Special Economic Zones in China

The Reforms That Made China's Economy What It Is Today

China World Trade Center Tower 3 with China Central TV Headquarters, Beijing, smog
China World Trade Center Tower III and China Central Television Headquarters, Beijing. Photo by Feng Li/Getty Images AsiaPac Collection/Getty Images

Since 1979, China’s Special Economic Zones (SEZ) have been beckoning foreign investors to do business in China. Created after Deng Xiaoping’s economic reforms were implemented in China in 1979,  Special Economic Zones are areas where market-driven capitalist policies are implemented to entice foreign businesses to invest in China.

The Importance of Special Economic Zones

At the time of its conception, Special Economic Zones were considered so "special" because China's trade was generally controlled by the nation's centralized government.

Therefore, the opportunity for foreign investors to do business in China with relatively no government intervention and with the freedom to implement market-driven economics was an exciting new venture.

Policies regarding Special Economic Zones were meant to incentivize foreign investors by providing low-cost labor, specifically planning Special Economic Zones with ports and airports so that goods and materials could be easily exported, reducing corporate income tax, and even offering tax exemption. 

China is now a huge player in the global economy and has made large strides in economic development in a concentrated period of time. Special Economic Zones were instrumental in making China's economy the way it is today. Successful foreign investments galvanized capital formation and spurred urban development what with the proliferation of office buildings, banks, and other infrastructures.

What Are the Special Economic Zones?

The first 4 Special Economic Zones (SEZ) were established in 1979.

Shenzhen, Shantou, and Zhuhai are located in Guangdong province, and Xiamen is located in Fujian province. 

Shenzhen became the model for China’s Special Economic Zones when it was transformed from 126-square-miles of villages known for sales of knockoffs to a bustling business metropolis. Located a short bus ride from Hong Kong in southern China, Shenzhen is now one of China’s richest cities.

 

The success of Shenzhen and the other Special Economic Zones encouraged the Chinese government to add 14 cities plus Hainan Island to the list of Special Economic Zones in 1986. The 14 cities include Beihai, Dalian, Fuzhou, Guangzhou, Lianyungang, Nantong, Ningbo, Qinhuangdao, Qingdao, Shanghai, Tianjin, Wenzhou, Yantai, and Zhanjiang. 

New Special Economic Zones have been continually added to encompass a number of border cities, provincial capital cities, and autonomous regions.