The China Venture
The China Venture The China Venture
technologies and great amounts of capital should be brought into the country. Europe and the USA are more than welcome to enter the new modern model of the Chinese economy. Yet success is far from guaranteed. Deng’s reforms liberated millions to earn a decent living and some to become wealthy. Farmers in the countryside can still only profit from the land but may not own it outright. People in China’s richer coastal provinces look to foreign markets and investments, rather than to Mr. Jiang’s Beijing. "Today China’s state-owned enterprises still account for around two-fifths of industrial output and soak up four-fifths of investment, blocking opportunities for more productive companies to create wealth and jobs. In many ways China remains a collectivist nightmare. Nine out of ten Communists at party headquarters tell you it must stay that way.“ 78 3.2.2.2 Creation of Special Economic Zones (SEZ), Free Trade Zones (FTZ), and High Technology Development Zones Special Economic Zones (SEZ) Deng Xiaoping’s idea that some regions should get preferential treatment and become rich sooner than others was essential. Between 1979 and 1980, in order to attract foreign investments, the Chinese Government entitled the Guangdong and Fujian provinces to special preferential policies and flexibility in their economic activities. On a "trial basis“ five special economic zones were opened (Shenzhen, Zhuhai, Xiamen, Shantou, and Hainan Island). 79 In May 1984, China opened 14 coastal cities including Shanghai. In the 1990s, the Shanghai Pudong New Area was opened. The opening of all these areas has had a great impact on inland China and the border areas. So far China has established special economic zones, economic and technological development zones, coastal open cities, coastal open economic regions, riverside open cities, and tourism and vacation zones. In total, there are ten different types of open regions where preferential policies are granted for foreign investment. Within these regions, a large number of infrastructure and service facilities have been established: communications, electric power supply, telecommunications, water supply, and industrial facilities. All this creates a sound 77 Craighead’s Country Reports, 1996. 78 The Economist, 9/97. 79 Ernst and Young, Doing Business in China, 1994. 64
environment for foreign investment and good living conditions for foreign staff working in China. 80 FIGURE 3-2: Map of China 81 The run to China (possibly due to low growth rates in the industrial countries) favoured the idea and implementation of special zones. Today approximately 288 special zones are found within China, each having different tax concessions and supportive measures for foreign investors. Generally, technology and export intensive companies can rely on generous privileges. Mostly terms and conditions depend on good negotiation skills by the investors. Suzhou and Wuxi (Province Jiangsu) e.g., two hours from Shanghai by car, are known for conceding even more privileges in order to attract important foreign investors. 82 Free Trade Zones (FTZ) and High-Technology Development Zones Free Trade Zones, also known as bonded trade zones, were established primarily to encourage export processing by allowing the duty-free import of goods and materials. By the end of 1993, there were 13 FTZ's. China has approximately 50 hi-tech industry development zones. These zones were established to encourage economic and technological development and to attract technology- intensive and knowledge -intensive enterprises that research, develop, or produce several types of new technology and related projects, including microelectronics, information technology and computer software, laser technology, biotechnology, life science and pharmaceuticals, etc.. 80 Wang Yongjun, Investment in China, 1997. 81 Source: Internet http://www.emulateme.com/chinamap.htm. 82 China - Wirtschaftspartner zwischen Wunsch und Wirklichkeit, Reisach et al., 1997. 65
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technologies and great amounts of capital should be brought into the country. Europe and the<br />
USA are more than welcome to enter the new modern model of the Chinese economy. Yet<br />
success is far from guaranteed. Deng’s reforms liberated millions to earn a decent living and<br />
some to become wealthy. Farmers in the countryside can still only profit from the land but<br />
may not own it outright. People in <strong>China</strong>’s richer coastal provinces look to foreign markets<br />
and investments, rather than to Mr. Jiang’s Beijing. "Today <strong>China</strong>’s state-owned enterprises<br />
still account for around two-fifths of industrial output and soak up four-fifths of investment,<br />
blocking opportunities for more productive companies to create wealth and jobs. In many<br />
ways <strong>China</strong> remains a collectivist nightmare. Nine out of ten Communists at party<br />
headquarters tell you it must stay that way.“ 78<br />
3.2.2.2 Creation of Special Economic Zones (SEZ), Free Trade Zones (FTZ),<br />
and High Technology Development Zones<br />
Special Economic Zones (SEZ)<br />
Deng Xiaoping’s idea that some regions should get preferential treatment and become rich<br />
sooner than others was essential. Between 1979 and 1980, in order to attract foreign<br />
investments, the Chinese Government entitled the Guangdong and Fujian provinces to special<br />
preferential policies and flexibility in their economic activities. On a "trial basis“ five special<br />
economic zones were opened (Shenzhen, Zhuhai, Xiamen, Shantou, and Hainan Island). 79 In<br />
May 1984, <strong>China</strong> opened 14 coastal cities including Shanghai. In the 1990s, the Shanghai<br />
Pudong New Area was opened. <strong>The</strong> opening of all these areas has had a great impact on<br />
inland <strong>China</strong> and the border areas.<br />
So far <strong>China</strong> has established special economic zones, economic and technological<br />
development zones, coastal open cities, coastal open economic regions, riverside open cities,<br />
and tourism and vacation zones. In total, there are ten different types of open regions where<br />
preferential policies are granted for foreign investment. Within these regions, a large number<br />
of infrastructure and service facilities have been established: communications, electric power<br />
supply, telecommunications, water supply, and industrial facilities. All this creates a sound<br />
77<br />
Craighead’s Country Reports, 1996.<br />
78<br />
<strong>The</strong> Economist, 9/97.<br />
79<br />
Ernst and Young, Doing Business in <strong>China</strong>, 1994.<br />
64
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