This is the script for my video posted on August 26, 2026. Watch it on TikTok.
Macao is like the Las Vegas of Asia, and China is very happy with it because while it’s a Special Administrative Region just like nearby Hong Kong, Macao has no mass democracy movement. So why is Macao so different from Hong Kong, and how did it become such a hub for gambling?
It all starts in 1557 when the Portuguese established a permanent settlement in Macao after years of using the Pearl River Delta for trade.
By 1573 the Portuguese were paying an annual rent to local Chinese imperial authorities, with a formal lease following in 1582. As the Portuguese later told it, this was a legal lease made between equals in gratitude for them fighting pirates in the South China Sea, and they would eventually claim this had transferred sovereignty.
But the Chinese viewed the payments as a simple tribute to the empire that conferred no sovereignty at all.
From 1557 on, Macao operated under a dual arrangement, practicing Portuguese law for Portuguese and Christian residents as well as Chinese customary law for local Chinese, with China retaining sovereignty.
Hong Kong, by contrast, was ceded outright to Britain under the 1842 Treaty of Nanking. This legal distinction is why Portugal could later reclassify Macao as just Chinese territory under Portuguese administration rather than an actual colony.
In 1849 though, the Portuguese expelled Qing dynasty officials, shut the Chinese customs house, and stopped paying rent in an aggressive assertion of sovereignty. The governor who made it happen was assassinated by the Chinese, triggering a battle at Passaleao. Every Portuguese governor after him avoided confrontation with Chinese authorities.
Portugal formalized its control in 1887 via the Lisbon Protocol and the Sino-Portuguese Treaty of Peking, in which China confirmed the perpetual occupation and government of Macao by Portugal. In return, Portugal vowed never to alienate Macao to a third party without Chinese agreement.
Macao was initially a major hub for trading silver and silk, and later for opium, indentured labor, and gold.
When WWII came, Portugal was neutral, so Macao avoided the outright Japanese occupation Hong Kong suffered, though it operated under heavy Japanese pressure the whole time.
Hundreds of thousands of refugees flooded the territory, roughly tripling its population to around half a million, which caused extreme overcrowding, severe shortages of food and fuel, and famine.
One of the territory’s most important moments came in 1966 and 1967, when the Portuguese administration tried to prevent local Chinese residents on Taipa Island from building a neighborhood school. They delayed it for months by avoiding giving the school board a permit, until the Chinese people started building anyway.
The Portuguese had police halt construction, which triggered a fight that escalated across the territory into full-on riots. Inspired by Mao’s Cultural Revolution in mainland China and tired of the colonial administration, local Chinese attempted to storm the Governor’s palace and topple monuments. Riot police responded with tear gas and water cannons, and eventually the government invoked martial law and deployed military troops and tanks.
The crackdown caused hundreds of civilian casualties, and the Chinese community consequently decided to provide no services, pay no taxes, and sell no goods to the Portuguese. China stepped in without ordering a military invasion, instead massing Red Guards at the border and squeezing the territory economically.
The governor issued a formal apology in January 1967 at the Chinese Chamber of Commerce under a portrait of Mao, paid substantial reparations, and suppressed pro-Taiwanese activity as a result, agreeing never again to use force against the Chinese community. This is commonly considered the beginning of de facto Chinese control over Macao.
In 1974, the Carnation Revolution in Portugal overthrew the Estado Novo regime, and the new administration moved to decolonize around the world.
They offered to return Macao to China, but the Chinese government actually refused more than once, saying the time wasn't right, mainly because they wanted to settle Hong Kong first, and a prosperous Macao was useful regardless of legal status. Instead, in 1976 Portugal reclassified Macao as Chinese territory under Portuguese administration.
Over the next 25 years, they incrementally made progress toward transferring sovereignty. The parties signed a joint declaration in 1987 to establish the process and conditions for the territory’s transfer to China. The Macao Basic Law came in 1993 establishing the Macao Special Administrative Region of China, and it finally took effect in 1999. The Basic Law guaranteed the territory’s capitalist system and way of life would go unchanged for 50 years.
Meanwhile, while the Portuguese had legalized gambling in Macao way back in 1847, the industry didn’t really blow up until 2002, when the new government ended Stanley Ho's forty-year monopoly and awarded concessions opening the door to American operators like Wynn, Las Vegas Sands, and MGM.
While the gambling industry in Macao has had its ups and downs since, peaking at 7x the revenue of the Las Vegas strip in 2013, it now earns around 30b USD per year. Gaming taxes supply over 80% of the region's tax revenue, and under the Basic Law all of it stays in Macao's own treasury rather than going to the Chinese government.
Of course, Xi Jinping's broader anti-corruption campaign from 2013 on hit Macao hard, scaring mainland officials away from gambling. They've since cracked down on the junket system used to recruit high rollers, extend credit, and settle debts across the border from mainland China, effectively skirting China’s capital controls.
China happily accepted destroying much of that revenue base if it meant keeping money inside China, and the industry has since rebuilt on mass market tourists instead. Licensing still runs through the Macao government, but foreign operators keep those licenses only by aligning with what China wants.
In 2021, the master plan came out for an In-Depth Cooperation Zone between Macao and neighboring Guangdong on the mainland, and a new strategy called 1+4 has rolled out as well, keeping tourism and leisure at the core while also promoting new sectors, including big health, modern finance, high technology, and conventions, exhibitions, culture and sport.
The foundational difference between Macao and Hong Kong is that the largest share of residents were born on the mainland, and pro-China business and neighborhood associations have run local life since 1967.
The region overwhelmingly depends on flows of tourists from China. There is consequently no mass movement for democracy. Not to mention, the electoral system is designed so that directly elected seats are a minority and pro-Chinese forces dominate.
This made it incredibly easy to pass and enforce the Article 23 national security law of 2009. Hong Kong was a different story. Its 2003 national security law died after half a million people marched, and China had to impose a national security law directly in 2020 to end the protests. Hong Kong only passed its own Article 23 law in 2024, fifteen years after Macao.
Overall, China views Macao as proof that the one country with two systems approach actually works. They pitch Taiwan the same framework, but Taiwan has rejected it every time, with around 85% opposed in Taipei's own polling year after year. In reality, an occupied Taiwan would be like if Hong Kong became a giant warzone. There is no scenario in which it’s similar to Macao.
Keep reading
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- Why does North India have the votes while South India has the money?
- How did Japan end up controlling China’s gateway to the Pacific?
I’m writing a book called Groundwork about the buried history beneath geopolitics. Join the waitlist to hear when it has a publisher, a cover, and a release date.