Photo taken on Dec. 1, 2019 shows light decorations during the 2019 Macao Light Festival in south China's Macao. (Xinhua/Cheong Kam Ka)

The Macao Special Administrative Region is set to re-anchor its economy to the financial sector as the casino capital of the world eyes closer ties with the Chinese mainland to rev up its economic diversification away from the gambling industry, a veteran market watcher said on Tuesday. 

The city, scheduled to celebrate the 20th anniversary of its return to the motherland later this month, is embracing new opportunities to diversify its economy toward the financial sector, Ding Meng, a senior strategist at Bank of China's Macao branch, told the Global Times. 

There are two areas of focus for the central government to consider when it comes to policies to boost the role of the financial sector in Macao's economy, Ding said. 

For one thing, mainland companies can be encouraged to issue bonds in Macao with the government offering interest subsidies and simplifying issuance procedures, he suggested, noting that unlike Hong Kong, the banking sector in Macao is composed mostly of mainland banks, meaning the risks could be easily controlled.

For another, Hengqin, a free trade zone in Zhuhai, South China's Guangdong Province can be tapped to spur the financial sector in Macao. Hengqin, increasingly a magnet for financial businesses, is an ideal location for domestic businesses to set up fund pools and fundraising hubs, thereby benefiting the adjacent city of Macao, he went on to say. 

The city's flagging gambling sector, still a hefty contributor to local finances, apparently puts the local economy under pressure to pursue green shoots of growth. 

Macao's gross gaming revenue shrank 8.5 percent year-on-year in November, worsening from a contraction of 3.2 percent in the prior month, according to data from the city's Gaming Inspection and Coordination Bureau.

In the first 11 months of the year, the city's gross gaming revenue fell 2.4 percent on a yearly basis.  

Macao's economy contracted 4.5 percent year-on-year in real terms in the third quarter, official data showed. This marked the third consecutive quarterly contraction. In the first nine months, the local economy fell by 3.5 percent.  

The financial sector is an important part of Macao's economy, albeit trailing the gambling and property sectors in terms of contribution to GDP, which offers a viable alternative to underpin the city's economic growth, according to Ding.

He cited the city's legal environment, its alignment with the international markets, its offshore market, and Macao's proximity to Hong Kong, one of the global key financial hubs.