By Jean Jinghan Chen

Chair Professor in Accounting and Finance, Faculty of Business Administration, University of Macau

Being a major subject for the development of the Guangdong-Macau In-Depth Cooperation Zone in Hengqin, financial innovation is an important direction for the implementation of economic diversification in Macau. Development is inseparable from capital; therefore, how to broaden financing channels has also attracted widespread attention. How to make good use of available funds in Macau, that is, the way to accumulate wealth, should be of concern to the financial community. At the current stage, how to effectively gather and use funds on hand by broadening the channels of wealth management is an important issue to be explored. In fact, Macau is a place full of opportunities. In addition to being adjacent to Shenzhen and Hong Kong, it enjoys historical connections with Europe and the United States, while some of the world’s top large-scale gaming and hospitality enterprises operate here in Macau. All these strengths work together and have laid a solid foundation for the expansion of financial management channels in Macau and the In-Depth Cooperation Zone, creating great potential for development.

In Macau, the wealth of local public enterprises and residents is mainly divided into three categories: government, family businesses, and retail investors. The Macau SAR Government has always been known for its prudence in the management of its financial reserves by focusing on value preservation, as well as taking the government’s financial reserves as a cornerstone of local economic growth. For a long time, the government’s fiscal savings and investments grew at a steady pace, with an annual growth rate of around 3%. After the outbreak of the epidemic, its performance has been especially outstanding, while a return rate of 5% was recorded in 2020, which is hard to achieve. The cooperation between Hengqin and Macau will introduce a new wealth management model to the SAR Government. For example, it can consider establishing a financial system that boosts collaboration in the Guangdong-Hong Kong-Macau Greater Bay Area to materialise the free circulation and settlement of MOP and RMB, which can expand the channels and models of wealth management in Macau, so that the city’s financial savings can quickly capture the new opportunities brought about by the development of the Greater Bay Area, expand the scope of investment, and better contribute to the construction of the Greater Bay Area. It is believed that this kind of investment, which may be relatively risky, should enjoy higher returns in the medium and long term with the policy support of the Central Government.

The management of family business wealth is the issue of greatest concern to family entrepreneurs. In 2021, the asset allocation structure of Chinese family business wealth centres on banking financial products (26.47%) and savings and cash (26.34%) (source: BOC “Report on Family Wealth Management of Chinese Entrepreneurs”), which together account for 52% of the wealth of the entire family business. Relatively speaking, in the asset allocation of family businesses in North America, savings and cash account for only 22% of the total wealth. Therefore, the management of family business wealth in China is significantly different from that in North America. The industry should fully understand these differences so as to develop financial products that are attractive to investors from all over the world.

The third group of people is retail investors, or small clients, who should be the key target group of the financing sector. The choice of wealth management products for such investors has a lot to do with their age. The younger, who are more risk averse, prefer financial products with high risks and high returns, whereas the elders are generally more risk averse, preferring wealth management products with low risks and a greater emphasis on value preservation. It is worth mentioning that the population of the middle- and old-aged (over 45 years old) in Macau accounts for about 43% of the total population of local residents (source: Detailed Results of 2021 Population Census), but this group of residents is often excluded from the target customer group of new financial products outside. From this point of view, the range of wealth management products in Macau should be further expanded to suit different groups. At the same time, it should be closely integrated with the international market to enrich wealth management products and channels in Macau.

陳靖涵

澳門大學工商管理學院會計與金融講座教授

金融創新是深合區發展的重要議題，也是澳門經濟多元化的一個重要方向。發展離不開資金，因而融資渠道如何拓寬也被廣為關注。如何利用好澳門現有的資金，即如何聚財，應是金融界所關注的問題。在現階段，如何以拓寬財富管理的途徑來有效的聚集和使用澳門現有的資金是一個亟待發展的問題。其實澳門這邊機會很多，其毗鄰深圳香港，同歐美有著歷史性的淵源，而且集中了一些世界頂級的大型博彩、酒店及款客企業。這些優勢為澳門及深合區拓寬理財渠道打下了良好的基礎，使其有很大的發展空間。

在澳門，當地政府企業及居民的財富主要分為三類：政府、家族企業、散戶。澳門特區政府財政儲備管理方面管理一直以穩健著稱，以保值为主，把政府的財政儲蓄作為澳門經濟增長的一個基石。長期以來，政府財政儲蓄投資都保持一個非常穩定的增長，年增長率大至在3%左右。特別是疫情發生以後做的非常好，2020年回報率達到5%，非常不容易。琴澳合作可以為澳門政府帶來新的財富管理模式，比如可以考慮建立一個粵港澳大灣區合作的金融體系，實現澳門幣與人民幣的自由流通與支付，這可以擴大澳門財富管理的渠道與模式，使澳門的財政儲蓄能敏捷地捕捉到大灣區發展所帶來的新機遇，擴大投資範圍，也能更好地為灣區發展做貢獻。這種投資，可能相對的風險略大一些，但相信有國家政府的政策支援，應該在中長期會有較高的回報。

家族企業的財富管理是家族企業家們最爲關心的問題。2021年中國家族企業的資產配置結構以銀行金融產品（26.47％）和儲蓄及現金（26.34％）為中心（資料來源：中國銀行-2021中國企業家家族財富管理白皮書），這兩項加起來就佔了整個家族企業財富的52%。相對而言，北美的家族企業的資產分配中，儲蓄和現金加起來才佔總財富的22%。所以，中國的家族企業財富管理與北美有顯著不同。業界需充分了解這些差異才能夠開發出對各地投資者有吸引力的理財產品。 

第三部分人群就是散戶，或小客戶，也就是普惠金融主要針對的群體。這類投資者對理財產品的選擇同年齡有很大關聯。年輕人抗風險的能力相對高一些，偏好高風險高回報的理財產品。長者一般抗風險能力較低，偏好低風險保值為主的理財產品。值得一提的是澳門本地中老年人口（45歲以上）約佔澳門本地居民的43% （資料來源：2021年澳門統計局人口普查），但這類人群往往被排除在新型金融產品考慮範圍之外。因此澳門的理財產品範圍需要進一步擴大，以適應不同的群體， 同時需要跟國際市場緊密結合，使澳門的理財產品及渠道更豐富。

Professor Jean Chen

Dean of Faculty of Business Administration and Chair Professor of Accounting and Finance

Family businesses act as the economic bedrock of countries, economies, and communities, which is also the predominant form of business organization provide a sizeable contribution to the countries’ economies.

According to recent statistics, it is estimated that family businesses present over 80% of all businesses worldwide, and contribute to over 70% of global GDP. In specific, the U.S. family business produce 54% of private sector GDP and are responsible for employing 59% of private sector workforce. Family Businesses in the U.K. accounted for 50% of private sector employment, and 38% of all employment. In China, family businesses account for 55% of private enterprises and 30% of listed firms in China.

Wealth management of family business is the top priority of family wealth inheritance. In 2021, the Back of China published the “report on family wealth management of Chinese entrepreneurs” (中國企業家家族財富管理白皮書) (hereinafter refer to “FW report 2021). According to the report, the four Mostly Concerned Issues by FB in China are wealth growth, wealth allocation, wealth inheritance and social responsibility. The Asset Allocation Structure of Chinese FB Wealth centers on Banking financial products (26.47%) and Savings and Cash (26.34%), other options, in order, are real estate (8.66%), public funds (7.32%), insurance (7.16%), stocks (7.12%), bonds (3.97%), etc. As a comparison, according to Asset allocation of high net worth individuals in North America in 2019, Statista the top choices of asset allocation of FB wealth in North America are equity (38.8%), Savings and Cash (22.1%) and bonds (17.5%). More importantly, 82.49% of interviewed entrepreneurs maintained growth in their family assets during the epidemic. A considerable part of the growth was derived from the income generated by investments such as stocks and funds (40.35%). Other sources of growth include corporate value rise (40.5%) and real estate value rise (19.15%).

Regarding the wealth inheritance issue, the wealth inheritance tools most often used in China are insurance (56.36%), settlement (38.99%), will (28.48%), family trust (25.45%), family office (3.64%) and philanthropic foundation (3.03%). It should be noted that family trust and family office are two very useful tools in Western countries, but its importance is generally underexplored in China. Family offices are generally established by wealthy families (typically having a net worth exceeding MOP 1 billion) to manage their wealth, help in the family’s plans for the future and to offer consultancy services. FOs can help: (1) Centralization of specialized and tailor-made services (2) Increasing transparency (3) Family members are left with more time to focus on more currently prevailing issues (4) Enhancing communication and improved management of family members’ expectations and (5) Educating family members. Trust in family wealth is “where a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose, or for both such benefit and purpose aforesaid.” FTs can help: (1) Preservation of family wealth, tax planning and efficient decision making (2) Creating consolidation, whereby upon death, family wealth is managed as one fund which can continue to accumulate, rather than divided amongst several heirs (3) Prevention of having one dominating individual influence business decisions and the protection of vulnerable family members. 

As a matter of fact, only a relatively small percentage of family firms are able to survive throughout generations. For instance, about 30% of the family firms in the United States pass the business to the second generation, and approximately 10% transfer the business to the third generation. Things are even worse in China’s conditions. Why does ‘clogs to clogs in three generations’ always repeat itself? The reasons could be multiple: poor operation of the business, investment failure, family confliction, children squander, incapable successor, inefficacious wealth management…

There are two levels of family business governance: one is the corporate governance of the business, the other is the family governance within the family. A good governance could not only mitigate business-related risks, such as avoiding direction error of operation, reducing investment risk, policy risk and debt risk; but also could minimize family-related risks, such as avoiding children squander and family conflict, and reducing marriage risk and succession risk.

First, building a modern corporate governance structure could be very helpful in addressing business risks for family business owners. A modern corporate governance structure mainly consists of stakeholders, board of directors, board of supervisors and management executives. Stakeholders (general meeting) are the owner of the company of all rights. Due to the large quantity of shareholders, the majority of shareholders will entrust minority shareholders to join the board of directors and act on their behalf. The board of directors is composed of directors elected by the shareholder (general) meeting, internally in charge of the company’s affairs, externally representing the company’s business decisions and business execution agencies. The board of supervisors is composed of supervisors elected by the shareholder (general) meeting. It is an organization that supervises and inspects the company’s business activities. The CEO, as the head of management executives, is nominated by the board of directors. Within the scope of authorization of the board of directors, he has the management and agency rights of the company’s affairs and is responsible for handling the company’s daily business affairs.

Family governance is mainly through first, family council and assembly. Family assembly is a periodic, generally annual gathering of the extended family, whereas the family council is a group of family members who meet regularly to discuss and make decisions on the issues related to the family’s involvement in the firm. Moreover, family assemblies and councils provide a forum in which different values, opinions, and attitudes about the firm are provided and presented to the firm management. Family assemblies and councils can also advise, monitor, and support management. Second, family constitution. A family constitution, often referred to as a family protocol, or family creed, or family agreement, is a legal written agreement signed by family business owners, including a set of rules and procedures for governing the members’ relationships. A family constitution could help the family firm not only guide current and future generations but also signal the long-term orientation of the business to other stakeholders such as business partners and alliances. Third, a family charter. A family charter represents the code of conduct to the family business members, which could facilitate the development of formal policies by documenting principles and guidelines regarding the relationship of the family to the business.

Last but not least, succession and family businesses longevity has been considered as the most important component in a family constitution. It consists of three elements: processes (management and ownership succession), activities (intended to integrate family members into the management and ownership succession processes and to feel comfortable with both succession processes and outcomes), and desired outcomes. Generally, family business succession involves the transfer of the business management and ownership to the next generations. Ownership succession focuses on who will own the business and when and how this process will occur. It is a joint arrangement of the role between members of two generations. A successful succession requires a fully engagement of the successor during the whole process. Succession in entrepreneurial family businesses should ensure a capable leadership in all generations. Specifically, the most important issues to consider in the process of succession issues include:

• Do any of the children want to take over the business?

• How to choose between equally able children?

• Will they become good leaders, or the company will suffer due to their weak leadership skills?

• Will the successors collaborate in the future, or their behavior will raise into sibling rivalry?

• How do we nurture the needed competencies to take the business forward?

• How will you support those who want to pursue a career outside the family business?

Dean of the Faculty of Business Administration of the University of Macau (UM)

Chair Professor in Accounting and Finance

Jean Jinghan CHEN

Striking a Balance between Theory and Practice

Traditionally, higher education institutions are ivory towers that value academics. However, nowadays, with economic and technology development, there has been an increasing demand for talents who possess skills of applying theory into practice quickly. Therefore, higher education is striking to find a balance between theory and practice. 

Reducing the gap between theory and its application should draw attention to the higher education sector. Starting from the first day of higher education study, we should pay attention to building students’ ability to implement in practice what they have learned in classes, so as to minimise the gap between higher education study and real-world practice. Evidence shows it is an effective vehicle for enhancing students’ competitiveness for future career opportunities and professional development, thus increasing their employability. From this perspective, strong business engagement in various ways, such as internship programmes and joint teaching and learning practice, has become an important pillar of modern higher education that could produce a value-added element of its final products – students.

Modern Technology and Higher Education

Recent years have seen the rapid advancement of science and technology that has had a significant impact on curriculum development and research in higher education. This has brought both challenges and development opportunities to the sector. It is imperative for the higher education sector to embrace technological revolution; thus, it is essential for higher education to improve its curriculum by embedding the fundamentals of technology development and its application to reflect fast-changing real-world practice.

The fast advancement of technology shows that it is now common to talk about technologies such as data mining, blockchain, artificial intelligence, machine learning, etc. However, the challenge we are facing now is how to take advantage of these technologies to improve higher education provision in terms of both curriculum and delivery. This development is not icing on the cake, but imperative. The industry and society are now looking for graduates who possess multi-disciplinary knowledge. They need to be knowledgeable in specific traditional academic subjects and also capable of applying information technology into real-world business. 

More importantly, embracing technology does not narrowly mean higher education should be driven by ‘disruptive’ technology development, but it should strive to take a leading role in the era with rapid technological development and become a ‘disruptor’ itself. 

The Essence of Success of Higher Education 

The end product of higher education is ultimately “students”. To a large extent, employability is a window of education quality and value enhancement of a higher education institution. The recognition of success of education is not only limited to knowledge transfer but also the ability to work and survive in the real world. How then to achieve this? Cultivating students’ comprehensive all-round abilities can be more influential than simply focusing on knowledge transfer.

Many higher education institutions have still focused on students’ academic achievement, that is, IQ development. However, soft skill development, such as teamwork, spirit, social skills, resilience to adversity, sense of responsibility etc, is also important. I refer to these types of soft skill as being amongst the most important parts of higher education, which represent the real success of higher education as well as a decent mirror of a person’s EQ.

One may notice a common social phenomenon nowadays. Most of youth communicate well with others through mobile phones or social media platforms, but when it comes to face-to-face communications, many of them lack the most basic interpersonal skills, as they have no idea how to talk with others, strangers in particular, face to face to express themselves. Their social skills are very limited. 

Furthermore, with the popularisation of machine intelligence applications, it is possible that more and more services and social interactions will not be completed face to face. Does it mean that interpersonal skills are not necessary to future talents? A machine, no matter how smart it is, works under a human being’s control. It is the human being who makes the machine smart, not the other way round. A human being should have a sufficient understanding of application scenarios and special features of machines so as to design a communication programme and make the software smarter. Therefore, in fact, it is just a different way of communication instead of non-talk. After all, we always return to society, and no one can live in isolation. In today’s informative era, the differentiation of soft skills is even more striking because this is the only aspect in which machines cannot replace human beings. Therefore, higher education must pay attention to cultivating not only students but also faculties to improve their soft skills and enhance their understanding and awareness towards self-development. 

Some youngsters have also shown signs of lack of a sense of responsibility, inability to cope with pressure and withstand setbacks. It is not unusual that we read from a newspaper that a student has committed suicide due to a poor test result. Are they not well-educated academically? Obviously not. In the past, in my generation, or my parents’, we enjoyed far less rich and advanced education than today, but our resilience to setbacks is significantly greater than today’s youth. It is attributed to the personal development training we received from higher education, in particular from those world-class universities. They captured the essence of education. Unfortunately, this shining part of education is often ignored nowadays, as it is not sufficiently incorporated in a faculty’s career development plan, neither as a job assessment and/or promotion criteria. Faculty has a lack of motivation to work on it. If we would like to cultivate students’ soft skills and help them develop comprehensive skills and abilities to face life and work, we need to require the faculty to be a role model. A responsible faculty should not only teach students academic knowledge but also care about students’ career planning and self-growth motivation. From this aspect, staff training and development is also imperative in higher education.

What the sector needs most is staff who are passionate, enthusiastic and responsible for their students, and love education as a career. An accomplished disciple owes his accomplishment to his great teacher.

In the future, both industry and society will call for talents who are excellent in self-awareness, have strong motivation toward self-growth and a balanced portfolio and skills, to cope with the rapid development we face. It is worth mentioning that the cultivation of talents should not only be the responsibility of higher education, but in fact it should gain attention as early as the primary and secondary stages. The whole of society will greatly benefit from quality education and it is our future.

The Chief Executive has issued the Guidelines for Information Disclosure by Enterprises with Public Capital(No. 133/2020) on June 15, 2020.

Professor Jean Jinghan Chen

Dean of Faculty of Business

Administration and Chair Professor in Accounting and Finance

University of Macau

Phillip Law

Assistant Professor in Accounting

Faculty of Business Administration

University of Macau

The new guidelines require enterprises with public capital to disclose more information such as the company name, shareholder details, shareholding ratio, company structure, capital amount, audit committee, annual financial statement and operation report, opinion of the auditor or the supervisory board, information on acquisition and bidding, and guarantee information, as well as matters relating to enterprises with public capital such as material investments, asset arrangements, losses, loan defaults, litigations or liabilities and dissolution.

It is necessary to help improve the current operations of public capital companies by increasing corporate value and improving the effectiveness of organizational operations, risk management and corporate governance, and to add value to organizations by improving the operational efficiency of public capital companies. Specific measures include: 1) improving the reliability and integrity of information to meet more requirements for disclosure; 2) enhancing the transparency of financial information of enterprises with public capital; 3) ensuring the compliance with policies, laws and regulations issued by the Government of the Macau SAR concerning procurement contracts from suppliers; 4) protecting assets, avoiding false financial reports, and meeting the requirements for the setup of an audit committee and the audited financial statements; 5) issuing advice or suggestions on the improper practicesof public capital companies on the public website set up and managed by the Office.

The new guidelines aim to ensure that enterprises can efficiently, effectively and economically obtain, protect and use public resources, so as to ensure the implementation of the “three E’s” raised by the government and operational audit. In operational audit, the first E (efficiently) defines the degree of cost reduction without lowering efficiency. The second E (effectively) defines the level of goal achievement by enterprises, and the third E (economically) defines the extent to which enterprises use their resources economically. With the new guidelines, local companies with public capital will be better supervised, and be more transparent and accountable to their stakeholders.

Terms requiring public capital companies to disclose detailed information on the procurement contracts have also been set up in the new guidelines, specifying that the bidding information and bidding results of the suppliers must be disclosed if the procurement amount exceeds MOP4.5 million or the construction project exceeds MOP15 million. In addition, the guidelines also require the disclosure of events related to material investments, asset arrangements, material losses, loan defaults or liabilities; it has also supplemented the description of events, further clarified the time limit and methods for submitting such information and specified that the events shall be reported to the Office within 30 to 90 days depending on the circumstances. The annual audit report shall be submitted to the Public Assets Supervision and Planning Office within six months. The new regulation allows the office implementing supervision to provide advice or suggestions to enterprises with public capital that have improper practices  or do not comply with the regulations issued by the Government of the Macau SAR.

Although the Commercial Code of Macau is provided for companies to abide by, it is only a general regulation not specifically devised for public capital companies, nor is it a specific code (corporate governance code) for enterprise operations. It is pointed out in literature on corporate governance issues that, the sound corporate governance is inseparable from the complete laws and regulations. The concept of corporate governance includes corporate governance in narrow and generalized senses.

Corporate governance in a narrow sense aims to ensure the interests and responsibilities of shareholders and operators by supervising the company operations through some mechanisms. It mainly covers the supervision of company operations and internal governance through a balance mechanism, such as a governance structure consisting of the shareholders’ general meeting, the board of directors, the board of supervisors, the compensation committee and the management, thereby ensuring the rights and responsibilities between the shareholders and operators. Broadly speaking, corporate governance refers to the supervision and coordination of the interest relationship between the company and all stakeholders through complete laws and regulations, so as to ensure that the company protects the interests and responsibilities in all aspects. The complete laws and regulations are the key to the balance of corporate governance, so that a sound corporate governance structure and efficient operations can be established. Corporate governance not only provides an important governance framework for modern enterprises, but also enhances their competitiveness and provides a mechanism for corporate governance.

The regulators in Macau, such as the Monetary Authority of Macau (AMCM), the Financial Services Bureau, and the Gaming Inspection and Coordination Bureau (DICJ) have issued laws, regulations and guidelines for different industries, including the Commercial Code, Finance Law, Insurance Law, Macau Gaming LawGuidelines on  Corporate Governance of Authorized Insurers, Anti-money Laundering Law, and Guidelines on Management of Corporate Bond Issuance and Trading. However, these are only regulations on corporate governance practices rather than a unified corporate governance code. With the diversified development of Macau’s economy, it is crucial to establish an effective corporate governance code. Multinational corporations and institutional investors will be more confident in the investment and business operations in Macau only when local governance criteria are in line with international standards. In addition, Macau also has an increasing demand for the establishment of unified corporate governance code for local companies.

For example, the Guidelines for Information Disclosure by Enterprises with Public Capitaldoes not raise requirements for the submission of internal control reports to relevant departments. There are many international practices that can be referred to, such as Section 404 of theSarbanes Oxley Actof the US, which requires listed companies to submit internal control reports to the regulatory authorities. Many countries have followed these best practices, which are also the trend of corporate governance models in order to achieve sound corporate governance and operations. Such provision can be included in Macau’s unified corporate governance code. In addition, there is no existing law that requires companies to issue reports on their social, ethical and environmental responsibilities.

With regard to sound corporate governance and international best practices, companies in countries and regions such as the US, the UK, Singapore and Hong Kong SAR have all stated their social, ethical and environmental responsibilities in their annual reports, indicating a trend of sound corporate governance. Currently, there is no such provision in the Guidelines for Information Disclosure by Enterprises with Public Capital. It can be included in Macau’s unified corporate governance code that companies shall state their corporate social responsibility in their annual reports. As public capital companies utilize government funds, the report on corporate social responsibility is conducive to improving their transparency, accountability and social responsibilities to the community and stakeholders.

In summary, as a Special Administrative Region of China, Macau should consider establishing its exclusive corporate governance code. China has approved its first Code of Corporate Governance in 2001, which were updated in 2011 and 2016. To diversify Macau’s industries, support the development of all industries in Macau and improve their competitiveness, it is increasingly necessary and urgent to formulate a unified corporate governance code. Financing in the international capital markets based on the funds held by institutional investors and international fund managers has become a trend. Without the unified corporate governance criteria, it is difficult to compare Macau’s corporate governance practices to international standards and the best practices of major financial markets around the world. With the highly globalized capital flow, institutional investors will also be extremely prudent when investing in the Macau market.

In February 2019, the central government promulgated the Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area.

Professor Jean Jinghan Chen

Dean of Faculty of Business

Administration and Chair Professor in Accounting and Finance

University of Macau

Dr Hung Wan Kot

Finance Programme Leader and Assistant Professor in Finance

Faculty of Business Administration

University of Macau

Macau is positioned as one of the four major central cities in the development of the bay area. Its main goal is to build itself into a world tourism and leisure center with distinctive financial services and moderately diversified economy, and a business cooperation service platform between China and Portuguese speaking countries. In April 2020, the chief executive mentioned in his Fiscal Year 2020 Policy Address that finance is a key development direction for the SAR government to achieve diversified economic development. Measures include expanding RMB financial services and product innovation, and building a Portuguese speaking national RMB clearing center, etc.

At the end of June, the People’s Bank of China, the Macau Monetary Authority and the Hong Kong Monetary Authority jointly announced the “Wealth Management Connect (理財通)”   pilot business, which allows individual investors from Guangdong, Hong Kong and Macau to invest in the financial products of banks in the region. At present, Macau’s banks provide more on mutual fund and insurance services, while banks provide channels for customers to buy stocks themselves. Chinese banks have some structured products, such as swaps and high yield credit-linked investment. It is worth mentioning that both Chinese and foreign banks have few bond products, and some of them even have no bond products.

According to the 2016 census data of the Macau Statistics and Census Service (DSEC), there are 226,620 local residents in Macau over the age of 45, accounting for 42% of the local residents. Most of the residents who go to the bank for business belong to this age group. There are three reasons for this phenomenon: first, young customers are better at using online banking services, while Macau’s major banks have been working hard to improve their online banking services. Even credit products can be applied in online banking, which greatly reduces the opportunities for young customers to go to banks. Second, people who are ready to retire or who have retired have more spare time, and they are not familiar with the services of online banking. Third, people who are ready to retire and those who have already retired pay more attention to service and physical objects. For example, they prefer to choose bankbook accounts when they open an account.

This phenomenon leads banks to focus on products for such customers. In the first half of 2020, there are many advertisements about annuity on the streets of Macau, which is the common product of Macau banks in the first half of 2020. Annuity is aimed at the aging customers with certain wealth accumulation. These people enjoy the economic dividend after the opening up of gambling rights in Macau. They are rich and the Macau government has the financial strength to support their retirement life. Therefore, they are not willing to take risks. Time deposit, insurance and annuity are attractive products for them. However, from the actual situation, annuity products are not very popular because Macau people do not like products with long investment period. According to past experience, people prefer investment products with a year or so, no more than three years at most.

DSEC 2016 data also shows that more than 90% of Macau citizens over the age of 45 have no degree education, which means that they are not very interested in complex products. They will refuse to buy and take risks when they hear the product name. There is little chance for young people to accept bank promotion products when they come to the bank, because their consumption confidence and consumption desire are quite strong, and they have not accumulated wealth. Middle-aged and elderly people use savings as wealth management. Even if they buy investment products, they also use the concept of saving – investment means saving money. Middle-aged and elderly people do not like to invest in products with a long period of time. The popularity of products with a product life of more than one year begins to decline, and a significant decline occurs after more than two years. In terms of customer service experience, most middle-aged and elderly people will provide funds to buy a car and a house for their next generation’s marriage, and they also like to go out and buy luxury goods. Elderly people need security, they rarely buy health insurance – cash gives them the most security.　It can be seen that the development of wealth management in Macau has a bright future, but it has a long way to go. The launch of Wealth Management Connect in the Greater Bay Area provides an opportunity for Macau banks.

We believe that the banking sector in Macau should at least focus on the development of the financial market in the following two aspects.

First, Macau is the only big city in the Greater Bay Area has close ties with Portuguese speaking countries. Therefore, Macau has inherent advantages in the development of investment products related to Portuguese speaking countries, which cannot be replaced by the first-tier cities of Hong Kong, Shenzhen and Guangzhou. Macau should take advantage of the launch of Wealth Management Connect to develop relevant financial products. On the one hand, the introduction of financial products related to Portuguese can fill the market gap, attract rich people from the Greater Bay Area to open accounts in Macau, enhance Macau’s position in the financial market in the region and increase Macau’s market share in the financial market of the Greater Bay Area. On the other hand, from an investment point of view, Portuguese related financial products should be less relevant to most financial products on the market. If it is put into the investment portfolio, the risk of the portfolio can be greatly reduced, and the purpose of risk diversification can be effectively achieved. Such products should be welcomed by the market.

Second, banks in Macau need to develop financial products for young people. One of the purposes of investment is to prepare for retirement in the future. Therefore, the earlier an investor starts investing, the more his retirement amount will be when he retires. But the relationship between the two is not linear. The reason is very simple, because the earlier the investment is, the wealth effect of money generating money will be doubled with the increase in investment years. For example, suppose that investor A starts to invest at the age of 25 and deposits 3,000 MOP a month with an annual interest rate of 5%. If he retires at the age of 65, he will receive a total of 4,578,060 MOP. Investor B starts to invest at the age of 35. Under the same conditions, he only received 2,496,776 MOP when he retired at the age of 65. A has invested 1,440,000 MOP in total, while B has invested 1,080,000 MOP in total. The difference between the total investment in 40 years is only 360,000 MOP, but in the end, the wealth difference between the two is 2,081,285 MOP. The difference between the two shows that the investment effect of wealth varies significantly in different investment horizons.

Investment while young. For young people’s financial products, in addition to the earlier the better, we can also try to educate the concept of compulsory savings, that is, to reserve money for savings and investment first, and then use the remaining money for entertainment and consumption. The bank can act as a financial consultant, tailor-made professional financial management plans for customers, let customers understand what an asset purchase is, what is spending and consumption, launch products of deposit small sums of money every month and draw out both the principal and interest in a lump sum when the specified time comes up (零存整取), and cultivate young people’s habit of savings. At the same time, Macau should pay attention to financial education for young people. The general education course of personal finance at the University of` Macau is designed for young people who are about to enter the society and are widely welcomed by students.

At the end of April this year, the Chief Executive of Macau mentioned in his “Fiscal Year 2020 Policy Address” that finance is a main development direction for the SAR government to achieve diversified economic development.

Professor Jean Jinghan Chen | Dean of Faculty of Business Administration and Chair Professor in Accounting and Finance, University of Macau 

Dr Hung Wan Kot | Finance Programme Leader and Assistant Professor in Finance, Faculty of Business Administration, University of Macau 

Measures include speeding up the revision and deliberation of laws and regulations, following up the feasibility study on the establishment of an RMB denominated securities market in Macau, promoting mainland enterprises to issue bonds in Macau and expanding RMB financial services and products innovation, development of financial leasing, and the construction of Portuguese national RMB clearing center. At the end of June, the People’s Bank of China, the Macau Monetary Authority and the Hong Kong Monetary Authority jointly announced the “Wealth Management Connect” (理財通) pilot business, which allows individual investors from Guangdong, Hong Kong and Macau to invest in the financial products of banks in the region. Specifically, mainland residents are eligible to purchase qualified investment products sold by banks in Hong Kong and Macau by opening investment accounts in banks in Hong Kong and Macau. At the same time, residents in Hong Kong and Macau are also eligible to purchase qualified financial products sold by mainland banks through opening investment accounts in mainland banks in the Greater Bay Area. 

Wealth Management Connect is an extension of Shanghai-Hong Kong Stock Connect in 2014, Shenzhen-Hong Kong Stock Connect in 2016 and Bond Connect in 2017. It is the specific presentation of the policy of promoting individual cross-border investment facilitation of residents in the Greater Bay Area under “Outline Development Plan for the Guangdong-Hong Kong-Macau Greater Bay Area”. At present, the financial services announced use RMB for cross-border settlement of capital transactions, and the exchange of funds is completed in the offshore market. The cross-border capital flow is managed by the total amount and individual investor limit. The initial investment scope is limited to purchase qualified low-risk and simple investment products, such as interest-bearing products and foreign currency-related products. The official start-up time and implementation rules are expected to be announced later. 

Since its return to the motherland, Macau’s political and economic development has been stable. The accumulated wealth of Macau’s residents is considerable. According to the Statistics and Census Service (DSEC) of Macau, as of the end of 2019, the total deposits of Macau residents were 670 billion MOP, including fixed deposits of 406 billion MOP and non-resident deposits of 243.8 billion MOP. Moreover, the market value of Macau’s securities, including those held by the Macau government and individuals, exceeded 900 billion MOP. These data fully reflect that Macau has a relatively rich market foundation for the development of financial investment. On the one hand, most of the deposits of Macau residents are fixed deposits, which reflects the low-risk investment of Macau residents but the single variety of financial products. On the other hand, the rate of return of bank deposits is almost the lowest among all types of investment. If residents want to increase the value of accumulated wealth, they should consider other diversified investment products, including personal stocks, bonds, and bank financial products. However, at present, the private financial services business of banks has not yet been developed. In particular, local bank mainly provides mutual fund and insurance services to customers. However, investors need to purchase and manage stocks by themselves while banks can only provide some advice. It is worth mentioning that both Chinese and foreign banks have relatively weak bond products or even no bond products. 

At the same time, wealth management education for investors is equally important. In fact, there are risks everywhere in the investment market. If investors lack sufficient financial knowledge and risk awareness, they may lose significantly. News of the occurrence of financial product “explosion” is not uncommon. For example, on the 15^th September 2008, the bankruptcy of Lehman Brothers caused the value of its credit-linked notes, known as mini bonds in Hong Kong, to plummet, causing dissatisfaction among investors. In fact, mini bonds are not bonds. They are financial derivatives with the investment target of credit default swaps (CDS). They are high-risk financial investment products. Investors, including many professional investors, don’t know exactly what a CDS means. Hong Kong is the region with the largest issuance and most extensive coverage of mini bonds. Most of the mini bond investors regard it as a deposit substitute with a higher yield, so they cannot accept the fact that their principal may not be recovered because they are conservative investors. As investors directly contact the retail banks, they do not even notice the relationship between them and Lehman Brothers in the purchase process, their dissatisfaction with the banks has increased sharply. The main complaint is the unreasonable sales methods of banks. 

There have also been recent incidents in the mainland, such as the “fake gold” incident of Jinhuang Jewelry. Listed on NASDAQ in the United States, Jinhuang Jewelry, one of the largest manufacturers of gold jewelry in the mainland, is suspected of pledging 80 tons of gold to a number of financial institutions in order to obtain loans of more than RMB16 billion. However, the inspection results show that the so-called gold is “fake gold” plated with copper. The financial institutions involved include a number of trusts, banks and microfinance companies. Behind these financial institutions, tens of thousands of investors are implicated, and their investment interests may be damaged. Another example is the “Crude Oil Treasure” (原油寶) incident in April this year, which caused heavy losses to investors and damaged the reputation of banks. 

In addition, investors need to pay attention to the principle of diversifying their investments and avoid putting most of their wealth on top of the superficial return of a particular financial product. High returns are accompanied by high risks. Furthermore, because Guangdong, Hong Kong and Macau have different financial systems. They also have different institutional framework in the protection of investors’ rights, interests and the settlement of disputes. These are all potential risks that investors need to pay attention too. 

From design, management to marketing, a financial product involves knowledge of wealth management, bank management, financial risk management, and business ethics. Recently, the Faculty of Business Administration at the University of Macau has re-designed its finance programmes at both undergraduate and postgraduate level. New courses such as Macau’s economy, wealth management, bank management, financial risk management, and modern financial technology are added. These newly designed finance programmes aim to make up for the demand of the Greater Bay Area in this respect, especially the demand of Macau market, so as to better contribute to the economic development of Macau.