Small and medium-sized enterprises are under increasing pressure. This is not simply a difficult phase in the economic cycle, but a structural shift that is redefining the very space in which these businesses operate.
The latest data on rising loan defaults are merely the most visible symptom of a deeper problem. As Nelson Kot and Henry Lei point out (pages 6 and 7), there is now a clear transformation in consumption patterns: residents no longer consume predominantly in Macau. Between regular trips to Zhuhai, e-commerce and the dominance of price, the local market is no longer a “closed” space.
This has direct consequences. Many SMEs survived on the basis of relatively stable and predictable demand. That balance has disappeared. Today, they compete not only with each other, but with a more efficient, cheaper and more diversified regional ecosystem.
The central question is not how to preserve every existing SME, but how to ensure that those which remain are sustainable in a new economic context
The price gap with Zhuhai is not a detail – it is a structural factor. It is not just about commercial margins, but about underlying costs: rents, wages and logistics. As long as that gap persists, there will always be a clear economic incentive to consume elsewhere. And as long as mobility remains easy, that trend will continue to grow.
Reducing the SME crisis to “consumption leakage” would be an oversimplification. There is also an internal factor that cannot be ignored: difficulty in adapting. Many local businesses remain tied to undifferentiated business models, heavily dependent on volume and unable to compete beyond price. In an open market, that strategy is no longer viable.
Faced with pressure, the instinctive response is protection: subsidised credit, direct support, consumption incentives. These measures may be necessary to prevent an abrupt collapse – but they do not address the root problem. The key issue is not how to preserve all existing SMEs, but how to ensure that those that remain are viable in a new economic reality.
This requires difficult choices – including accepting that part of the business fabric may not be adaptable to the new conditions. Above all, it requires real transformation: helping viable firms differentiate themselves, move up the value chain, and offer products and services that cannot be easily replaced by cross-border alternatives – while remaining competitive in the online marketplace.
Promoting local consumption through administrative measures has its limits. In an open economy, consumers decide based on price, quality and experience – not institutional appeals or local sentiment.
The challenge, therefore, is not to “bring consumption back,” but to make Macau competitive enough to retain it. The pressure on SMEs will not disappear. The real question is whether Macau adapts to that pressure – or continues trying to cushion it without ever resolving it.
