The Political Economy of China's Special Economic Zones

The Political Economy of China's Special Economic Zones

The Political Economy of China's Special Economic Zones

The Political Economy of China's Special Economic Zones

Synopsis

In 1979 China launched a new international economic policy with the establishment of four Special Economic Zones (SEZs): Shenzhen, Zhuhai, and Shantou in Guangdong Province and Xiamen in Fujian Province. Modelled loosely on export processing zones and free trade zones found in other less developed countries, the SEZs offer a variety of financial inducements to foreign investors in order to harness international business for national economic advantage. Designed to be a cornerstone of China's economic reforms, by 1985 the SEZs (in the mid-80s zone-like policies were extended to fourteen coastal cities) were scandal-ridden and fraught with serious problems.

Excerpt

In 1979 the People's Republic of China initiated a new international economic policy under which it established four Special Economic Zones (SEZs)--three in Guangdong province (Shenzhen, Zhuhai, and Shantou) and one in Fujian province (Xiamen). Modeled loosely on Export Processing Zones and Free Trade Zones found in other less developed countries, the SEZs offer a variety of financial inducements to foreign investors in the belief that international business can be harnessed for national economic advantage. The zones are designed to provide foreign enterprises with lower taxes, reduced tariffs, more modern infrastructure, flexible labor and wage policies, and less bureaucracy. Additionally, to take maximum advantage of this "opening to the outside," the SEZs have been laboratories for innovative domestic economic reforms.

From the outset, SEZs were presented by their supporters as a logical extension of the post-Mao reform ethos. Optimistic analysts contended that the zones would boost exports, earn foreign exchange, promote technology transfer, introduce new management techniques, and hasten local development (Sun 1980; Xu 1981a). They would contribute positively to China's modernization in myriad ways. Indeed, early assessments of SEZ success were confirmed by none other than Deng Xiaoping as he gave his imprimatur to the Shenzhen, Zhuhai, and Xiamen SEZs in 1984.

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