On The Value Of The Existence Of The Macau Legal Tender

Macau, formerly called "Haojiang", has a total area approximately 16.9 km2, is composed by the Macau peninsula with Tai Pa and Coloane Island. Its north part is connected with Zhuhai Guangdong and its east part is apart from Hong Kong 56 km; Macau locates at the entrance of Pearl River Delta. Macau economy has it's own unique characteristic. The main industries in Macau are divided into four parts: travel and gambling industry, exportation and manufacturing industry, finance industry and real estate industry. At present, finance industry is only an accessory to Macau economy. The money market is not in advance to the economical development and only follows its steps, and therefore cannot be independent. This type of synchronization also manifests in the diversify and endogenous characteristic of Macau currencyIn Macau, the existence of local currency in the real economic proportion is lower than Hong Kong dollar. This reflects its characteristic of highly rely on Hong Kong economy. However, since the finance crisis of 1997, the market participants in Hong Kong, Macao and Mainland China reacts differ when Hong Kong dollar facing the depreciation pressure. Due to the limitation of Macau's monetary policy, it can do nothing at that moment. At last, Macau has to face the same pressure as Hong Kong and this made the exhausted economy become worse.This is a chance for us to analyze the monetary system and fiscal policy in both Macau and Mainland China and also let us understand that different economic structure and the legal system have to use different monetary policy and the way to carry out this policy. As a result of the characteristic of Macau economy, its ability to face the attack of foreign exchange is quite low. In this article, try to use the integration of European currency, the probability of free exchange of Renminbi and its underlying impact to Macau to analyze the situation of Macau currency and consider whether it is valuable to keep it existence. Simultaneously, apply the currency substitution theory as the assumption to discuss the feasibility of Renminbi substitutes Macau currency (pataca). Finally, the conclusion is that Macau currency can be substituted after Renminbi has implemented free exchange policy.