-
cessful in terms of a high employment rate, decent levels of social
welfare, and a high life expectancy.
The past several years have also witnessed a shift in Macau's eco-
nomic structure toward a gaming industry-dominated economy. In
1999, Macau's four pillar sectors were manufacturing, construction and
real estate, financial services, and gaming. In 2013, however, the
gaming industry peaked at over 60% of GDP. Although Macau's gaming
industry entered a period of decline thereafter, its share of GDP was still
as high as 47% in 2016. That same year, Macau's gross gaming revenue
was roughly seven times as high as that of Las Vegas. At present, Macau
not only holds a legal monopoly on China's casino gaming, but also
maintains global preeminence as the world's largest gaming center.
However, Macau's stunning successes have not been without
downsides. As the gaming industry boomed, other industrial sectors
saw rapid contractions. Macau's lack of a broad-based economic
structure has raised worries about the sustainability of its growth and
the sustainability of its economy.
There has also been growing public concern about the social and
environmental consequences of Macau's gaming industry boom. The
industry attracts more and more visitors each year, posing challenges
for Macau's limited tourist carrying capacity. Approximately 31 million
tourists – nearly 48 times the population of local residents – visited
Macau in 2016. Given Macau's very limited land area of 30.3 km2, such
large tourist numbers place a heavy strain on environmental resources
and affect the wellbeing of locals.
Moreover, as Macau has tried to meet the growing manpower need
of the gaming industry, it has imported labors on an ever-larger scale.
There is concern that such labor inflows will threaten employment
opportunities and depress earnings for local laborers. Other challenges
associated with the gaming boom include worsening trade deficits, real
estate bubbles, small business failures, widening social gaps, dilution of
cultural authenticity, and problems of gambling addiction. In view of

⁎
Corresponding author.
E-mail addresses: mingjie.sheng@tju.edu.cn (M. Sheng), gucl@mail.tsinghua.edu.cn (C. Gu).
1
Macanese pataca, the currency of Macau.

https://doi.org/10.1016/j.cities.2018.01.003
Received 22 August 2017; Received in revised form 29 November 2017; Accepted 6 January 2018
Available online 07 February 2018
0264-2751/ © 2018 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/BY-NC-ND/4.0/).
M. Sheng, C. Gu
these issues, it is essential to take stock of both the gains and losses that
have accompanied the gaming industry's boom. Only by acknowledging
and addressing the problems Macau faces as well as the progress it has
made, can the long-term sustainability of its development be achieved.
Scholars in the field of economics, politics, geography, tourism, and
urban planning have studied Macau from different perspectives, var-
iously describing its urban profile (Hobson, 1995; Simpson, 2008; Tang
& Sheng, 2009; Yeung, Lee, & Kee, 2008), examining its tourism drivers
(Huang, Tsaur, & Yang, 2012; Wong & Rosenbaum, 2012), discussing
its tourism growth and local welfare gains (Sheng, Li, & Wang, 2017;
Sheng & Tsui, 2009), analyzing the effects of foreign investments
(Sheng, 2011), examining cultural and spatial aspects of casino cities
(Balsas, 2013; Hannigan, 2007; Loi & Kim, 2010; Luke, 2010), and
analyzing financial features of the gaming industry (Gu & Gao, 2012;
Gu & Tam, 2011). However, there is a lack of academic publications
that thoroughly examine Macau's gaming industry boom and the sub-
sequent impacts on economic growth and overall development. This
paper addresses this gap.
This paper assesses the consequences of Macau's specialization in
the gaming industry between 1999 and 2016. In particular, it seeks to
answer the following questions: How is the gaming industry planned,
developed, and managed during this period? What are the roles of in-
ternal and external institutional factors in shaping Macau's gaming in-
dustry? What is the relationship between the gaming industry's boom
and Macau's economic development and urban transformation? Could
effects of Macau's gaming industry boom be well explained by existing
theories established in western countries? Answers to these questions
will provide a new perspective in understanding Macau's impressive
economic achievements over the past few years.
The remainder of the paper is organized as follows. Section 2 re-
views existing literature on both effects of booming sectors in small
economies and effects of casino gaming industry, as well as provides a
short description of Macau's institutional contexts. Section 3 examines
the explosive development of Macau's gaming industry between 1999
and 2016. Section 4 discusses how the gaming industry boom has af-
fected the economic performance and socio-spatial development of
Macau. The final section offers conclusions and discussions.
2. Theoretical background
2.1. Booming sectors in small economies
To understand the likely effects of booming gaming industry in
Macau, it might be helpful to first look at the small economy with one of
its sectors experiencing rapid growth. The small economy is defined as a
price taker in the international markets, and is usually featured by the
smallness of population, land area, and GDP (Croes, 2006). Faced with
inherent limitations in terms of market size, labor, resources and ca-
pital, small economies have difficulties achieving sufficient economies
of scale in many basic economic activities. As a result, they typically
end up specializing in certain sectors, which offers a way to overcome
size constraints.
Corden and Neary (1982) develop an influential model to explain
the profound effects of booming sectors in small economies. The model
was first used to describe the adverse impacts of natural gas extraction
in the 1960s on the economy of the Netherlands. According to the
model, an economy can be divided into three parts: booming sectors,
lagging sectors, and non-tradeable sectors (Corden, 1984; Corden &
Neary, 1982). Corden & Neary highlight two distinct mechanisms
through which growth in booming sectors can erode the competitive-
ness of lagging sectors. The first is a resource movement effect, whereby
economic factors are reallocated from lagging sectors to booming sec-
tors. The second is a spending effect, whereby demand growth raises
the price of non-tradeable goods and leads to appreciation of the real
exchange rate. As a consequence, a boom in a tradeable sector usually
squeezes profitability in other tradeable sectors (typically
73
Cities 75 (2018) 72–80
manufacturing sectors), thus making the rest of the economy less
competitive and more difficult to sustain.
Although the model was first established to examine effects of
natural resource booms, it has been recently applied to many small
economies characterized by booming service sectors, such as tourism. It
is usually concluded that heavy dependency on tourism might bring
about similar economic consequences. For example, Capo, Font, and
Nadal (2007) shows that flourishing tourism has made island econo-
mies extremely vulnerable to external disturbances, and brings with
them low levels of education, innovation and technological progress.
Chao, Hazari, Laffargue, Sgro, and Yu (2006) argue that by raising the
price of non-tradeable goods, a tourism boom lowers the capital accu-
mulation in other traded sectors, and the subsequent de-industrializa-
tion might cause resident welfare loss in the long-run. Nowak and Sahli
(2007) highlight that tourism booms could sometimes cause net welfare
losses, in particular urban employment and labor migration.
However, few studies have applied the model to casino gaming in-
dustry, whose growth is more dependent on policies. Originated in Las
Vegas in around 1931, casino gaming is now among the most fast-
growing industry world-wide, and has become an important pillar for
many small economies. For those small economies, what are the roles of
casino gaming in economic development? Will this kind of boom bring
about similar effects? These questions remain largely unknown.
2.2. Effects of casino gaming industry
Distinguished by high profits and economies of scale, casino gaming
has gained growing popularity all over the world, especially in re-
source-poor regions, in economically struggling regions, or in small
economies. It is evidenced to generate wide economic benefits to local
economies. Based on data from 68 U.S. counties, Rephann, Dalton,
Stair, and Isserman (1997) measure the regional economic impacts of
casinos. They conclude that casino development has positive effects on
economic growth, overall employment, per-capita income, and poverty
alleviation. Furthermore, service sectors such as retail trade, finance,
insurance, real estate and construction are benefit from the casino
growth. Based on investigations in North America, Eadington (1999)
finds that the booming industry has generated a series of positive ef-
fects, including rapid economic growth, increasing investment and
employment, and enhancement of government revenues. However,
when examining effects of casino gaming on state economic growth
within the U.S. contexts, Walker and Jackson (2007) find that real ca-
sino revenues and real per capita income are not significantly related,
indicating that the industry has initial positive growth effects but the
effects die out over time.
In addition, studies examining how casino gaming affects local labor
market indicate that casinos generally provide positive effects. For ex-
ample, based on the U.S. county-level data, Cotti (2008) concludes that
the opening of casinos leads to an increase in employment, especially in
the entertainment sector, but has little measurable effect on average
earnings. Based on data drawn from Canada, Humphreys and Marchand
(2013) find that despite its positive effects on employment and earnings
in the gaming industry, the opening of new casinos can have indirect
spillover effects on closely related industries of hospitality and en-
tertainment.
Despite its economic influences, the wider social and spatial effects
of casino gaming on host communities have been paid more attention
recently. Chang, Lai, and Wang (2010) highlight the social disorder
costs of casino gaming, including compulsive gambling, productivity
losses and other social pathologies embodied in local communities.
Hannigan (2007) notices that by combining other forms of consump-
tion, casinos have turned the host city into urban resorts. However,
risks are that visitors' arrival will displace local residents, squeeze out
neighborhood businesses, and steamroll indigenous culture and heri-
tage. Simpson (2016) argues that the built environment of casino cities
is primarily constructed by non-local concerns to attract non-local
M. Sheng, C. Gu Cities 75 (2018) 72–80

visitors and workers, contributing very little to the lives of local re- 25000 Other services
sidents. Chu (2015) indicates that huge influx of casino consumers will Insurance
20000
drive local residents to further-away neighborhoods. Furthermore, the
Banks㸤securies
construction of mega casino projects erodes urban identity, and leads to 15000
Gaming
a collective sense of loss among local residents.
It should be noticed that the effects of casino gaming on local 10000 Transport, storage㸤communicaons
communities may vary across different institutional settings, and will Hotels㸤restaurant
5000
depend on the extent to which casinos may attract non-local consumers,
Wholesale㸤retail
as well as how many non-local workers are able to participate in the 0
Construcon
gaming sector. However, most of the existing studies are set in North 2001 2002 2003 2004 2005 2006 2007
American, where casinos are developed under a regime of market ca- -5000 Industrial producon

pitalism. This paper contributes to the literature by conducting a

Fig. 1. Foreign direct investment inflows by industry, 1999–2007 (Data prior to 2001 is
comprehensive analysis of casinos in Macau, which has recently re-
unavailable.) unit: million MOP.
united with China's market-socialist economy, and thus will provide a (Source: Census and Statistics Department, the Macau SAR)
broader picture about how casino gaming boom can play out in this
institutional context.
Sociedade de Turismo e Diversoes de Macau (STDM), a syndicate jointly
formed by Hong Kong and Macau businessmen, was granted a four-
2.3. Institutional context of Macau
decade monopoly on all forms of gaming. Following Macau's handover
to the People's Republic of China in 1999, the Macau Special
The recent expansion of casino gaming in Macau has attracted
Administrative Region (SAR) government made plans to promote the
global attention. Although Portuguese Macau had legalized casinos and
gaming industry more aggressively by opening the sector to foreign
other forms of gaming in 1962, it is not until the beginning of this
investments. With approval from Chinese central government, the
century, when Sovereignty over Macau was transferred back to China,
Macau SAR government opened bidding for casino concessions in 2002,
that Macau has witnessed the booming growth of its gaming industry.
and initiated a strategy “to lure investment and to remake Macau's
Thanks to a liberalized gaming market and deregulated PRC market
casinos into larger, more wholesome Las Vegas-Style operations capable
(Chu, 2015), Macau's gross gaming revenue has grown 9 times in a
of attracting conventions and longer-stay tourists, who would shop, eat,
short span of 18 years, making it the world's largest gaming destination.
and enjoy cultural activities in addition to gaming” (Luke, 2010). Fol-
However, Macau differs markedly from most casino cities in its in-
lowing this bidding process, a subsidiary of STDM, Sociedade de Jogos
stitutional contexts. As Simpson (2016) notes, “Macau is an autono-
de Macau (SJM), continued to own a casino concession. Another five
mous space of exception to normal political and juridical rule, an en-
concessions were issued to global casino operators from the United
clave or offshore space in a larger territory”. On one hand, as a Special
States and Australia, leading to the establishment of Wynn Resorts
Administrative Region (SAR) of China, Macau retains considerable
(Macau), Galaxy Casino, Venetian Macau, MGM Grand Paradise and
degree of autonomy with regard to legal systems, monetary systems,
Melco Crown (Macau). However, the Chinese central government did
separate customs territory, and immigration policies. On the other
not allow any mainland Chinese companies to enter Macau's gaming
hand, the state plays an important role in Macau's political decisions
market.
and economic vitality.
Macau's gaming market expanded rapidly following the infusion of
Macau's gaming industry deserves special attention, in that it is
foreign capital and seasoned casino operators. During this period, for-
decided by not only local government but also the state. Since the
eign investments in gaming-related infrastructure and promotion ac-
Chinese central government allows Macau a legal monopoly on casino
tivities were encouraged by the SAR government. Fig. 1 shows that
gaming within China, the development of gaming industry is affected
Macau's annual foreign direct investment inflows increased from 1065
by mainland China's attitude. Sheng (2011) reveals that the liberal-
million MOP in 2001 to 18,519 million MOP in 2007, with most of the
ization of Macau's casino concessions is decided by multiple players.
increased foreign investment entering gaming industry.
For example, the Venetian successfully won a gaming license through
Overseas investors have greatly promoted Macau's gaming facilities
lobbying the Beijing government's top officers responsible for Macau
and services. The former sub-standard casinos were replaced by Las
affairs. In addition, Customers of Macau's casinos are drawn mostly
Vegas-style casino-resort complexes on a much grander scale. The
from mainland China. However, the amount that Chinese mainlanders
Sands Macau, Wynn Macau, MGM Grand Macau, and Venetian Macau
visit Macau each year is tightly managed by the state. As a result, a
resorts opened for business during this period, and constructions began
sudden change in visa policies of mainland China might cause con-
on dozens of other complexes as well. During this time, Macau's land
siderable loss in Macau's gaming revenues.
area increased from 23.8 km2 to 29.2 km2, with most of the newly re-
Against this backdrop, the purpose of this paper is to examine the
claimed land being granted to gaming concessionaires.
expansion of casino gaming industry in Macau ever since its handover
In order to support the massive expansion of the gaming industry,
to China, to lay out some of the internal and external institutional de-
large numbers of imported workers, mostly from mainland China and
signs that have shaped the gaming industry, and to investigate the
Hong Kong, were recruited into Macau. These imported workers were
socio-economic and spatial consequences of gaming industry boom.
permitted to stay in Macau for a limited period of time, but had little
Furthermore, this paper will examine whether the model proposed by
access to Macau's permanent resident status. In addition, imported
Corden and Neary (1982) examining effects of booming sectors in small
workers were barred from some of the higher-paid occupations in the
economies applies to Macau's situation, and will discuss the extent to
gaming industry. To protect the employment opportunities for locals,
which Macau's experience could be explained by theories established in
the Macau SAR government banned the hiring of non-local croupiers,2
North American casino cities.
allowing only permanent residents to work as croupiers or pit super-
visors in casinos.
3. The evolution of Macau's gaming industry (1999–2016)
Meanwhile, the Chinese central government launched an Individual
Visit Scheme (IVS) policy in July 2003, relaxing prior restrictions on
3.1. 1999–2007: end of the monopoly and gaming market expansion

The legalized gaming industry in Portugal's Macau colony operated 2

A croupier or dealer is someone appointed at a gambling table to assist in the conduct
under a government-granted monopoly after 1962. In that year, the of the game, especially in the distribution of bets and payouts.

74
M. Sheng, C. Gu
30 90000
80000
25
70000
20 60000
50000
15
40000
10 30000
20000
5 0
10000
0 0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Chinese tourist arrivals (million) Other tourist arrivals (million)
Gross gaming revenue (million MOP)
Fig. 2. Gross gaming revenue, total tourist arrivals and Chinese tourist arrivals,
1999–2007.
(Source: Census and Statistics Department, the Macau SAR)
Chinese mainlanders' travels to Macau. Under the IVS, residents of se-
lected mainland cities were allowed to apply for seven-day visas to visit
Macau individually, and could apply for such visas again upon their
return to the mainland. Prior to the IVS, mainlanders could only visit
Macau on business visas or in group tours. This policy succeeded in
bringing more gaming customers to Macau, as evidenced by sharp rises
in Chinese tourist arrivals and gross gaming revenues. As Fig. 2 shows,
Chinese tourist arrivals to Macau soared from 5.7 million in 2003 to
14.9 million in 2007, accounting for 55.3% of Macau's total tourist
arrivals in 2007. And during the same period of time, Macau's gross
gaming revenue had more than tripled.
3.2. 2008–2013: efforts to rein in gaming growth began but the boom
continued
Aggressive efforts to expand Macau's gaming industry were sus-
pended in 2008, when the Global Financial Crisis hit the economy hard
and the negative social and environmental consequences of depending
on gaming sector grew increasingly clear. The Macau SAR government,
under increasing pressure from the Chinese central government to keep
gaming growth under control, placed a range of restrictions on gaming
industry development. On April 22, 2008, Ho Hau-wah, then Chief
Executive of the Macau SAR, put a halt to new casino concessions in the
foreseeable future. The Macau government also announced that it
would not approve any land for the building of new casinos (an ex-
ception was made for existing casino projects). For existing operators,
the Macau government imposed a cap on gaming table growth.
Accordingly, the number of live dealer tables in casinos in Macau
should not exceed 5500 by the end of 2012, and the annual growth rate
of live dealer tables between 2013 and 2022 should be limited to 3%.
The government also implemented various strategies to encourage
gaming operators to incorporate more non-gaming attractions, such as
hotels, retail shops, and restaurants, into their properties. For example,
authorities required that non-gaming amenities should account for at
least 90% of the total floor area in the newly opened casino-resort
complexes.
At the same time, the Chinese central government took its own
actions to dampen excessive growth in Macau's gaming industry. With
Chinese mainlanders losing an estimated $87 billion each year from
gaming in Macau (Zhang, 2011), new restrictions were imposed on the
IVS system to moderate the number of mainland visitors to the city. In
order to slow the capital outflow and to mitigate the growing problem
of gambling addiction, the Chinese central government tightened the
IVS in 2008, permitting mainlanders to visit Macau just once every
three months. These restrictions led to a sudden drop in mainlander
arrivals: 2008 saw a fall of 22.0% from a year earlier, when 14.9 million
mainlanders visited Macau. And, even as the Chinese central govern-
ment approved the Macau government's application to reclaim 3.6 km2
of land for urban expansion in 2009, it stipulated that none of the
75
Cities 75 (2018) 72–80
400000 70.0
300000
60.0
200000
50.0
100000
40.0
2008 2009 2010 2011 2012 2013
Gross gaming revenue (million MOP) Gaming industry's share of GDP (%)
Fig. 3. Gross gaming revenue and gaming industry's share of GDP, 2008–2013.
(Source: Census and Statistics Department, the Macau SAR)
reclaimed land could be used for gaming projects.
Despite efforts by policy-makers to keep gaming growth under
control, the industry experienced a tremendous boom between 2008
and 2013, as rapid economic growth in mainland China generated
rising demand for Macau's casinos. This boom brought a dramatic
physical transformation of Macau's urban space, with rapid expansion
of new casino resorts that had been approved before the freeze on
gaming land was announced. Luxury projects such as the City of
Dreams, Encore Macau, Galaxy World Macau, and Sands Cotai Central
opened their doors for business, attracting millions more tourists.
Macau's gaming industry reached its peak in 2013, generating over
MOP 363.1 billion (USD 45.4 billion) in gross gaming revenue, as
compared with a mere MOP 111.1 billion (USD 13.9 billion) in 2008. As
of 2013, the gaming industry accounted for 63.1% of Macau's GDP,
compared with only 47.2% in 2008 (Fig. 3).
3.3. 2014–2016: a period of decline
The rapid growth of gaming industry suspended in 2014, when
Macau's gaming revenue experienced its first-ever decline since the
liberalization of casino concessions, falling 2.5% from the year before.
Macau saw a more dramatic drop in gaming revenue of 34.1% in 2015,
and further 3.3% drop in 2016.
This decline was largely due to a sharp fall in revenues from VIP
Baccarat, which has long been the most important source of revenue for
Macau's casinos. As Fig. 4 shows, about 66.1% of Macau's total casino-
gaming revenues came from VIP Baccarat in 2013. However, this
number decreased to 53.3% in 2016. Behind this precipitous fall was
mainland China's anti-corruption campaign, initiated in late 2012. As
the campaign gained speed, it deterred mainland high rollers from
lavish spending, especially on casino gaming.
Another factor that may help to explain Macau's shrinking gaming
revenue is the recent casino boom in neighboring Asian regions.
Indonesia, Malaysia, Thailand, and Singapore are increasingly com-
peting to secure a share of Asia's fast-growing market, and the emer-
gence of new rivals has made Macau's gaming industry growth more
difficult to sustain.
From its early days as a monopoly gaming market, to its opening of
VIP Baccarat
Baccarat
Slot Machines
25%
Cussec
Black Jack
66%
Stud Poker
Live Mul Game
Others
Fig. 4. Revenues generated by different types of casino games, 2013 unit: %.
(Source: Gaming Inspection and Coordination Bureau, the Macau SAR)
M. Sheng, C. Gu Cities 75 (2018) 72–80

Fig. 5. GDP growth rates of Macau, Hong Kong, Taiwan, and

Mainland China, 1999–2016 unit: %.

bidding for casino concessions, to its dramatic success at overtaking Las increase in employment. Consequently, Macau's unemployment rate
Vegas as the world's largest gaming hub, to its first period of decline in decreased from 6.3% in 1999 to 1.9% in 2016.
decades, Macau provides a critical case for examining how internal and However, the risk is that the gaming industry is a labor-intensive
external policies promote or restrain the evolution of casino gaming and largely non-technical sector, and thus it may discourage local
industry. Going one step further, it is important to clarify how these human capital development. Being a croupier or a pit supervisor in
policies, by affecting the fate of the gaming industry, have shaped casinos requires very little human capital, but is highly rewarded. The
Macau's more general trajectory of economic, social, and urban devel- median income in gaming industry is 21, 990 MOP in 2016, much
opment. The next section addresses this question. higher than Macau's average (15,000 MOP). High remuneration creates
an incentive for local labor to flow into this industry rather than pursue
employment in more highly skilled sectors. In addition, the ban on
4. Broader effects on economic growth and urban development hiring non-local croupiers and pit supervisors gives privileges to per-
manent residents, further reducing their incentive to pursue higher
The gaming industry boom and its increasing dominance of Macau's education. These dynamics have contributed to lower educational at-
economy have had several impacts on economic growth and urban tainment as well as a higher rate of engagement in gaming-related jobs
development. among local residents. In 2016, only 33.4% of the local labor force had
First, Macau's economic dependence on gaming makes the economy completed tertiary education, and 30.3% worked in the gaming in-
extremely vulnerable to external changes. This effect is common to dustry.
most small economies with a single booming sector (Capo et al., 2007). Besides driving a reallocation of labor resources, the gaming boom
However, the situation of Macau may be more precarious, considering has also led to the reallocation of land resources from other economic
that demand for casino gaming is driven largely by Chinese main- activities to the building of gaming projects. Given Macau's extremely
landers. As Fig. 5 shows, although Macau's GDP generally grew at a limited land areas, competition for land has been fierce, especially since
much faster pace than that of Hong Kong, Taiwan, or mainland China, the liberalization of casino concessions. As Fig. 6 shows, gaming land
this growth was crucially influenced by factors far beyond local control. constituted a considerable proportion of Macau's total land area. In
A decrease in tourist arrivals brought about by Chinese visa restrictions, particular, much of the Cotai Strip, a five-square-kilometer parcel of
a drop in external demand caused by China's anti-corruption campaign, newly reclaimed land, has been mainly granted to gaming operators.
and the emergence of rival gaming destinations in Southeast Asia all led With the construction of large-scale, luxury gaming projects throughout
to periods of painful adjustment for Macau's economy. the tiny enclave, other urban activities have been crowded out. As a
Second, Macau seems to have experienced the resource movement result, the Macau government had to lease extra land on the adjacent
effect, which is typically observed in booming sector economies. As its Hengqin island, an area under the administration of mainland China.
gaming boom generated increased employment opportunities, labor The University of Macau was permitted to move its campus to Hengqin
resources were drawn away from other sectors (Table 1). In 2016, the in 2009 (as shown in Fig. 6), and several other organizations, including
gaming industry provided over 92,700 jobs, accounting for 23.8% of the young entrepreneur's association, the institute of Chinese medicine,
Macau's total employment; in 1999, this proportion had been only and a television group, have also sought out space on Hengqin island.
9.8%. The rapid gaming sector employment growth has led to an Third, like most casino cities in western countries, Macau's gaming
industry boom has directly increased the demand for local service
Table 1
sectors, such as real estate, hotels and restaurants, and wholesale and
The distribution of Macau's labor force by industry, 1999–2016 unit: %.
retail, all of which are closely linked to the gaming sector (Fig. 7). The
1999 2005 2010 2016 rapid expansion of these labor-intensive sectors has generated in-
creasing demand for labor, which in turn has been met by recruiting
Gaming 9.8 17.2 23.9 23.8
tens of thousands workers. The number of imported workers surged
Manufacturing 21.8 14.9 4.8 2.0
Construction 8.3 9.7 8.6 11.4
from 32,183 in 1999 to 177,638 in 2016, accounting for 45.6% of
Wholesale and retail 15.5 14.9 13.1 11.3 Macau's total employment in 2016. With an increasing share of the
Hotels and restaurants 10.7 10.5 13.6 14.7 local workforce engaged in the gaming sector, imported workers have
Real estate 4.7 6.0 8.7 7.8 replaced locals in sectors such as construction, hotels, and restaurants,
Others 29.2 26.8 27.3 29.0
which generally offer lower wages. This has led to a growing divergence
Source: Census and Statistics Department, the Macau SAR. in the incomes of local and imported workers. High levels of labor

76
M. Sheng, C. Gu
migration have also brought about a rise in domestic demand for local
service sectors, further worsening conditions in other parts of the
economy. Consequently, apart from sectors closely which are linked to
the gaming industry, other sectors have experienced sharp declines
during the booming years (as shown in Fig. 7). For example, apparel
manufacturing, which was one of the mainstays of Macau's economy in
1999, accounted for less than 0.5% of GDP in 2016.
Fourth, since Macau's economic growth depends largely on foreign
casino operators, there is a risk that control over urban development
will end up in the hands of outsiders who care less about local interests.
The small size of this economy means that it is difficult to raise capital
locally, and, as mentioned in Section 3, mainland Chinese companies
were not allowed to enter Macau's gaming market. Therefore, policies
encouraging overseas investment were favored at the initial stage of the
gaming industry's development. As shown in Fig. 8, following the lib-
eralization of casino concessions, the market share of Macau's local
gaming operator (SJM) decreased sharply, from 100% in 2002 to 20.0%
in 2015. The other five overseas casino concessionaires thus became
key players in Macau's economic development, and took on their im-
portant roles in local affairs, such as providing bus service and paying
for the “Macau week”.
However, as the foreign investors gained increasing control over
Macau's development, they were also criticized for causing various
social and environmental problems. One complaint is that foreign
77
Cities 75 (2018) 72–80
Fig. 6. The spatial distribution of land used for gaming facilities,
2016.
investors have been ambitiously attracting millions of additional visi-
tors without regard to Macau's limited capacity. The number of visitors
to Macau reached 31 million in 2016, nearly 48 times the local popu-
lation. This uncontrolled growth of tourist arrivals had placed heavy
pressures on Macau's limited natural resources, caused harmful pollu-
tion, and raised the prices of local goods - all at the expense of locals'
wellbeing. Another complaint has been the erosion of local identity.
Macau, once famous for its unique amalgamation of Asian and
Portuguese cultures, now has difficulty distinguishing itself from other
top gaming destinations in the world. By introducing Las Vegas-style
casino-resort complexes into Macau, foreign operators have to some
extent steamrolled Macau's indigenous culture and heritage. In addi-
tion, overseas tycoons threatened the development of local small- and
medium-sized enterprises (SMEs), particularly by raising the cost of
labor and land. As a result, SMEs, which made up a majority of Macau's
planned strategic industries (the convention and exhibition industry,
the cultural and creative industry, and the Chinese medicine industry),
could hardly compete with gaming magnates.
Finally, the gaming industry boom has also given rise to highly
uneven spatial development within Macau. As policies aimed at pro-
moting the gaming industry devoted more and more urban space to
tourism activities, the needs of local residents were ignored to some
extent. For example, the Cotai Strip, an inter-island reclamation project,
was initially planned to contain a new town that would accommodate
M. Sheng, C. Gu Cities 75 (2018) 72–80

Fig. 7. Gross value added of principal economic

300000 activities, 1999–2016 unit: million MOP.
(Source: Census and Statistics Department, the
Macau SAR)
250000

200000

150000

100000

50000

0
20002001200220032004200520062007200820092010201120122013201420152016
Gaming Real estate
Construcon Hotels and restaurants
Wholesale & retail Banking
Public administraon and social security Renng & business acvies
Transport, storage & communicaons Educaon
Health and social welfare Insurance & pension funding
Electricity, gas and water supply Manufacturing
Mining Others

over 150,000 local residents. However, in order to boost gaming in-
dustry growth, the Macau SAR government changed the initial plan
soon after the liberalization of casino concessions, granting the majority
of the Cotai Strip land to new casino concessionaires. After many years
of construction, the Cotai Strip is now crowded with dozens of mega
casino-resort complexes. One of these, the super-sized Galaxy Macau, is
a combination of luxury hotels, grand casinos, entertainment areas, and
shopping arcades, and has a floor area of more than 550,000 square
meters. Another, the newly-opened Parisian Macau, will provide more
than 3000 hotel rooms and suites, 45,990 square meters of retail space
and expansive convention facilities.
While mega casino-resorts were taking shape in the Cotai Strip, the
living conditions of local residents on the Macau Peninsula, the historic
center of Macau, deteriorated. Abutting the border of China's
Guangdong province to the northwest, and surrounded by sea to the
southeast, the Macau Peninsula has little space for urban expansion.
Despite its land area of only 9.3 km2, the peninsula is home to more
than 510,000 residents, or over 80% of Macau's total population.
Consequently, the Macau Peninsula has become one of the most densely
populated urban areas in the world, with a population density of 55,900
persons per square kilometer, higher than that of Bombay (29,700/
km2), Calcutta (23,900/km2), or Karachi (18,900/km2).
Unlike tourists who enjoy world-class facilities in the Cotai Strip,
many local residents living on the Macau Peninsula still lack basic
public service facilities (Fig. 9). For example, there is a shortage of
qualified educational facilities. Most existing primary schools were too
small to accommodate a growing number of students. To deal with
expanded enrollments, some schools have had to curtail students' hours
of instruction, and many students are only able to spend half a day on
campus. In addition to the shortage of public facilities, Macau's high-
density urban development has also resulted in a lack of open space.
There are few parks, neighborhood recreational fields, or natural
landscapes, aggravating the living conditions of locals. This has led to
an increasing number of conflicts between deprived local residents and
the elite groups who have benefited from gaming-based growth. Such
conflicts may threaten Macau's social and environmental sustainability.
5. Conclusions and discussions
For Macau, the period from 1999 to 2016 is highly illustrative,

Fig. 8. Market share of the six casino concessionaires,

100% 2002–2015 (2016 data is unavailable.) unit: %.
(Source: Gaming Inspection and Coordination Bureau, the
90%
Macau SAR)
80%
70% MGM Grand Paradise
60% Venetian Macau
50% Galaxy Casino
40%
Wynn Resorts (Macau)
30%
Melco Crown (Macau)
20%
10% SJM
0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

78
M. Sheng, C. Gu
Fig. 9. Images of Cotai Strip (left) and Macau Peninsula (right).
marked by its reunification with mainland China, the opening-up of its
gaming market, and a subsequent phase of explosive gaming-driven
growth.
In the first few years after reunification, the local government as
well as the Chinese central government aggressively promoted gaming
industry to help Macau recover from the Asian Financial Crisis of the
late 1990s. By issuing casino concessions to seasoned foreign operators,
granting large parcels of land to casino facilities, encouraging labor
migration, and loosening restrictions on mainlanders' travels to Macau,
authorities helped Macau achieve dramatic gaming growth.
However, with the negative effects of gaming industry boom accu-
mulating, policy-makers suspended their efforts to expand the gaming
market. A range of restrictions on gaming development were placed
since 2008. Despite more restrictive policies, however, rising demand
from mainland China helped the gaming industry maintain an un-
precedented pace of growth until 2014, when the effects of mainland
China's anti-corruption campaign and the rise of foreign competitors
began to be felt. As a result, in 2014, Macau's gaming industry ex-
perienced its first-ever revenue decline since 1999, and this turning
point drew increasing public attention to the negative effects of the
gaming industry boom.
The model proposed by Corden and Neary (1982) applies pretty
well to explaining the situation of Macau. Or in other words, Macau has
displayed many of the same economic symptoms found in other small
economies with booming sectors, such as natural resource booms and
tourism booms. Conforming to expectations of existing literature, Ma-
cau's flourishing gaming sector has contributed to meteoric economic
growth, high levels of investment and labor migration, growing vul-
nerability to external disturbances, reallocation of labor and land re-
sources from lagging sectors to booming sectors, and a de-in-
dustrialization process.
Furthermore, Macau has experienced some of the effects which are
typically observed in western casino cities. For example, gaming in-
dustry expansion contributes to increasing investment, employment,
and government revenues. Thanks to the huge amount of visitors
brought by casinos, local service sectors such as real estate, hotels and
restaurants, and wholesale and retail are generally pro-cyclical with
gaming industry booms. In addition, the rapid expansion of gaming
industry came partly at the expense of local interests, as evidenced by
worsening living environment for locals, a dilution of local identity, and
the crowding out of local small- and medium-sized enterprises.
However, Macau is faced with some unique challenges, compared
with western casino cities. First, being an independent economy, Macau
is expected to build a broad-based economic structure to achieve the
long-term sustainability of economy. However, this is not common in
most casino cities elsewhere. Given Macau has a land area of just
30.3 km2, with much of the land being occupied by gaming operators, it
might be even harder for Macau to diversify its economic structure.
79
Cities 75 (2018) 72–80
Second, while most western casino cities worry about the social dis-
order costs embodied in local gamblers, Macau's casino consumers are
largely drawn from mainland China. As a result, Macau may be able to
enjoy the benefits brought by the industry without bearing the ac-
companying cost. Third, in many western casino cities, by offering ca-
sino jobs to imported workers, it is worried that much of gaming rev-
enues may go to “outsiders”. However, as an independent economy, the
Macau government is able to prevent imported workers from entering
gaming employment market, and thus protect the local interests.
Despite the challenges, it is undeniable that Macau has achieved
impressive levels of growth and prosperity within several years of its
handover to China, and has served as a prototype for China's “one
country, two systems” policy. However, to ensure a brighter economic
future, Macau might consider implementing one or more of the fol-
lowing strategies.
First, learning from the U.S. experiences, the Macau government
should consider place more limitations on casino operators regarding to
the location, size, and numbers of casino facilities. By limiting the total
amount and spatial distribution of gaming facilities, Macau may gra-
dually gain back control over its economic future.
Second, it is advisable for Macau to further enhance its competi-
tiveness as a global tourism destination. Learning from Las Vegas,
sufficient attention should be paid to promoting non-gaming tourism
activities, such as convention and exhibition, athletic events, and lux-
urious amenities. It might be possible to rebrand Macau as a world-class
tourist destination for middle-class families and businesspeople.
Third, Macau has the potential to serve as an effective bridge of
economic and trade relations between China and the world's
Portuguese-speaking countries. Macau's legal system, financial system,
cultural features, and language retain many similarities with those of
Portugal. China is already the largest trading partner of Portuguese-
speaking countries, and in the future, the Belt and Road Initiative, an
economic and diplomatic program, will further boost trade relations
between China and these countries. These trends provide an opportu-
nity for Macau to establish itself as a platform for promoting economic
and trade relations between China and the Lusosphere3 world.
Ultimately, Macau's economic prospects depend not only on market
mechanisms but also on the external institutional environment. The
Chinese central government has been trying to help Macau build a di-
versified economic structure. Initiated in 2004, the Mainland and
Macau Closer Economic Partnership Arrangements (CEPA) aims to en-
hance economic and trade cooperation between Macau and mainland
China. Under the agreement, qualifying products, companies, and re-
sidents of Macau enjoy preferential access to the mainland China
3
The Lusosphere (Portuguese: Lusofonia) is a community of people who are culturally
and linguistically linked to Portugal.
M. Sheng, C. Gu
market. Indeed, many of the preferences surpass the concessions made
by China upon its accession to the World Trade Organization. Recently,
the Chinese central government drew up a plan to develop a city cluster
in the greater Pearl River Delta region, in hopes of deepening co-
operation between the province of Guangdong, the Hong Kong SAR,
and the Macau SAR to develop a world-class bay area. As such, the
economic fortunes of Macau and mainland China have become more
closely intertwined than ever before. Macau should seize this oppor-
tunity to overcome restrictions regarding to capital, market size and
land area, and thereby promote a pattern of economic growth and
urban development that can prove sustainable in the long run.
Funding
This work was supported by the key project of the National Natural
Science Foundation of China (grant numbers 41590844); the in-
dependent research program of Tsinghai University (grant numbers
2015THZ01); and the National Social Science Foundation of China
(grant numbers 16CRK020). This work was also supported by the
Macau Strategic Plan.
Acknowledgements
The author would like to thank Kyle Jaros for polishing the manu-
script and offering constructive guidance.
References
Balsas, C. J. (2013). Gaming anyone? A comparative study of recent urban development
trends in Las Vegas and Macau. Cities, 31, 298–307.
Capo, J., Font, A. R., & Nadal, J. R. (2007). Dutch disease in tourism economies: evidence
from the Balearics and the Canary Islands. Journal of Sustainable Tourism, 15(6),
615–627.
Chang, J. J., Lai, C. C., & Wang, P. (2010). Casino regulations and economic welfare. Can.
J. Econ. 43(3), 1058–1085.
Chao, C. C., Hazari, B. R., Laffargue, J. P., Sgro, P. M., & Yu, E. S. (2006). Tourism, Dutch
disease and welfare in an open dynamic economy. The Japanese Economic Review,
57(4), 501–515.
Chu, C. L. (2015). Spectacular Macau: Visioning futures for a world heritage city.
Geoforum, 65, 440–450.
Corden, W. M. (1984). Booming sector and Dutch disease economics: Survey and
80
Cities 75 (2018) 72–80
consolidation. Oxford Economic Papers, 36(3), 359–380.
Corden, W. M., & Neary, J. P. (1982). Booming sector and de-industrialisation in a small
open economy. The Economic Journal, 92(368), 825–848.
Cotti, C. (2008). The effect of casinos on local labor markets: A county level analysis. J.
Gambling and Businsess Economics, 2(2), 17–41.
Croes, R. R. (2006). A paradigm shift to a new strategy for small island economies: em-
bracing demand side economics for value enhancement and long term economic
stability. Tourism Management, 27(3), 453–465.
Eadington, W. R. (1999). The economics of casino gambling. Journal of Economic
Perspectives, 13(3), 173–192.
Gu, X., & Tam, P. S. (2011). Casino taxation in Macau: An economic perspective. Journal
of Gambling Studies, 27(4), 587–605.
Gu, Z., & Gao, J. Z. (2012). Financial competitiveness of Macau in comparison with other
gaming destinations. UNLV Gaming Research & Review Journal, 10(2), 1.
Hannigan, J. (2007). Casino cities. Geography Compass, 1(4), 959–975.
Hobson, J. P. (1995). Macau: Gambling on its future? Tourism Management, 16(3),
237–243.
Huang, C. H., Tsaur, J. R., & Yang, C. H. (2012). Does world heritage list really induce
more tourists? Evidence from Macau. Tourism Management, 33(6), 1450–1457.
Humphreys, B. R., & Marchand, J. (2013). New casinos and local labor markets: Evidence
from Canada. Labour Economics, 24(6), 151–160.
Loi, K. I., & Kim, W. G. (2010). Macau's casino industry reinventing Las Vegas in Asia.
Cornell Hospitality Quarterly, 51(2), 268–283.
Luke, T. W. (2010). Gaming space: Casinopolitan globalism from Las Vegas to Macau.
Globalizations, 7(3), 395–405.
Nowak, J. J., & Sahli, M. (2007). Coastal tourism and ‘Dutch disease’ in a small island
economy. Tourism Economics, 13(1), 49–65.
Rephann, T. J., Dalton, M., Stair, A., & Isserman, A. (1997). Casino gambling as an
economic development strategy. Tourism Economics, 3(2), 161–183.
Sheng, L. (2011). Foreign investment and urban development: A perspective from tourist
cities. Habitat International, 35(1), 111–117.
Sheng, L., Li, T., & Wang, J. (2017). Tourism and externalities in an urban context:
Theoretical model and empirical evidence. Cities, 70, 40–45.
Sheng, L., & Tsui, Y. (2009). A general equilibrium approach to tourism and welfare: The
case of Macau. Habitat International, 33(4), 419–424.
Simpson, T. (2008). Macau, capital of the 21st century? Environment and Planning D:
Society and Space, 26(6), 1053–1079.
Simpson, T. (2016). Tourist utopias: Biopolitics and the genealogy of the post-world
tourist city. Current Issues in Tourism, 19(1), 27–59.
Tang, U. W., & Sheng, N. (2009). Macau. Cities, 26(4), 220–231.
Walker, D. M., & Jackson, J. D. (2007). Do casinos cause economic growth? American
Journal of Economics and Sociology, 66(3), 593–607.
Wong, I. A., & Rosenbaum, M. S. (2012). Beyond hardcore gambling: Understanding why
mainland Chinese visit casinos in Macau. Journal of Hospitality & Tourism Research,
36(1), 32–51.
Yeung, Y. M., Lee, J., & Kee, G. (2008). Hong Kong and Macau under Chinese Sovereignty.
Eurasian Geography and Economics, 49(3), 304–325.
Zhang, Z. (2011). The development of the gaming industry in Hainan opportunities,
challenges and solutions. Science Economy Society, 29(4), 71–77 (in Chinese).