Special economic zones of China
|Special Economic Zones|
A map showing the locations of the Special Economic Zones
Special economic zones of China (SEZs) are special economic zones located in mainland China. The government of China gives SEZs special (more free market-oriented) economic policies and flexible governmental measures. This allows SEZs to utilize an economic management system that is more attractive for foreign and domestic firms to do business in than the rest of mainland China. In SEZs, "...foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing." SEZs offer "tax and business incentives to attract foreign investment and technology".
In the late 1970s, and especially at the 3rd Plenary Session of the 11th Central Committee of the Communist Party of China in December 1978, the Chinese government initiated its policy of reform and opening up. Officials in Guangdong led by Provincial Party Secretary Xi 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 locations, namely Shenzhen, Zhuhai and Shantou in Guangdong and Xiamen in Fujian. For these, Deng Xiaoping coined the name "special zones" with reference to the designation of another border region during China's Civil War. The proposal was approved on July 15 and the four special zones were officially established on August 26, 1979.
In 1984, China further opened 14 coastal cities to overseas investment: Dalian, 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.
Shortly afterwards, the State Council expanded the open coastal areas, extending into an open coastal belt the open economic zones of the Yangtze River Delta, Pearl River Delta, Xiamen-Zhangzhou-Quanzhou Triangle in south Fujian, Shandong Peninsula, Liaodong Peninsula (Liaoning Province), Hebei and Guangxi. In June 1990, the Chinese government opened the Pudong New Area in Shanghai to overseas investment, and additional cities along the Yangtze River valley, with Shanghai's Pudong New Area as its "dragon head."
Since 1992, the State Council has opened a number of border cities, and in addition, opened 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.
Primarily geared to exporting processed goods, the five SEZs are foreign trade-oriented areas which integrate science, innovation and industry 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 high-tech products 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 Zone 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 Zone that are not yet 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 Zone 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 from 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.
List of SEZs
As part of its economic reforms and policy of opening to the world, between 1980 and 1984 China established special economic zones (SEZs) in Shantou, Shenzhen, and Zhuhai in Guangdong Province and Xiamen in Fujian Province and designated the entire island province of Hainan a special economic zone.
In 1984, China opened 14 other coastal cities to overseas investment (listed north to south): Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang, and Beihai.
Then, beginning in 1985, the central government expanded the coastal area by establishing the following open economic zones (listed north to south): Liaodong Peninsula, Hebei Province (which surrounds Beijing and Tianjin), Shandong Peninsula, Yangtze River Delta, Xiamen-Zhangzhou-Quanzhou Triangle in southern Fujian Province, Pearl River Delta, and Guangxi.
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.
|Special Economic Zone, City||Shenzhen||Guangdong|
|Special Economic Zone, Province||-||Hainan|
|Coastal Development Areas||Dalian||Liaoning|
Economic policies of SEZs
- Special tax incentives for foreign investments in the SEZs.
- Greater independence on international trade activities.
- Economic characteristics are represented as "4 principles":
- Construction primarily relies on attracting and utilizing foreign capital
- Primary economic forms are Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises
- Products are primarily export-oriented
- Economic activities are primarily driven by market forces
SEZs are listed separately in the national planning (including financial planning) and have province-level authority on economic administration. SEZs local congress and government have legislation authority.
Leong (2012) investigates the role of special economic zones (SEZs) in liberalizing the Chinese and Indian economies and their impact on economic growth. The policy change to a more liberalized economy is identified using SEZ variables as instrumental variables. The results indicate that export and FDI growth have positive and statistically significant effects on economic growth in these countries. The presence of SEZs increases regional growth but increasing the number of SEZs has negligible effect on growth. The key to faster economic growth appears to be a greater pace of liberalization.
- Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India , 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.
- Chung-Tong Wu. China's special economic zones: five years later – Asian Journal of Public Administration
- Special Economic Zones: Lessons from China by Bhaskar Goswami
- Coordination of tax legislation of special zones in Mainland China
- Support service to enter development Zones to Mainland China