In justifying opening up and the series of economic reforms that ensued in China, Deng Xiaoping referred to Karl Marx and his theories, which predicted that nations need to undergo urbanization and a stage of capitalism for a natural socialist transition. One of the most renowned reforms under Deng was establishing four "special economic zones" along the Southeastern coast of China, with Shenzhen, Shantou, and Zhuhai located in Guangdong province and Xiamen located in Fujian province. The four aforementioned special economic zones were all established from 1980 to 1981. As of 2024, there have been 3 additional special economic zones. In 1988, Hainan became the fifth "SEZ". In 1990, Pudong district in Shanghai became the sixth "SEZ". In 2009, Binhai district in Tianjin became the seventh "SEZ". Special economic zones (SEZs) in mainland China are granted more free market-oriented economic policies and flexible governmental measures by the government of China, compared to the planned economy elsewhere.
This allows SEZs to utilize economic management which is more attractive to foreign and domestic businesses. In SEZs, "...foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing" with "tax and business incentives to attract foreign investment and technology".[1] Trade was originally controlled by China's centralized government. However, these special zones are where market-driven capitalist policies are implemented to entice foreign investments in China. In 1986, China then added 14 additional cities to the list of special economic zones.
History
In the late 1970s, and especially at the 3rd Plenary Session of the 11th Central Committee of the Chinese Communist Party in December 1978, the Chinese government initiated its policy of reform and opening up, as a response to the failure of Maoist economic policy to produce economic growth which would allow China to be competitive against not only industrialized nations of the west but also rising regional powers: Japan, Korea, Singapore, Taiwan, and Hong Kong.[2]
Officials in Guangdong Province led by Provincial Party SecretaryXi Zhongxun seized the initiative, starting with an investment project in Shekou prepared by Yuan Geng on behalf of the Hong Kong-based China Merchants Steam Navigation Company. This project, initially a ship breaking facility, was approved by Li Xiannian on January 31, 1979. In April 1979, Xi Zhongxun and other Guangdong officials presented in Beijing a proposal to give broader flexibility to the coastal provinces of Guangdong and Fujian to attract foreign investment, with additional exemptions in four cities, namely Shenzhen in the Pearl River Delta region, Zhuhai and Shantou in Guangdong and Xiamen[3]:158 (Amoy) in Fujian Province. For these, Chinese Paramount leaderDeng Xiaoping coined the name "special zones"[4][5] and characterized them as experiments in the mold of the pre-1949 Communist base areas.[6]:65 The proposal was approved on July 15 and the four special zones were officially established on August 26, 1979.[7] Within these SEZs, export-focused businesses had the leeway to respond to quickly respond to demand in foreign markets.[8]:50 These initial SEZs successfully attracted foreign capital, primarily from ethnic Chinese in Taiwan, Hong Kong, and Southeast Asia.[9]:90 Foreign businesses in these areas were generally motivated to move production to China's SEZs because of lower labor costs, preferential economic policies, and the general trend of offshoring more simple manufacturing as globalization increased.[9]:90
Successes in the initial SEZs led to the establishment of additional SEZs in 14 coastal cities:[8]:50Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang and Beihai. Since 1988, mainland China's opening to the outside world has been extended to its border areas, areas along the Yangtze River and inland areas. First, the state decided to turn Hainan Island into mainland China's biggest special economic zone (approved by the 1st session of the 7th NPC in 1988) and to enlarge the other four special economic zones.
Since 1992, the State Council has opened a number of border cities and, in addition, all the capital cities of inland provinces and autonomous regions. In addition, 15 free trade zones, 32 state-level economic and technological development zones, and 53 new and high-tech industrial development zones have been established in large and medium-sized cities. As these open areas adopt different preferential policies, they play the dual roles of "windows" in developing the foreign-oriented economy, generating foreign exchanges through exporting products and importing advanced technologies and of "radiators" in accelerating inland economic development.
Most of China's SEZs are located in former treaty ports and therefore have symbolic significance in demonstrating a "reversal of fortunes" in China's dealings with foreigners since the century of humiliation.[8]:51 Researcher Zongyuan Zoe Liu writes that "[t]he success of these cities as 'red' treaty ports represented another step in China's overall reform and opening-up plan while legitimizing the leadership of the CPC over the Chinese state and people."[8]:51
Primarily geared to exporting processed goods, the five SEZs are foreign trade-oriented areas which integrate science, industry and innovation with trade. Foreign firms benefit from preferential policies, such as lower tax rates, reduced regulations and special managerial systems. In 1999, Shenzhen's new and high-tech industry reached an output value of 81.98 billion yuan, making up 40.5% of the city's total industrial output value.
Since its founding in 1992, the Shanghai Pudong New Area has made progress in both absorbing foreign capital and accelerating the economic development of the Yangtze River valley. The government has extended special preferential policies to the Pudong New Area that are not currently enjoyed by the special economic zones. For instance, in addition to the preferential policies of reducing or eliminating Customs duties and income tax common to the economic and technological development zones, the state also permits the zone to allow foreign business people to open financial institutions and run tertiary industries. In addition, the state has given Shanghai permission to set up a stock exchange, expand its examination and approval authority over investments and allow foreign-funded banks to engage in RMB business. In 1999, the GDP of the Pudong New Area came to 80 billion yuan, and the total industrial output value, 145 billion yuan.
In May 2010, the PRC designated the city of Kashgar in Xinjiang a SEZ. Kashgar's annual growth rate was 17.4 percent in 2009, and Kashgar's designation has since increased tourism and real estate prices in the city. Kashgar is close to China's border with the independent states of former Soviet Central Asia and the SEZ seeks to capitalize on international trade links between China and those states.[11]
In 2015, then-magistrate of Kinmen County (ROC) Chen Fu-hai, along with a non-profit Taiwan organization "with close ties to the CCP",[12] proposed a referendum in which Kinmen would become a special economic zone and obtain free trade and free investment between it and neighboring SEZ Xiamen on the mainland. The plan received controversy due to PRC investment in the ROC being otherwise strictly controlled; it was praised by a Xiamen government official and PRC state media, but the referendum did not[citation needed] receive approval from the government of Taiwan before Chen's term ended in 2018.
In 1990, the Chinese government decided to open the Pudong New Area in Shanghai to overseas investment, as well as more cities in the Yang Zi River Valley.
Since 1992, the State Council has opened a number of border cities and all the capital cities of inland provinces and autonomous regions.
In addition 15 free-trade zones, 32 state-level economic and technological development zones, and 53 new and high-tech industrial development zones have been established in large and medium-sized cities. As a result, a multilevel diversified pattern of opening and integrating coastal areas with river, border, and inland areas has been formed in China.[16]
Economic policies of SEZs included tax exemptions, reduced custom duties, reduced priced land, and increased flexibility to negotiate labor contracts and financial contracts.[17]:37 SEZs were also authorized to develop their own legislation.[6]:84 The Shenzhen Special Economic Zone was the most active SEZ for legislative experiments over the period 1979-1990 and these had a significant role in shaping national economic legislation on foreign trade and investment.[6]:84
Shenzhen's economic transformation
Out of the special zones, perhaps the most successful was Shenzhen. It transformed from 126 square miles of villages into a business metropolis.[18] As seen by the table below, the ten years of economic reform from 1980 to 1990 increased population in Shenzhen by six-fold, GDP by around sixty-fold, and gross industrial output by two-hundredfold. Before 1980, Shenzhen's GDP was just 0.2 percent of Hong Kong's. In 2018, the city's GDP hit 2.42 trillion yuan (US$372 billion), overtaking Hong Kong.[19] Successes in Shenzhen prompted Chinese central authorities to instruct provincial officials to learn from Shenzhen.[20]:114
Year
Population (thousands people)
GDP (million yuan)
Gross industrial output (million yuan)
1980
332.9
270
99
1982
449.5
826
424
1985
881.5
3902
3119
1990
2019.4
17,167
20,912
Overseas SEZs
From 1990 to 2018, Chinese enterprises established eleven SEZs in sub-Saharan Africa and the Middle East including: Nigeria (two), Zambia, Djibouti, Kenya, Mauritius, Mauritania, Egypt, Oman, and Algeria.[21]:177 Generally, the Chinese government takes a hands-off approach, leaving it to Chinese enterprises to work to establish such zones (although it does provide support in the form of grants, loans, and subsidies, including support via the China Africa Development Fund).[21]:177 Such zones fall within the Chinese policy to go out and compete globally.[21]:182 The Forum on China-Africa Cooperation promotes these SEZs heavily.[21]:177–182
The first Chinese overseas SEZs facilitated the offshoring of labor-intensive and less competitive industries, for example in textiles.[21]:177 As Professor Dawn C. Murphy summarizes, these zones now "aim to transfer China's development successes to other countries, increase business opportunities for China manufacturing companies, avoid trade barriers by setting up zones in countries with preferential trade access to important markets, and create a positive business environment for Chinese small and medium-sized enterprises investing in these regions."[21]:177 Overseas SEZs also foster support for China in the international system and help advocate for developing country causes through South–South cooperation.[21]:182 They "help China demonstrate it is acting as a responsible great power in these regions."[21]:182
Effectiveness and legacy
Deng described China's SEZs as "social and economic laboratories where foreign technologies and managerial skills could be observed", including in the development of manufacturing technology, a private real estate market, and management techniques.[20]:113
Many scholars argue that SEZs played a decisive role in the development of China and the success of Communism as implemented in China. Since their inception, SEZs have contributed 22% of China's GDP, 45% of total national foreign direct investment, and 60% of exports. SEZs are estimated to have created over 30 million jobs, increased the income of participating farmers by 30%, and accelerated industrialization, agricultural modernization, and urbanization.[22] One of the primary theoretical foundation of SEZs is its ability to cultivate a form of innovation that is uniquely top-down (supported by government) and bottom-up (characterized by local problem solving), while utilizing resources and research at every level. SEZs reflected a desire for Deng Xiaoping's CCP to be experimental, fluid, and localized when implementing Communist reforms.
However, issues like prioritizing the short-term gains, encompassing a limited number of industries, and lack of entrepreneurial promotion are pointed out by critics of the SEZs. Others, like Gopalakrishnan, point out that "Left out of the picture are inequities in development, arable land loss, real estate speculation and labour violence", as well as significant transparency problems in bureaucracy.[23]
China has benefitted from SEZs through foreign enterprises bringing in expertise, technology, and equipment.[17]:37 In turn, private firms have benefitted from inexpensive labor, a business-friendly environment, robust infrastructure, and China's large domestic market.[17]:37–38
SEZs became destinations for workers from across southern and southwest China, particularly younger women who could earn significantly more for factory work than they could earn in their hometowns.[24]:66
A 2022 study in the American Economic Journal found that SEZs in China led to increased human capital investment with improved educational outcomes.[25]
1 2 Šebeňa, Martin (2023). "Chinese Economic Miracle". In Kironska, Kristina; Turscanyi, Richard Q. (eds.). Contemporary China: a New Superpower?. Routledge. ISBN978-1-03-239508-1.
Guangdong, formerly romanized as Canton or Kwangtung, is a coastal province located in South China, on the north shore of the South China Sea. The provincial capital is Guangzhou. With a population of 126.84million across a total area of about 179,800 km2 (69,400 sq mi), Guangdong is the most populous province of China and the 15th-largest by area as well as the second-most populous country subdivision in the world.
A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increasing trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.
Fujian is a province on the southeastern coast of China. Fujian is bordered by Zhejiang to the north, Jiangxi to the west, Guangdong to the south, and the Taiwan Strait to the east. Its capital is Fuzhou and its largest city by population is Quanzhou, other notable cities include the port city of Xiamen and Zhangzhou. Fujian is located on the west coast of the Taiwan Strait as the closest geographically and culturally to Taiwan. Certain islands such as Kinmen are only approximately 10 km east of Xiamen in Fujian.
Xiamen Special Economic Zone, established in October 1980, is one of the five special economic zones in the People's Republic of China. Originally comprising a territory of 2.5 km2 in Xiamen City, it was expanded to 131 km2 in 1984, covering the entire Xiamen Island, which comprises Huli District and Siming District excluding Gulangyu.
Pudong is a district of Shanghai located east of the Huangpu, the river which flows through central Shanghai. The name Pudong was originally applied to the Huangpu's east bank, directly across from the west bank or Puxi, the historic city center. It now refers to the broader Pudong New Area, a state-level new area which extends all the way to the East China Sea.
The Open Door Policy is the United States diplomatic policy established in the late 19th and early 20th century that called for a system of equal trade and investment and to guarantee the territorial integrity of Qing China. The policy was created in U.S. Secretary of State John Hay's Open Door Note, dated September 6, 1899, and circulated to the major European powers. In order to prevent the "carving of China like a melon," as they were doing in Africa, the Note asked the powers to keep China open to trade with all countries on an equal basis and called upon all powers, within their spheres of influence to refrain from interfering with any treaty port or any vested interest, to permit Chinese authorities to collect tariffs on an equal basis, and to show no favors to their own nationals in the matter of harbor dues or railroad charges. The policy was accepted only grudgingly, if at all, by the major powers, and it had no legal standing or enforcement mechanism. In July 1900, as the powers contemplated intervention to put down the violently anti-foreign Boxer uprising, Hay circulated a Second Open Door Note affirming the principles. Over the next decades, American policy-makers and national figures continued to refer to the Open Door Policy as a basic doctrine, and Chinese diplomats appealed to it as they sought American support, but critics pointed out that the policy had little practical effect.
Regional policy is the sum of a series of policies formulated according to regional differences to coordinate regional relations and regional macro operation mechanism, which affects regional development at the macro level. It includes regional economic policy, regional social policy, regional environmental policy, regional political policy, regional cultural policy, etc.Regional policy aims to improve economic conditions in regions of relative disadvantage, either within a nation or within a supranational grouping such as the European Union. Additionally, a regional policy may try to address high levels of unemployment and lower-than-average per capita incomes. Its main tool is public investment.
The Shenzhen Special Economic Zone is a special economic zone (SEZ) of China. One of four special economic zones (SEZ) established in May 1980, it was the first SEZ created by Deng Xiaoping, and, like the other three zones, was modeled after Ireland's Shannon Free Zone.
Nansha District and Nansha New Area is one of 11 urban districts and a state-level new area of the prefecture-level city of Guangzhou, the capital of Guangdong Province, China. It is the home of the present-day port of Guangzhou, as well as the Nansha Wetland Park.
The National Economic and Technological Development Zones are the special areas of the People's Republic of China where foreign direct investment is encouraged. They are usually called the "Economic and Technological Development Zones" or simply the "Development Zones".
Western Taiwan Straits Economic Zone or West Coast Economic Zone is the proposed economic development zone for the economic region west of the Taiwan Straits by the Fujian government and the Chinese central government. This include the coastal cities of Xiamen, Zhangzhou, Quanzhou and Fuzhou along Fujian province.
The economy of Guangdong is one of the most prosperous in China. Guangdong is located in southern China, bordering on Fujian Province to the east, Hunan Province to the north, Guangxi Autonomous Region to the west and the special administrative regions of Hong Kong and Macau to the south. It is also the largest economy of a sub-national entity in terms of GDP in all of Asia and 3rd largest sub-national entity in the world.
Liangjiang New Area is a state-level new area established in 2010 located within the City of Chongqing, China. The area covers 1,205 square kilometres combining part of Jiangbei District, Yubei District, and Beibei District.
The Hangzhou–Fuzhou–Shenzhen passenger-dedicated railway is the dual-track, electrified, high-speed rail lines (HSR) in service along the southeastern coast of China, linking the Yangtze River Delta on the East China Sea and Pearl River Delta on the South China Sea. It is one of the eight arterial high-speed rail corridors of the national 4+4 high-speed rail grid. The southeast coast is the only region of high-speed rail construction where no previous conventional railroads existed. Hence, the high-speed rail lines built on the southeast coast will, for the most part, carry both passenger and freight traffic, and will not be passenger-dedicated lines that comprise most of the other HSR corridors in China.
Xu Shijie was a Chinese Communist revolutionary and politician. He held many positions in his native province of Guangdong, including as Party Chief of the provincial capital Guangzhou. He came out of retirement in 1988 to serve as the inaugural Party Chief of the newly established province and special economic zone of Hainan. In Hainan he worked closely with Governor Liang Xiang to implement reformist policies, but they were both dismissed in the aftermath of the Tiananmen Square protests of 1989 and the fall of the liberal leader Zhao Ziyang. He died soon afterwards in 1991.
The Guangdong–Hong Kong–Macao Greater Bay Area, commonly known as the Greater Bay Area (GBA), is a megalopolis, consisting of nine cities and two special administrative regions in South China. It is envisioned by Chinese government planners as an integrated economic area aimed at taking a leading role globally by 2035.
Foreign direct investment (FDI) has been an important part of the Chinese economy since the 1980s. During the Mao period, most foreign companies halted their operations in China, though China remained connected to the world economy through a limited scale of international trade. Since 1978, China was again open to foreign investment and within two decades it became the largest recipient of foreign direct investment among developing countries. While China's acceptance of foreign investment is commonly associated with Deng Xiaoping’s policies, Chinese leaders including Mao Zedong and Hua Guofeng already acknowledged the need to import foreign capital and technology in the early 1970s. The investments from the 1970s up till the 2000s mainly focused on the manufacturing sector, earning China the label “world’s factory”. However, female migrant workers who contributed to the growth through participation in the foreign-owned manufacturing sector had to work in poor conditions, with insufficient labor protection, and under restricted migration opportunities due to the hukou system.
Deng Xiaoping's southern tour, or 1992 southern tour, was the tour of Deng Xiaoping, the former Paramount leader of China, in southern China, including in Shenzhen, Zhuhai, Guangzhou and Shanghai, from January 18 to February 21, 1992. The talks and remarks made by Deng during the tour resumed and reinforced the implementation of his "Reforms and Opening-up" program in mainland China, which had come to a halt after the military crackdown on 1989 Tiananmen Square protests ordered by Deng himself. The 1992 Southern Tour is widely regarded as a critical point in the modern history of China, as it saved the Chinese economic reform as well as the capital market, and preserved the stability of the society.
References
Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India Archived 2011-07-19 at the Wayback Machine , Dynamics, Economic Growth, and International Trade (DEGIT) Conference Paper.
Chee Kian Leong, (forthcoming), Special economic zones and growth in China and India: an empirical investigation, International Economics and Economic Policy.
This page is based on this Wikipedia article Text is available under the CC BY-SA 4.0 license; additional terms may apply. Images, videos and audio are available under their respective licenses.
