China’s Special Economic Zones (SEZs) are areas of the country where preferential treatment is given to businesses in an effort to help the areas develop economically. They allow foreign companies to conduct business in these areas under flexible policies that aren’t available in most of mainland China.
The SEZs have played a very important role in boosting China economically and increasing China’s foreign trade.
The SEZs were first developed in the late 1970s after the Cultural Revolution left the country’s economy drained and weak, according to a study of SEZs done after 30 years after they were first instated.
In July 1979, half a year after the Open Door Policy was adopted, China’s Communist Party Central Committee designated Guangdong and Fujian provinces as the first areas where special policies would be implemented. Since then, other areas have gained the SEZ designation as well.
From the beginning, the main goals of the SEZs were to attract foreign investment, increase China’s exports and expand the use of new technology. For the most part, the SEZs have been successful in reaching these goals, producing unprecedented levels of growth in China.
This type of development played out most dramatically in Shenzhen, which was a small fishing village across a river from Hong Kong, before it became an SEZ. The first year after its designation, Shenzhen received more than half of the whole country’s foreign direct investment. Today, Shenzhen is far from a little fishing village. It’s a booming industrial and commercial center, which produces the lion’s share of the world’s iPods and which has high rise skyscrapers all over the skyline.
Shenzhen is the poster child of China’s SEZ policies. It also adopted some bold measures, was on the cutting edge of technological reforms, and received some special privileges from the central government. For instance, Shenzhen was exempted from having to submit taxes to the central and provincial governments, which gave it a huge economic advantage that allowed it leeway for economic experimentation.
Today, Shenzhen is home to many successful high-tech companies, IT firms and financial companies. It’s probably the most successful example of one of China’s special economic zones, as it’s been able to balance market-driven economic development with the constraints of being part of a planned economy.
China’s place today on the world stage as an economic powerhouse can be largely attributed to its special economic zones that drew in foreign investment and continue to do so today.