Special Economic Zones — a quick primer

[photopress:zone_sez_china.jpg,full,alignright]Sometimes it is difficult to understand all the terms used. This is a brief primer.

Special Economic Zones (SEZs) are, for the moment, always located in mainland China. The government gives SEZs special economic policies and flexible governmental measures. This allows SEZs to utilize an economic management system that is especially conducive to doing business.

All of which seems pretty clear. And it has been going on since 1978 when the government decided to reform the national economic setup. Our illustration shows Shenzen, an early starter.

Since 1980, the PRC has established special economic zones in Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province, and designated the entire province of Hainan a special economic zone.

In 1984, the PRC 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.

(For the record Hainan Island is China’s biggest special economic zone.)

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 PRC 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 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.

Now it get a bit complicated because the nomenclature changes along with the developments.

At that time 15 free trade zones, 32 state-level economic and technological development zones, and 53 new- and high-tech industrial development zones were established in large and medium-sized cities. What are the differences between these categroies. They tend to have different preferential policies although the general aim is always the same — building up trade.

The five special economic zones are foreign-oriented areas which are primarily geared to exporting processed goods, integrating science and industry with trade. In 1999, Shenzhen’s new-and high-tech industry became one with best prospects, and the output value of new-and high-tech products reached RMB81.98 billion, making up 40.5% of the city’s total industrial output value.

To sum up the attractions (and they have seriously worked because these zones have been a great success are:

1. Special tax incentives for foreign investments in the SEZs.
2. Greater independence on international trade activities.
3. Economic characteristics are represented as 4 principles:

a. Construction primarily to rely on attracting and utilizing foreign capital.
b. Primary economic forms to be Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises.
c. Products to be primarily export-oriented.

d. Economic activities primarily driven by market forces.