China and the Reversion of Macau: Background and Implications

China and the Reversion of Macau: Background and Implications

Order Code RL30289
CRS Report for Congress
Received through the CRS Web
China and the Reversion of Macau:
Background and Implications
August 24, 1999
Alexander van Praag
Research Associate
Kerry Dumbaugh
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report examines factors which might be relevant for US policy towards Macau after it
reverts to Chinese administration on December 20, 1999. It includes a brief background to
the reunification, followed by the discussion of economic and social factors which make the
case of Macau different for China than the case of Hong Kong, as well as Macau’s economic
relevance to the United States. It includes a brief examination of the political status of Macau
as a Special Administrative Region of China and of possible areas where controversy might
arise concerning Chinese administration. This CRS report also discusses some implications
for U.S.-Macau relations. Information on Hong Kong’s reversion can be found in CRS Issue
Brief 95119, Hong Kong after the Return to China: Implications for U.S. Interests, by Kerry
Dumbaugh. This report may be updated in the light of changed circumstances.

China and the Reversion of Macau:
Background and Implications
Summary
On December 20, 1999, the Portuguese territory of Macau will revert to Chinese
administration after four hundred and fifty years of colonial rule, to become a Special
Administrative Region (SAR) of the People’s Republic of China (PRC). Macau has
technically been Chinese sovereign territory since 1979, when China and Portugal
established formal diplomatic relations and the two countries decided that Macau was
a Chinese territory under Portuguese administration. On December 20, the PRC takes
over administration of the territory.
At present, policy-makers are examining the U.S. stance towards the future
SAR. On the basis of the PRC’s promise of autonomy for the SAR in all respects
except foreign relations and defense granted by the Basic Law of the Macau SAR,
Representative Bereuter and Senator Thomas have proposed the United States-Macau
Policy Act of 1999 (H.R. 825/S. 1430) patterned after the model of the United
States-Hong Kong Policy Act of 1992 (S. 1731/P.L. 102-383).
The two Basic Laws governing Hong Kong and Macau after their reversion to
China are effectively very similar, granting largely the same degree of autonomy to the
two SARs. Significant differences exist, however, particularly in the commercial and
economic foundations of the two territories. The economy of Macau is based mainly
on a large gambling industry, and other leisure sectors. A general weakness of this
economy, as well as a significant crime problem in Macau, will present the Chinese
government with problems very different from those which it faced with Hong Kong
in 1997. In the reversion of Macau, China may well face economic and social
problems.
The potential exists that China may act in such a way towards Macau that it
could be judged as infringing on the autonomy of the SAR or as denying consular
protection to foreign nationals, especially in the case of Macanese residents who have
chosen Portuguese citizenship. Furthermore, the way the United States forms its
policy towards Macau and Hong Kong as SARs may be judged by some observers as
reflecting how it would relate to Taiwan if Taiwan were to reunify with China under
a similar “one country-two systems” model.

Contents
Congressional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Background to Reunification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Macau’s Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Scale and Basis of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . 3
Gambling and Crime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Political Future of Macau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
“One country, two systems” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Implications for U.S.-Macau Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

China and the Reversion of Macau:
Background and Implications
Congressional Interest
The territory of Macau reverts—after 450 years of Portuguese rule—to Chinese
control on December 20, 1999. In order to set forth U.S. policy with respect to
Macau, provide statutory authority for Macau’s treatment under U.S. law, and
provide a framework for U.S.-Macau relations once Macau becomes a Special
Administrative Region (SAR) of the People’s Republic of China (PRC), the United
States-Macau Policy Act of 1999 (H.R. 825 [rep. Bereuter et al.] / S. 1430 [Sen.
Thomas et al.]) has been introduced in Congress. The act effectively proposes to
continue to treat the Macau SAR as an entity in most respects independent of China.
It is similar to the United States-Hong Kong Policy Act of 1992 (P.L. 102-383),
which provided statutory authority for Hong Kong’s treatment under U.S. law after
its reversion to China.
This issue acquires additional, potentially greater, significance in the relation
between the reversions of Hong Kong and Macau to Chinese administration, and the
possibility of Taiwan’s eventual reunification with China itself as an SAR. U.S.
relations with both SARs are likely to be scrutinized as forecasting the United States’
likely relationship with Taiwan if Taiwan were ever to reunite with China under the
same “one country-two systems” model. The purpose of this report is, therefore, to
outline the circumstances of Macau’s reunification with China, raise issues with which
the PRC must deal when it assumes control over Macau, and draw implications for
U.S. policy towards Macau as an SAR and as a potential model for a similar situation
involving China and Taiwan. This report provides background on Macau, an
overview of its economy, the political situation there, some problems that may occur
there, and some implications for the United States.
The Background to Reunification
When Macau becomes an SAR of mainland China on December 20, 1999, it will
do so under circumstances similar to the reversion of Hong Kong to Chinese
sovereignty in 1997. The same “one country, two systems” formula is being followed;
the Joint Declarations under which they revert are in many respects similar; and the
Basic Laws under which they are to be governed are also similar in many key aspects.1
Significant differences exist, however, both in terms of the history of Western
1See David W. Chang and Richard Y. Chuang, The Politics of Hong Kong’s Reversion to
China, Macmillan, 1998, ch. 2.

CRS-2
sovereignty over the two territories and also in terms of their economic bases, such
that the example of Hong Kong cannot simply be assumed to hold for the case of
Macau as well.
Hong Kong came under foreign rule much later than Macau: The post-Opium
War treaty of Nanking in 1840 was followed shortly by the addition to Hong Kong
2
of Kowloon and the New Territories, in 1860 and 1898, respectively; Macau, on the
other hand, was first settled by Portuguese merchants, who began official trade with
China in 1553. In 1557, the Portuguese acquired permission for permanent residency
and then acquired the de facto rights to govern Macau beginning in 1573. In 1887,
with China weakened by the Opium Wars, Portugal concluded a treaty granting it the
right to perpetual jurisdiction over Macau.3 For much of its history, until the British
colony of Hong Kong gained significance in the mid 19 century and came t
th
o
dominate trade in the area, Macau served as the principal entrepôt for trade between
the West and China and Japan.
Thus, Macau’s association with Portuguese government and culture significantly
antedates Hong Kong’s with Great Britain. Moreover, the prospect of the return of
Macau to Chinese government was raised much earlier than was the case with Hong
Kong. Twice Portugal offered to return Macau to China: In 1966-67, after the pro-
China riots in Hong Kong and Macau, and subsequently in 1974, following the coup
d’état in Portugal, during the period when Portugal relinquished its other
colonies—such as Timor, Mozambique and Angola.4 In 1974, China, in the midst of
the Cultural Revolution, declined to undertake the administration of Macau.
Technically, Macau became a Chinese sovereign territory in 1979, when Portugal
established formal diplomatic relationships with the PRC. At that time, the two
countries agreed that Macau was a Chinese territory, although the agreement
provided for it to remain under Portuguese administration.5
In June 1986, after discussions concerning the return of Hong Kong had begun,
China and Portugal began negotiations for the return of Macau to Chinese
administration. This resulted in the Sino-Portuguese Joint Declaration of 1987. In
many respects, the Sino-Portuguese Joint Declaration resembles the Sino-British Joint
Declaration over the return of Hong Kong.6 The most significant difference in the
context under which the two Joint Declarations were conceived is that, while there
was no question of which country ought to have sovereignty over Macau, Portugal
having been willing to relinquish sovereignty in 1974, Sino-British negotiations had
temporarily stalled over the possibility of Great Britain’s retaining sovereignty over
2See Consolidated Treaty Series, vol. 93.
3See John K. Fairbank, et al., East Asia: The Modern Transformation, Boston, Houghton
Mifflin, 1965, p. 343.
See CRS issue brief 98018,
4
China-U.S. Relations, by Kerry Dumbaugh.
For
5
an excellent overview of this, as well as a general disussion of the issues involved in the
reversion, see article by Beatrice Leung, in Asian Affairs an American Review, Washington,
Spring 1999.
For
6
a detailed breakdown of differences between the two treaties, see Chang and Chuang, The
Politics of Hong Kong’s Reversion to China, ch. 2.

CRS-3
Hong Kong after it returned to Chinese administration, which was subsequently
rejected.
The Future
Macau’s Economy
The Scale and Basis of the Economy. Compared to the economy of Hong
Kong, that of Macau is relatively tiny. Moreover, where Hong Kong is established
internationally both as a trading center of East Asia, and also as a financial center,
Macau has become increasingly marginal in these respects since the mid 19 century.
th
It is only in a very limited field, viz., gambling and leisure, that it is of major
significance throughout the region. This small scale may be seen both from the Gross
Domestic Product (GDP) of Macau, and also its volume of trade with the outside
world, shown in Table 1. Its GDP of $7.3 billion is roughly the same size as that of
Angola, Jordan or Bolivia. Although on a per capita basis Macau’s volume of trade
and GDP are relatively high, this is tempered by the small population of the territory,
which has approximately 450,000 inhabitants.
Table 1. GDP and Volume of Trade for Macau
(Millions of U.S. Dollars)
Year
Imports
Exports
GDP
1995
2,033.4
1,989.2
7,410.2
1996
1,991.3
1,987.3
7,282.0
1997
2,075.4
2,141.2
7,309.0
1998
1,949.6
2,135.5
N.A..
Source:
Direccao dos Serviços de Estatística e Censos de Macau (DSEC); converted from
Macanese Patacas at the fixed rate of 8 MOP per U.S. dollar.
Macau’s economy depends largely on gambling. A monopoly held by the
Sociedade de Turismo e Diversoes de Macau (STDM), the society for tourism and
amusements in Macau, a company run by Hong Kong businessman Stanley Ho,
controls the gambling industry of Macau. The relative importance of STDM within
the context of Macau’s economy is evidenced by the significant proportion of
Macau’s total public revenue which comes from the approximately 30% tax levied on
gambling. In 1996, for example, Macau collected US$ 630 million from STDM, more
than 40% of government revenues. In the same year, STDM had revenues of more
7
than US$ 2.1 billion, out of a reported GDP of US$ 7.3 billion.8 Furthermore, STDM
ASIA,
7
INC., August 1997. Statistics for other years available from the Autoridade Monetária
e Cambial de Macau (AMCM).
8For comparison, the State of Nevada collected approximately 497 million dollars in
percentage taxes on gambling for the fiscal year of 1998-1999, according to a press release
(continued...)

CRS-4
employed about 10,000 workers, roughly 5% of Macau’s total workforce. In dealing
9
with Macau after December 20, 1999, China will face the dilemma of how to preserve
the profitability of the gambling industry, in order to retain this significant source of
revenue.
Gambling and Crime. There exist three potential complications for China’s
handling of the economy, and of the gambling industry, in Macau after December
1999. First, the monopoly held by STDM over Macau’s casinos expires in 2001.
Second, extensive organized crime exists in Macau, both in various Macanese criminal
organizations and also involving mainland Chinese gangs from Guangzhou province.
These gangs are currently fighting largely to control the VIP rooms of Macau’s
casinos. Thirdly, there is the weakness of an economy based on tourism and gambling
in the face of a volatile Asian economic environment, where fewer people currently
have the disposable income to expend on gambling.
Concerning the issue of the expiration in 2001 of STDM’s monopoly dating back
to 1962, China has the basic options of renewing the monopoly, either under STDM
(although the chairman, Stanley Ho is already 78 years old) or under another
company, or of dispersing control of Macau’s nine casinos among several companies.
In 1997, when previously renewing STDM’s monopoly, Stanley Ho argued to the
Sino-Portuguese Joint Liaison Group that to preserve gambling as a monopoly would
be in the government’s best interest, on the grounds that, given Macau’s relatively
small population, overall casino profits and, hence, gaming tax revenues for the
government, would be maximized. This is likely to be relevant when the question
10
of renewal comes up in 2001. It cannot be overstated how much gambling, under the
auspices of STDM, contributes to the Macau economy. According to government
statistics, in 1996, tourism and gambling contributed 43% of the territory’s GD
11
P
and, according to STDM officials, over three quarters of that year’s 8.1 million
visitors came primarily for gambling. If China were to take measures to reduc
12
e
gambling, Macau’s economy would be severely weakened.
The second question concerns the rise of organized crime in Macau, both as it
relates to the economy, and also as a problem in its own right. Crime levels in Macau
have been extremely high since 1997, with gang warfare between two rival Macau
13
triad organizations, the “14K” and the “Sui Fong” escalating over control over VIP
rooms in Macau’s top casinos. These VIP rooms, according to STDM officials,
(...continued)
8
by the Tax and Licence Division of the Nevada Gaming Control Board
9South China Morning Post, March 3, 1999
South China Morning Post,
10
June 26, 1997.
Cited, for example, in
11
South China Morning Post, July 11, 1997.
12This is consistent with AMCM and DSEC tourism statistics, which indicate an extremely
short (1.3 — 1.5 days) average stay for visitors in the territory.
According
13
to the South China Morning Post, August 19, 1999, there occurred 27 murders
in Macau in 1998, and, at the time when the article was written, 28 murders had already taken
place that year in the territory.

CRS-5
generate more than half of all gambling revenues. Recently, criminal elements from
14
Mainland China, particularly the so-called “Dai Huen” or “Big Circle” gangs from
Guangzhou province, have also begun activities in Macau. The high level that
organized crime has reached in Macau is evidenced not only by the recent period of
violence, but also by the high profile of some of this violence. On November 26,
1996, the deputy head of the Gambling Inspectorate, Lieutenant-Colonel Manuel
Antonio Apolinario, survived being shot twice in the head, while on March 24, 1998,
the third in command of the Gambling Inspectorate, Francisco Xavier Pinto do
Admiral, was shot dead near the Lisboa Hotel. There are indications that this level
15
of violence in Macau has had a very negative effect on tourism in the territory,
including on casino attendance, which in turn impacts GDP and government
revenue.16 Since the upsurge of crime in 1996/7, in a city of some 430,000
inhabitants, nearly 100 murders have occurred, the majority Triad-related. At the
same time, tourist arrivals fell to 6.9 million in 1998, down 16% from 1996.17
The PRC may therefore choose to take a tougher stance on crime. It has been
widely anticipated within Macau that a return to Chinese authority will bring a greater
level of law and order. What remains to be seen is
18
whether this can be done without
a major negative effect on casino revenues, which could cripple Macau’s economy as
it is currently structured. This might be the result of, for example, an all-out ban on
gambling as an anti-crime measure. It must also be seen whether China can reduce
Triad crime without incurring criticism for the use of improper measures. Some19
have expressed the concern, for example, that PLA troops scheduled to be garrisoned
in Macau after December 20 might be used in an improper law-enforcement role,
infringing on the judicial autonomy granted Macau by the Basic Law.
The third problem is the effect of regional financial problems on an economy that
depends so heavily on the leisure industry. The PRC may well encourage the
diversification of Macau’s economy into industries less reliant on the disposable,
leisure income of the region’s inhabitants.20
Although tourism and gaming comprise the major proportion of Macau’s GDP,
nonetheless, foreign trade remains a second area in which Macau receives revenue.
This income is currently waning in Macau’s economy: revenue from tourism has
exceeded the value of exported goods since 1992, the average rate of growth of
which dropped from 10%, between 1982 and 1987, to -2% in the following years.
Furthermore, employment in the industrial sector has decreased as well. While half
See
14
Cathy Hilborn, “Making a Killing”, in Far Eastern Economic Review, March 12, 1998.
15South China Morning Post, March 25, 1998
Far Eastern Economic Review,
16
Mar 12, 1998
Dow Jones
17
newswire, July 11, 1999
For example, Stanley Ho, cited in the
18
South China Morning Post, February 1, 1997
For
19
example Macau legislator Antonio Ng, cited in a Dow Jones newswire, July 11, 1999.
E.g., Stanley Ho, in
20
Far Eastern Economic Review, September 26, 1996

CRS-6
the working population was employed in the industrial sector at the beginning of the
1980's, only a third was registered as in the industrial sector as of 1998.
21
In order to provide some boost to the economy, major infrastructure projects
have been undertaken in recent years in which STDM has also played a major role.
These include the new Ka-Ho container port, the “Lotus Flower” bridge being built
to link Taipa and Coloane, two of Macau’s outlying island’s, with Mountain Island
in China (scheduled to be finished in November 1999), and the new Macau
International Airport. This is of course significant as an aid to increasing tourism in
Macau (including tourism not strictly relating to gambling), especially given the rise
in visitors from mainland China. Projects like the Ka-Ho container port, however,
22
can only be explained in the context of a desire to boost an export-based economic
sector, which is clearly consistent with the desire to reduce dependency on gambling
as a source of revenue.
It is unclear, however, whether Macau’s location at the mouth of the Pearl River
delta, and its proximity to the PRC’s Zhuhai Special Economic Zone will ultimately
prove to be beneficial to Macau’s export sector. For example, garment
manufacturing, once a major industry in Macau, has shifted to China and other regions
of Asia where labor costs are lower. What seems evident, however, is that th
23
e
current situation is not ideal: government revenues from gambling fell 15.4%, to five
billion patacas (630 million dollars) in 1998, from their 1997 level of 5.97 billion
patacas (750 million dollars).
24
After December 1999 the PRC may well take steps
to increase revenues from gambling, probably by attempting to reduce crime in the
colony and thus make Macau a safer place for tourist-gamblers to visit, and also to
diversify the economy of Macau, perhaps by increasing the emphasis on the
manufacturing and export sector.
The Political Future of Macau
“One country, two systems”. The principle of “one country, two systems” is
to be applied to Macau after reversion. This will allow Macau to retain its current
lifestyle and legal, social and economic systems for at least fifty years. It was also the
basis for the reversion of Hong Kong. This is presumably the approach through
which PRC leaders would contemplate reunification with Taiwan. The political future
of Macau depends on how this principle is in fact implemented. Moreover, Taiwan’s
willingness to unify with China may depend in part on the successful implementation
of unification in Hong Kong and Macau. Were either of these two reunifications to
prove unsuccessful, Taiwan may be less willing to unite with China, both under the
“one country two systems” model in effect in the cases of Hong Kong and Macau, or
From DSEC statistics
21
22Macau’s visitors come primarily from Hong Kong and China; DSEC tourism statistics
indicate a decrease in visitors to Macau by sea (mainly from Hong Kong) and an increase in
visitors to Macau by land (clearly from the PRC).
Far Eastern Economic Review
23
, March 12, 1998.
AMCM statistics, cited by the
24
South China Morning Post, March 3, 1999.

CRS-7
under other systems as well. The following discussion examines how this principle
might be implemented in Macau and some difficulties that might arise.
The principle of “one country, two systems” which determines the government
of SARs in China is provided for by Article 31 of the PRC constitution, which states
that:
The state may establish special administrative regions where necessary. The
systems to be instituted in special administrative regions shall be prescribed by law
enacted by the National People’s Congress in the light of specific conditions.25
On the face of it, and given the Basic Law of 1993 established for Macau on the basis
of the Sino-Portuguese Joint Declaration of 1987, this allows for the Macau SAR to
remain largely unchanged for fifty years after its reversion to China.26 Some China
watchers have, however, expressed reservations as to whether the Basic Law, in
conjunction with Article 31, would be likely to provide any protection for the status
quo, and the autonomy of Macau, were China not to wish it as a matter of policy.
First, contradictions have been noted between the Basic Law, especially articles
227 and 5 and Article 31 of the PRC constitution, and other articles of the PRC’
28
s
1982 constitution, especially article 5 , establishing the uniformity of the socialis
29
t
legal system, and article 630, establishing the uniformity of the socialist economic
system. Thus, it is not clear whether the autonomy granted the SARs under Article
31 would be legally defensible were the PRC to wish, for any reason, to revoke the
judicial or economic autonomy of the Macau SAR. Moreover, Article 18 of the Basic
Law of Macau, while allowing the SAR to be largely exempted from Chinese national
laws, also provides for the Central People’s Government to apply national laws to
Macau in case of the declaration of a state of war, or if turmoil should arise within the
The
25
Laws if the People’s Republic of China 1979-1982, Beijing, Foreign Languages Press,
1987.
See Articles 2 and 5 of the Basic Law of the Macau SAR.
26
Article 2 of Macau Basic Law:
27
“The National People’s Congress authorizes the Macau Special Administrative Region
to exercise a high degree of autonomy and enjoy executive, legislative and independent
judicial power, including that of final adjudication.”
Article 5 of Macau Basic Law:
28
“The socialist system and policies shall not be practised in the Macau Special
Administrative Region, and the previous capitalist system and way of life shall remain
unchanged for 50 years.”
Article 5 of PRC constitution:
29
“The state upholds the uniformity and dignity of the socialist legal system. No law or
administrative or local rules and regulations shall contravene the constitution...”
Article 6 of PRC constitution:
30
“The basis of the socialist economic system of the People’s Republic of China is
socialist public ownership of the means of production, namely, ownership by the
whole people and collective ownership y the whole people...”

CRS-8
SAR “which endangers national unity or security and is beyond the control of the
government of the region”.31
The case of how the Basic Law has been followed in Hong Kong since 1997 may
be enlightening, especially in the role played by China in Hong Kong judicial matters.
According to Article 19 of the Hong Kong basic law, the supreme judicial authority
in Hong Kong is to be held by the Hong Kong judiciary, and China is not to intervene.
In fact, several cases have arisen which some observers have noted as instances where
China has intervened in Hong Kong autonomy. These include the trial and execution
of the kidnapper Cheung Tze-keung in mainland courts, and the trial of Li Yuhai on
32
the mainland for crimes committed in the Hong Kong SAR. More controversial was
the recent reinterpretation of an immigration ruling made by Hong Kong’s highest
court by China’s parliament. Since theoretical judicial autonomy is granted to the
33
Macau SAR, were China similarly to intervene in Macau’s judicial matters, as might
be the case in dealing with Triad crime in Macau, similar controversy might arise after
December 20.34
A further possible source of contention lies in the issue of citizenship and
consular protection for Macanese residents. Unlike the British, who only conferred
on Hong Kong residents the status of British National (Overseas) or British
Dependent Territories Citizen (BTDC), which passport serves only as a travel
document and does not confer the right of abode in the United Kingdom on its bearer,
Portuguese authorities have offered full Portuguese citizenship to residents of Macau.
China does not however recognize Portugal’s right to grant consular protection to
what it perceives as “Chinese” residents of Macau. Thus, to Chinese authorities, a
Portuguese passport held by an ethnic Chinese resident of the Macau SAR constitutes
only a travel document held by someone who is in fact a Chinese national, and does
not grant its bearer the consular rights of a genuine Portuguese citizen. Afte
35
r
Macau’s reversion, Chinese authorities could attempt to try a resident holding a
Portuguese passport and deny him or her access to consular protection.
Refusal by the PRC to recognize foreign citizenship has already been seen in
several cases not directly related to a resident of an SAR. Harry Honda Wu, a
naturalized American citizen who entered China from Kazakhstan with a valid visa on
For
31
a much more detailed account of the issues discussed in this paragraph, see Chang and
Chuang, 1998.
Martin Lee,
32
Washington Post, January 13, 1999.
Cited
33
for example in a Reuters newswire, July 4, 1999. There is evidence of resentment of
the role played by China in the Hong Kong Judiciary amongst Hong Kong legal professionals.
See South China Morning Post, August 16, 1999. Additionally, on June 30, 1999, 600 Hong
Kong lawyers marched in opposition to Beijing’s reinterpretation of the Basic Law in the
Right of Abode case. See South China Morning Post, July 1, 1999.
Addendum:
34
The recent refusal by China to admit the Pope into Hong Kong, on the grounds
that the Vatican has relations with Taiwan, announced on August 9, 1999, might similarly be
classed as a case of China making decisions which might be considered in some respects to
violate Hong Kong’s statutory autonomy.
See
35
Economist, March 27, 1999, pp. 43-44.

CRS-9
June 19, 1995, was arrested by Chinese authorities and denied American consular
protection.36 Similarly, James Jiandong Peng, an Australian national, was taken on
October 13, 1993 from his hotel room in Macau and delivered without extradition
proceedings across the border to China, where he was tried and sentenced to 17 years
in a mainland prison. It is clear then that Chinese authorities take very seriousl
37
y
their claim that ethnic Chinese holding foreign passports are subject to Chinese law
without foreign consular protection, and we may speculate that similar cases might
arise in the case of Macanese residents who hold Portuguese passports.
Another potential issue is the role of the PLA troops to be stationed in Macau
after the handover. The last Portuguese military garrison was removed from Macau
in late 1975. In September 1998, Chinese Vice-Premier Qian Qichen announced that
a small PLA garrison would be stationed in Macau after the handover, a unilateral
decision made without the consent of Lisbon. This seems largely to have bee
38
n
welcomed by residents, on the grounds that it would lead to decreased crime in the
territory.
39 Worries have, however, been raised on two counts. Firstly, by passing a
law to accommodate the garrison in Macau, something not discussed in the Basic
Law, Beijing is seen as setting a precedent for future constitutional amendments.
Second, since the new law states that the PLA troops will “exercise the same powers
as relevant law-enforcement officials when requested by the governor”, it has been
argued that the military garrison might become a de facto auxiliary police force.40
Such objections notwithstanding, the structure of the Basic Law and of the post-
1999 government of the Macau SAR allows for the theoretical autonomy of the SAR
in a great number of respects. Section II of Annex II of the Sino-Portuguese Joint
Declaration states that the Chief Executive of the SAR is to be selected by “elections
or consultations to be held in Macau,” and appointed by the Central People’s
Government. The candidate selected in this case, Edmund Ho, is a man with
significant business experience, who has held positions of authority under the present
administration of Macau. Edmund Ho was selected in preference over rival Stanley
Au, in a ballot held by a China-selected committee.
According to Section III of Annex I, the majority of the members of the
legislature of the Macau SAR are to be elected. According to Section IV of th
41
e
same annex, the power of final adjudication is to be exercised by the court of final
appeal of the Macau SAR. Thus, if the framework established by the basic law is
followed, as has largely been the case with Hong Kong, then the Macau SAR may
See
36
The Economist, London, July 8, 1995
3 South
7
China Morning Post, Hong Kong, July 27, 1996. See also Martin Lee in the
Washingto Post, January 13, 1999.
Dow Jones newswire, July 11, 1999
38
39Ibid.; see also South China Morning Post, February 1, 1997
Ibid.
40
According
41
to Annex II of the Macau SAR Basic Law, the legislative body is to be selected
on the basis of a combination of direct election, indirect election, and appointment by the
PRC.

CRS-10
have significant autonomy. If, however, some of the circumstances discussed above
come to be realized in the Macau SAR, then it is possible that the autonomy of the
Macau SAR may be viewed as curtailed by Chinese influence in key respects.42
Implications for U.S.-Macau Relations
Macau is less likely to be an issue for U.S. policy than Hong Kong was in 1997.
First, Macau’s reversion to China, and its associated legislation, the United States-
Macau Policy Act of 1999 has a precedent in the case of Hong Kong and the United
States-Hong Kong Policy Act of 1992. Secondly, Macau is of less commercial
relevance to the United States than Hong Kong, given the latter economy’s greater
emphasis on trade and international finance. Although the United States receives a
large proportion of Macau’s exports, the total volume of U.S. trade with Macau
remains low, as Table 3 indicates, and Macau is not among the United States’ major
export markets.43
Table 2. Trade Relations between the United States and Macau
(US$ million)
Year
U.S. percentage of
U.S. Imports from
U.S. Exports to
Macau export
Macau
Macau
markets
1996
40.3
801.4
29.8
1997
45.2
968.4
67.4
1998
47.7
1017.6
40.8
Sources:
Macau DSEC; U.S. Census Bureau
The cases in which Macau has been considered of trade significance to the
United States has been with respect to trade regulations. Representative Cox has
alleged
44 that Hong Kong has been used as a transshipment point for strategic goods
by the PRC. Given the easier (overland) access to Macau from the PRC, this may
become of greater significance in the case of the Macau SAR. Furthermore, there are
Leung,
42
in Asian Affairs, An American Review, Spring 1999 also mentions possible
difficulties for China over the relationship between Macau and its islands of Taipa and
Colonne, as well as the establishment of an anticorruption organization as suggested in Article
60 of the Macau Basic Law. Additionally, she anticipates potential difficulties stemming from
the failure until now to strengthen the independence of the Macau civil service and judiciary,
which had grown reliant on Portuguese expertise and guidance.
By
43
comparison, in 1998 U.S. exports to Hong Kong were valued at 12,923.5 million dollars,
while imports from Hong Kong came to 10,538.4 million dollars. The major export of Macau
is textiles; according to statistics from the Macau AMCM, between 1991 and 1996
approximately 75 percent of Macau’s exports were textiles.
Cited, for example, in the
44
South China Morning Post, July 28, 1999.

CRS-11
also allegations that textile transshipments have been made by the PRC through
Macau, evading U.S. import quotas. According to a Reuters newswire of July 29,
1999, the U.S. Commerce Department has determined to deny imports of textiles and
clothes from 77 firms in Macau, on the grounds that they are being used to transship
textiles manufactured within the PRC.45
Even if the nature of U.S. relations with Macau is unlikely to have significant
implications for the U.S. economy, it may still be relevant to consider how the policy
on which Congress decides will be viewed in the context of the case of Taiwan. As
has already been discussed, it seems likely that, if Taiwan were ever to consider
uniting with China under article 31, its assessment of U.S. relations with other SARs
within China would be a factor in its decision.
Finally, given the commitment made by the United States-Macau Policy act of
1999 to the preservation of the autonomy of, and of civil rights within, Macau , such
46
potential breaches of civil liberties and autonomy as have been discussed, were they
to occur in Macau, would become directly relevant to U.S. foreign policy. This might
be particularly pertinent if China were to use the PLA to crack down on crime in such
a way as might be viewed as a breach of human rights. Additionally, were the PRC
to deny consular protection to an ethnic Chinese Portuguese national in Macau, this
might be seen as a breach of human rights relevant to the United States-Macau Policy
act of 1999
For
45
more information, consult McGraw-Hill Companies’ “Tower Group” bulletin for July
40, 1999, on www.towergroupintl.com. See also: Inside US Trade, March 26, 1999.
Sections 2 and 101 of H.R. 825.
46