Economic Zones Presentation Outline: Special Economic Zones (SEZs) Economic and Technological Development Zones (ETDZs)

Economic Zones Special Economic Zones (SEZ) Shenzhen, established in 1980 Zhuhai, Shantou Xiamen Hainan Island Purpose -- restrict the contagion effect (if any) Special tax status favorable investment climate for foreign investors

SEZ continued low wage, cheap land and convenient geographic location (water and air transportation) export tax waived import duties and other taxes waived after-tax profits to be repatriated without penalty decentralization of authority (red-tape reduced)

Shenzhen Set up as the special economic zone in 1980 Testing ground for market socialist economy Close to Hong Kong No price control No mandatory production goals Ambition to be the main export and foreign- exchange earnings center Base for technology, finance and banking center

Shenzhen- continued Migration of foreign-owned industries –falling work efficiency –fewer preferential policies –more red tape compared with other cities –increasing higher labor and material costs

Xiamen City close to Taiwan special zones targeted to Taiwanese investors 1992, Ziaman’ s GDP/capita grew 5 times a decade ago and 3 times the national average Used to have limited port facility. Now new wharf (built) financed by World Bank and a Hong Kong company Infrastructure projects (highway, railway, airport funds from local and central governments-- increasing difficult

Xiamen--continued Favorable terms for foreign investors large pool of unskilled workers weak on high-tech expertise

Shantou City between Guangdong and Fujian province Investments come from Hong Kong (mainly) and other countries such as Singapore, Malaysia, and Indonesia. Factory rent is low (1/3 of Shenzhen) and low labor cost Economic and cultural centers Extensive infrastructure projects Traffic is a problem

Hainan Ambition to be a “second Hong Kong” Economic activity centers on property and finance 1992, first stock market trading in 4 property companies and an import-processing firm -- later on closed Airport links to Hong Kong and Southeast Asian capitals tourist and finance center.

Zhuhai Smallest of all SEZs, closer to Macao (used to be a Portuguese colony) good port facility handling 30,000 ton vessels Good road links to Guangzhou trade Agricultural products light industries such as toys

Economic and Technological Development Zones 14 coastal cities more skilled and better educated work-force better communications better industrial infrastructure a tradition of commerce

Guangzhou Political, economical and cultural capital of the Southeast China vibrant and fun-loving city Port city Many foreign banks to set up offices there broad industrial base with strength in light industries (textiles, electronics, pharmaceuticals)

Shanghai A City with more than 13 million people 1% of China’s population contributed to 1/5 of industrial output and 2/3 of international trade New Development area- Pudong –Lujiazui Finance and Trade zone –Jinquao Export Processing Zone –Waigaoquio Free Trade Zone –Zhanjiang Hi-tech Park

Shanghai-continued Competitive factors: Strategic location - good port and middle of China Unique characteristics - heritage preferential treatments access to market quality of management

Lujiazui Finance and Trade Zone Catalyst for Pudong development central district business area future for Shanghai stock Exchange building central bank and other banks offices

Jinqiao Export Processing –industrial center –served by two ports Waigaoquio Free Trade Zone –small no. of firms (least successful) –uncertain tax and tariff regime Zhangjiang Hi-Tech Park –bio-technical engineering, microelectronics, laser computer and software and telecommunications

Tianjin Gateway to Beijing low taxes, cheap land and cheap labor Closer to South Korea, which is an important investor in that city Good port

Dalian Once occupied by Japan, somewhat influenced by Japanese culture more international scope --Korean and Hong Kong firms are moving in the city good port and airport focus on entreport predominance of money losing state-owned enterprises