Chinese President Xi Jinping is visiting Macao this week with a number of economic incentives and plans aimed at diversification of the region.

Macao is a semi-autonomous region best known for its gaming sector. However, a number of new financial incentives give rise to rumors that China has plans for transforming Macao from a casino-dependent economy into a financial sector and technology incubator.

New policies are designed for diversification of the economy and include the establishment of a yuan-denominated stock exchange in the region as well as the acceleration of a yuan settlement center, and the allocation of land for Macao to develop in mainland China.

Both Macao and Hong Kong are semi-autonomous regions of China having their own administrative, legal and judicial systems. “One country, two systems” rule grants the region’s citizens a degree of independence from the mainland. However, anti-government protests that occurred earlier this year in Hong Kong, have undermined the stability of the region.

The government of China strongly condemned the protists in Hong Kong. Many experts and officials therefore are seeing the move towards Macao’s diversification on part of the government as a reward for not engaging in the anti-governmental demonstrations. President’s visit to Macao this week is largely interpreted as a signal to Hong Kong.

Although there might be an attempt to put pressure on Hong Kong by promoting new financial incentives for Macao, it is not likely that there are plans to replace Hong Kong with another financial center. Macao may serve as a “backup plan” in the event that the situation in Hong Kong gets worse.

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