A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country’s typical or national laws. “Nationwide” laws may be suspended inside a special economic zone. The category SEZ covers, including free trade zones (FTZ), export processing Zones (EPZ), free Zones (FZ), industrial parks or industrial estates (IE), free ports, free economic zones, urban enterprise zones and others.
Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC), development of infrastructureand to increase the employment. Currently, the most prominent SEZs in the country are Shenzhen, Xiamen, Shantou, and Zhuhai. It is notable that Shenzhen, Shantou, and Zhuhai are all in Guangdong province, and all are on the southern coast of China where sea is very accessible for transportation of goods.
An analysis of the performance of these SEZs in China versus those in India in liberalizing the Chinese and Indian economies and their impact on economic growth was conducted by Leong (2012). This paper investigates the role of special economic zones (SEZs) . 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. Special economic zones of the people’s republic of china Special Economic Zones of the People’s Republic of China (SEZs) are special economic zones located in mainland China. The government of the People’s Republic 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 especially conducive to doing business that does not exist in the rest of mainland China. History Since the late 1970s, and especially since the 3rd Plenary Session of the 11th CPC Central Committee in 1978, the PRC government has decided toreform the national economic setup. The basic state policy has focused on the formulation and implementation of overall reform and opening to the outside world.
During the 1980s, the PRC passed several stages, ranging from the establishment of special economic zones and open coastal cities and areas, and designating open inland and coastal economic and technology development zones. 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 ofHainan a special economic zone.
In August 1980, the National People’s Congress (NPC) passed “Regulations for The Special Economy Zone of Guangdong Province” and officially designated a portion of Shenzhen as the Shenzhen Special Economy Zone (SSEZ). 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.
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 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 “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 special economic zones are foreign-oriented areas which integrate science and industry with trade, and benefit from preferential policies and special managerial systems.
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 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 great progress in both absorbing foreign capital and accelerating the economic development of the Yangtze River valley. The state 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 andreal 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. In 1990 the Chinese government decided to open the Pudong New Zone in Shanghai to overseas investment, as well as more cities in the Yangzi 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. Type| City| Province| Special Economic Zone, City| Shenzhen| Guangdong|
| Zhuhai| Guangdong| | Shantou| Guangdong| | Xiamen| Fujian| | Kashgar| Xinjiang| Special Economic Zone, Province| No city| Hainan| Coastal Development Areas| Dalian| Liaoning| | Qinhuangdao| Hebei| | Tianjin| Tianjin| | Yantai| Shandong| | Qingdao| Shandong| | Lianyungang| Jiangsu| | Nantong| Jiangsu| | Shanghai| Shanghai| | Ningbo| Zhejiang| | Wenzhou| Zhejiang| | Fuzhou| Fujian| | Guangzhou| Guangdong| | Zhanjiang| Guangdong| | Beihai| Guangxi| ————————————————- Hainan Special Economic Zone
Hainan became a special economic zone in 1988 after the other 4 zones had already established themselves as being successful and scalable. For current foreign investment regulations for the Hainan zone please see Hainan Special Economic Zone, Foreign Investment Regulations ————————————————- Economic policies of SEZs 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”: 1. Construction primarily relies on attracting and utilizing foreign capital 2.
Primary economic forms are Sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises 3. Products are primarily export-oriented 4. 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. China’s Special Economic Zones Xu Dixin The Chinese Government has set up four special economic zones.
They are located in the cities of Shenzhen, Zhuhai and Shantou of Guangdong Province and the city of Xiamen of Fujian Province . Politically, the special economic zones are based on assurance of China’s state sovereignty and governing authority is entirely in China’s hands. Economically, they are essentially based on state capitalism. APPROXIMATELY 300 special economic zones have been established in about 75 countries and regions in the world today (some are called free trading zones, some processing-exporting zones and some tax-free trading zones).
Practices vary between countries. Special economic zones are set up when a country delimits a special area where, through exemption of customs duty, it formulates various preferential conditions and provides public facilities so as to attract foreign investors to set up factories whose finished products are mainly for export. Insofar as capitalist social systems are concerned, few problems arise for those countries which set up special economic zones because the characteristics of such zones are essentially compatible with the development of capitalism.
Some people wonder why China, a socialist country, has set up special zones which permit the manoeuvre of foreign capital. They ask: Concessions were eliminated a long time ago, why are a few areas with foreign investment being operated in the manner of concessions? They also want to know whether the four special economic zones represent a revival of the former concessions. Although important, such concerns are oversimplified and superficial. The situation can be best understood within context of the past and the nation’s present state of development.
At the end of the 19th century, foreign capital poured into China. This was a result of invasion by imperialist powers which used “gunboat diplomacy” to impose unequal treaties on China and infringed upon its state sovereignty. The foreign capital presently being invested in China is not based on “unequal treaties,” but on the assurance of China’s state sovereignty. The special economic zones do not represent the revival of former concessions because authority over them is entirely in China’s hands.
Be they joint ventures with Chinese and foreign investments set up in the special zones or enterprises run exclusively by foreign or overseas Chinese capital, they must observe the Chinese Government’s decrees and regulations, pay business and income taxes according to provisions and abide by China’s labour laws. Although they represent a minor change in state economic policy, the special economic zones are not in basic conflict with China’s socialist economic system. The economy in the special zones encompasses the socialist state economy, the collective economy and the individual economy, but state capitalism has the lion’s share.
Processing materials for foreign countries, compensatory trade, co-operative enterprises and joint ventures are all state capitalist economic activities. Strictly speaking, the enterprises run by foreign or overseas Chinese capital constitute a kind of capitalist economy, but the activities of such enterprises are subject to control and regulation by the governments of the special zones. As a result, they are special kinds of capitalist enterprises. Lenin clearly said: “State capitalism is capitalism which we shall be able to restrict, the limits of which we shall be able to fix.
” This provides us with a theoretical explanation of the nature of the enterprises financed individually in the special zones. Some people worry that the capitalists will exploit the surplus value of the labourers. It should be admitted that some exploitation does exist in the joint ventures or individually financed enterprises in the special zones. According to China’s regulations, joint ventures or enterprises individually financed by foreign capital or overseas Chinese capital can remit their share of profits abroad after they have paid their income tax according to relevant provisions and with the approval of the authorities concerned.
The profits remitted abroad and the profits retained for reinvestment in the special zones obviously represent the surplus value of the labourers. But allowing foreign or overseas Chinese capital to gain profits is, in a sense, a policy of redemption (that is, a policy of gradually nationalizing the means of production of the exploiting classes at a certain price). Shortly after the founding of the People’s Republic, the government adopted a redemption policy towards the national bourgeoisie in order to win its co-operation.
Now we are employing a redemption policy to win the co-operation of foreign and overseas Chinese capital. This is necessary for the development of the economies of the special zones. One of the characteristics of special zone economies is the fact that they open the door to foreign countries. Take Shenzhen and Zhuhai for example, their economic ties with Xianggang (Hongkong) and Aomen (Macao) are much closer than with the interior. This situation may result in the close relationship and mutual-effect between the role of regulating production according to market demands and the market fluctuations of Xianggang and Aomen.
Within the special zones, it cannot be said that the regulation of production by state planning does not exist or does not function. However, if regulation of production by planning is made to cover too large an area, if it becomes the main body of the economy of the special zones, then it will be disadvantageous to absorbing foreign capital and developing the economies of the special zones.
Newly built harbour in the Shekou industrial area managed by a Xianggang (Hongkong) company. Special Zones’ Functions Because the special economic zones in Guangdong and Fujian Provinces have only been established for a short period of time, their role has not been brought into full play. The following points address the concerns most frequently expressed regarding their operation:
They serve as bridges for introducing foreign capital, advanced technology and equipment and as classrooms for training personnel capable of mastering advanced technology. Both in the process of production and circulation, and in the joint ventures with Chinese and foreign investments in the special zones, we can learn the latest techniques and scientific methods of management.
To develop the national economy and expedite China’s enterprise production and management, it is imperative to promote competition between regions, between trades and with-in a certain trade. In the development of the economies of the special zones -and during their competition with Xianggang and Aomen – it is possible to win in the competition by learning how to make comparisons regarding the regulation of production according to market demands. improve the quality of goods, develop new products and reduce production costs. It is possible to absorb considerable amounts. of foreign exchange.
It is also possible to transfer part of the foreign capital, technology and equipment through the special zones to other regions concerned and set up new enterprises there. The country’s special zones can serve as experimental units in economic structural reform and as schools for learning the law of value and the regulation of production according to market demands. By developing the economies of the special zones, it is possible to employ many young people waiting for jobs. Some people wonder why it is necessary, more than 30 years since the founding of the People’s Republic, to set up special
economic zones. They also wonder whether the special zones signify that China is seeking help from capitalist countries. Such concerns are understandable, but unwarranted. Since its establishment, New China has scored brilliant achievements in many fields of work, including economic construction. But it has also traversed a tortuous path. Compared with the world’s most advanced nations. China’s level of production is still rather low. Its funds and technology are incompatible with the requirements of the modernization drive.
Furthermore,” while implementing its policy of self-reliance in economic construction, China does not exclude co-operation with capitalism. Facts will prove that through developing the economies of the special zones, we will be able to make use of foreign and overseas Chinese capital, as well as state capitalism, to develop China’s socialist economy. Economic construction in the special zones will possibly become a special form of supplement to the development of China’s socialist economy. The total economies of the special zones will only constitute a very small portion of the national economy.
Although the socialist economy will continue to dominate, the role of the special zones must not be overlooked. Japanese technician passing on technical know-how to a Chinese worker at a joint Sino-Japanese TV company. Policies and Measures 1. The development of the special economic zones requires emphasis on the word “special. ” For instance, in opening the door to foreign countries, it is necessary to simplify procedures for entry and exit and make things easy for visitors. In tax rate, it is essential to give preferential treatment to imported goods in customs duties. Tax exemptions for some goods are needed.
A portion of the profits gained by foreign financed enterprises is allowed to be remitted abroad. 2. The essence of developing the special economic zones lies in the import of foreign capital; making foreign capital serve China’s socialist modernization drive. Given this, the lives of the people residing in the special zones are bound to change. Capitalist ideology is bound to increase. This will require us to devote special attention to the ideological education of people in the special zones. Of course, education and training in science and technology should not be neglected, either.
3. The currency used in the special economic zones is mainly Renminbi (people’s currency), the use of foreign currencies is limited to designated areas. Renminbi represents the currency of the People’s Republic of China, but in view of the characteristics of special economic zones, it may prove necessary to issue different currency for them. This is a very complicated problem which calls for further study. 4. It would be impossible for the special zones to develop without the support of China’s interior regions. Only when they operate in cooperation with the interior can the special zones gain necessary materials.
Of course, such cooperation is based on mutual benefit. And it can be successful only when the special zones produce commodities needed by the interior. This co-operation must be carried out in a planned way. China’s capital controls The more special economic zone The landscape of capital-account liberalisation Jul 7th 2012 | QIANHAI | from the print edition * Where there’s muck ELSEWHERE in the developing world, towns grow before the infrastructure is quite ready to support them. Things are different in Shenzhen, China’s original Special Economic Zone (SEZ), a stone’s throw from Hong Kong.
The subway station at Qianhai bay, on the city’s west coast, is spick and span, with a full complement of signs, announcements and billboards, including one for a performance by the BBC National Orchestra of Wales, sponsored by Classy Kiss milk. But only one exit is open. And it surfaces in the middle of a wasteland of dirt, scrub and puddles. It is, surely, the best connected nowhere anywhere. In this section * Powering down * »The more special economic zone * Rollercoaster * Duncan dough notes * The Oracle of Boston * Move over Reprints Related topics * Hong Kong * China This empty spot is, however, full of big ambitions.
It is one corner of a 15-square-kilometre zone earmarked for experimentation by China’s cabinet. The zone has licence to try policies that are “more special” than those prevailing even in an SEZ. It aims to attract “modern service industries” rather than big-box manufacturers. It will charge only 15% corporate-profit tax and levy no income taxes on the finance professionals, lawyers, accountants and creative people it hopes eventually to attract. These cosmopolitan folk will live in a “waterfront city”, says James Corner, whose firm won a competition two years ago to design the bay’s future landscape.
Over the next couple of years, he explains, the city will build a system of “water fingers”, large parks that collect, retain and purify the streams that flow from the hinterland, allowing water to enter the bay clean and clear. Water is not the only flow Qianhai aims to collect and retain. It also wants to attract some of the offshore yuan that have pooled outside mainland China’s borders. Over 550 billion yuan ($87 billion) now sits in Hong Kong deposit accounts; another 60 billion yuan sits in Singapore, and 35 billion more resides in customer deposits in London, according to an April study by Bourse Consult.
These yuan cannot flow freely back into mainland China, however. Banks can invest a limited amount in the mainland’s inter-bank bond market. Companies that raise yuan outside China can seek permission to invest the money in their operations inside the country. But the money can easily become bogged down in China’s exchange controls, especially when the authorities are trying to tighten credit. Qianhai, however, will be permitted to broaden these channels. Its firms will be given help in raising yuan offshore. Hong Kong banks will be allowed to enter the zone more easily. The ground will also be laid for greater cross-border lending.
“Since the mainland is targeting the gradual achievement of full yuan convertibility, Qianhai should be a pioneer for progress,” said Zhang Xiaoqiang of the National Development and Reform Commission, China’s planning body. The plan poses some puzzles. If offshore yuan were to be lent freely to Qianhai firms, what would stop them lending the money on to the rest of the country? An easing of capital controls between Hong Kong and Qianhai would seem to require a tightening of controls between Qianhai and the rest of the mainland. Otherwise the stream of yuan inflows could become a flood.
The answer to the puzzle may lie in the timing. The Qianhai zone is not scheduled for completion until 2020, by when China’s capital controls may already be far looser nationwide. It is therefore unlikely that Qianhai’s opening up will get too far ahead of the rest of the country’s. In finance, as well as infrastructure, China likes to lay down the tracks, platforms and ticket barriers before the throngs arrive. Definition of ‘Special Economic Zone – SEZ’ Designated areas in countries that possess special economic regulations that are different from other areas in the same country.
Moreover, these regulations tend to contain measures that are conducive to foreign direct investment. Conducting business in a SEZ usually means that a company will receive tax incentives and the opportunity to pay lower tariffs. Investopedia explains ‘Special Economic Zone – SEZ’ While many countries have set up special economic zones, China has been the most successful in using SEZ to attract foreign capital. In fact, China has even declared an entire province (Hainan) to be an SEZ, which is quite distinct, as most SEZs are cities. Read more: http://www. investopedia. com/terms/s/sez.
asp#ixzz29RnLw992 China’s Special Economic Zones Keep Importance| China’s special economic zones will still be “special” after the country’s entry to the World Trade Organization (WTO) and can continue to boom because they are better prepared for its rules, officials and economists said on Wednesday. | | | PRINT| DISCUSSION| CHINESE| SEND TO FRIEND| | | | Special zones better prepared for WTO rulesChina’s special economic zones will still be “special” after the country’s entry to the World Trade Organization (WTO) and can continue to boom because they are better prepared for its rules, officials and economists said on Wednesday.
While thousands of Chinese businesses have yet to familiarize themselves with the WTO principles and practices, China’s technological and economic areas are already ahead of the game, said Pi Qiansheng, chief official who oversees the Tianjin Economic Development Area (TEDA). Special Economic Zones| President Jiang on Special Economic ZonesChina will develop special economic zones (SEZs) all through the process of the country’s reform, opening up and modernization drive, Chinese President Jiang Zemin said November 14 in Shenzhen, China’s first SEZ. Feature : Economic Zones|
Chief special economic zonesChina’s chief special economic zones are Shenzhen, Zhuhai, Shantou, Xiamen cities and Hainan Province. But they encompass more than 100 national economic and technological development zones, 15 national bonded areas and 14 border trade and co-operation regions in the broadest sense, said Hu Ping, former director of the Special Economic Zone Office under the State Council. Years before China joined the global trade club, the special economic areas had begun operating in line with international practices, said Pi, director of the administrative commission of TEDA, the largest development zone in North China.
“By implementing international practices – like simplified approval procedures and transparency – TEDA has actually been operating according to WTO rules,” he said. Keep going wellBoth Pi and Hu denied allegations that the national treatment and non-discrimination principles of the WTO will undermine the development of the special economic and technological areas, which used to receive – and give – preferential policies. “The special zones in various sizes and forms in China have grown from their initial state when they needed policy support before they were able to rely on themselves for expansion,” Hu said.
“I don’t see much of a negative impact of WTO entry on their recruitment of experts and the overall investment environment. ” The special zones can instead maintain their “special” status by maximizing their accumulated expertise and their advantages in geographic locations and export-orientated industrial structures. They can gain a head start in absorbing foreign funds, technology and developing modern logistic systems, Hu said. The bonded zones, export product processing quarters and high-tech parks in those special areas will open still wider, Pi said.
“It is my understanding that the WTO rules obligate the government to shift its functions to serving businesses in a more efficient fashion,” Pi said. “In TEDA, for example, the authorities have already modified or removed all the regulations and operations that go against the WTO rules. ” Within the framework of national treatment requirements of the WTO, TEDA will give more favourable policies to overseas investment to attract more transnationals, he said. | SEZs: Go the Chinese way
S. Majumder SPECIAL Economic Zones (SEZs), first proposed in the Exim Policy 2000-01 by the erstwhile Commerce Minister, Mr Murasoli Maran, are now a reality. With Export Processing Zones (EPZs) failing to help achieve the export targets, sights are on SEZs to deliver the goods. Eight SEZs are already operational — seven EPZs were converted for this purpose — and another nine have been approved and are to be located strategically. The Commerce Minister, Mr Arun
Jaitley, overwhelmed by the success of China’s SEZ experiments has reposed much faith in them not only for export growth but also to boost FDI, which has become imperative especially as domestic investments are sagging. It is heartening that Mr Jaitley seems to be aware of the fact that the objectives of SEZs are much wider than merely boosting exports. Can India replicate China’s immensely successful SEZ model? The incentives offered in Indian SEZs are in no less than those in China.
From duty-free imports and tax holidays to freedom from cumbersome Custom procedures, the SEZs’ facilities match those in China. Hence, theoretically at least, India’s SEZs should be no less attractive to foreign investors as the Chinese versions. But reality paints a different picture. The key to SEZ success lies not just handing out incentives. Conceptually, EPZs and