The first half of 2025 was the worst in the last ten years in terms of the balance between business creation and dissolution in Macau. Between January and June, 469 companies closed, 5 percent more than in the same period last year, and only 2,020 new companies were registered, the lowest figure since 2016. Despite this, the net balance remained positive, with more companies being created than dissolved.
Although the balance is positive, economist Henry Lei warns that this should not be interpreted as a sign of economic vitality. Some companies choose not to cancel their registration even after ceasing operations because keeping it active does not involve costs and ensures greater flexibility. This is why there is always a positive balance. However, monthly statistics show a downward trend in new incorporations and an increase in closures, reflecting economic uncertainty and reduced consumer confidence.
According to the Statistics and Census Service (DSEC), the share capital of companies created in the first half of the year totalled 303 million patacas. Business creation fell 12 percent compared to 2024 and 38 percent compared to the pre-pandemic period in 2019, when 3,278 companies were established. Since 2023, the trend has been one of continuous decline.
For Lei, these numbers reflect an uneven economic recovery. The overall performance of Macau’s economy showed clear signs of improvement in the second quarter and first half of 2025. However, growth across sectors is unbalanced, with tourism and gaming leading the recovery thanks to higher-than-expected visitor numbers and gross gaming revenue. Sectors not linked to tourism, particularly retail, remain in a critical situation as consumer confidence is still weak.
Lei attributes the drop in company creation to the same causes. The decline in new businesses is due to uncertainty in the business environment and low consumer confidence. The fundamentals of the economy underwent structural changes during the pandemic, especially in gaming and tourism, with weakened domestic and external consumer confidence, increased incentives for online and overseas spending, and greater price sensitivity. This has created a business environment completely different from the pre-pandemic period.
He also highlights the importance of external factors. As a small open economy highly dependent on external demand, Macau is vulnerable to more conservative spending habits among tourists, which leads to a fall in average visitor spending. This reduces local income and weakens domestic demand, directly affecting the number of companies being created and dissolved. External factors, in his view, weigh more than internal ones. Local policies and stimulus measures are implemented occasionally to mitigate the adverse effects of external disruptions, and certain government policies aimed at promoting specific industries could encourage new company creation in those areas.
Regarding solutions, Lei believes it all comes down to the fundamental question of how to improve Macau’s overall economic and business environment to support companies, especially SMEs, which are more vulnerable. This is neither simple nor immediate and requires a set of coordinated policies to stimulate both external and internal demand, including tax cuts, financial subsidies, simplification of administrative policies and procedures, and temporary tax incentives to support businesses.
Declining consumption
Florence Lei, professor at the Faculty of Business and Law at the University of Saint Joseph (USJ), analyses the situation through consumption trends, citing the most recent Household Income and Expenditure Survey from DSEC, which shows that several categories registered declines last year, including clothing and footwear, housing and fuel, household goods and services, and recreation, sports, culture, and education. On the other hand, spending increased on food and non-alcoholic beverages, alcoholic drinks and tobacco, health, transport, and information and communication. She also notes that resident spending outside Macau has been rising.
There is a decrease in the consumption of goods and services that are not considered essential or are even seen as luxury items, a trend similar to what is being observed globally. According to her, consumer confidence in major global markets reached historic lows and has not returned to pre-Covid-19 levels due to factors such as geopolitical tensions, financial uncertainty, and health risks.
She also points to generational changes. Generation Z feels less attracted to traditional luxury goods and is more engaged in e-commerce. In Macau, these factors are combined with growing competition from neighbouring regions in both price and quality, which could seriously affect the local retail sector.
In the short term, she explains, if losses do not exceed fixed costs such as rent, companies remain in operation; in the long term, when rental contracts expire, unprofitable businesses close. In a market with free entry and exit, no new companies will emerge if existing ones are operating at a loss, and in a competitive environment, only the strongest survive.
Despite the adverse scenario, she believes that economic diversification could create new opportunities. While some sectors slow down, others may emerge and bring new start-ups. Those that prove uncompetitive in a given sector will have to adapt and transition to new businesses. The ability to adapt to constant change, especially to technological advances, is the rule for survival in today’s business world.
