Portugal made several moves during the 20th century to divest itself of its Far Eastern territory but China didn't seem interested, perhaps fearing a loss of foreign trade. When Britain and China signed the Hong Kong Joint Declaration in 1984, however, it was inevitable that China would seek a similar agreement with Portugal. The Sino-Portuguese Pact was signed in March 1987, but the lead-up to the handover on 20 December 1999 wasn't coloured by the uncertainty and panic that occurred in Hong Kong. Whereas British Hong Kong was administered according to independent colonial law, Macau was seen as a territory under the temporary administration of Portugal, taking its cues from China. European influences were by no means universal, with few Macanese speaking Portuguese or filled with nostalgia for their Portuguese past.

Macau is now a Special Administrative Region (SAR) of the People's Republic of China. In accordance with China's 'one country, two systems' formula, it retains a high degree of autonomy in all matters other than defence and foreign affairs, keeping its former laws and economic system for a period of 50 years from the handover.

Macau continues to enjoy a casino-led economy, with billionaire Stanley Ho monopolising the franchise since the early 1960s. Gambling accounts for a whopping 40% of government revenue and is the drawcard for a large proportion of Macau's eight million annual visitors. Tourism is the other cash cow and both came under attack in 1997 and '98 when a Triad war broke out, with groups vying for the profits of chaperoning wealthy gamblers from mainland China; tourism dropped by 13% as a result. Gang violence has subsided since the handover, but tensions remain between the Chinese police and members of the curious Falun Gong meditation sect. Gangster activities continue, however, ranging from money laundering, gun running and counterfeiting to organised crime racketeering and loansharking. The handover ceremony in 1999 was as stage-managed as the previous one held in Hong Kong. The following day 500 PLA soldiers drove down from Zhuhai. There are now an estimated 10,000 troops stationed here, though they have no responsibility for internal security.
The future will see Macau's identity tied more closely to Hong Kong and the Guangdong hinterland.

Macau is rapidly losing its backwater image, experiencing a massive land-reclamation program and construction boom, with all manner of plans afoot aimed at attracting investment, trade and tourism. A huge restoration program has tarted up Macau's historically significant buildings and, in 2005, Unesco named 30 buildings and squares collectively as the Historic Centre of Macau World Heritage Site. This was a significant step for a city that sees so much unbridled development, and should ensure that mega-tourism development won't entirely overshadow the more subtle attractions of cultural tourism.