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By Gentry Allen

In 1978, China enacted the Open Door Act to create Special Economic Zones (SEZ) after years of a centrally planned economy. Investors who decide to relocate into China’s SEZs are able to access perks not available everywhere else in China. Enterprises operating in these zones are independent from the state, allowing entrepreneurs’ autonomy to be protected. SEZs are also market-oriented with relaxed tax policies intended to attract foreign capital enterprises. However, in order to cultivate these structural changes, China has had to look inwards, and examine its own policies and procedures.

The first policies that were adopted to satisfy foreign interests were meant to create land reforms in the intended economic zones. Throughout the Cultural Revolution, which took place between 1966 and 1976, land in rural areas was removed from private ownership, and ‘production cooperations’ between farming communities and the Chinese government were established. In order to create SEZs, China leased selected state-owned areas to foreign corporations. By granting legal land rights to foreign corporations, the Chinese government has been able to encourage land development and accelerate the creation of markets while satisfying the expectations of global partners. Six different types of SEZs have developed: administrative areas, international cooperation areas, corporate industries, local industrial parks, industry clusters and geographical areas.

When creating SEZs, geographical considerations played a large part in deciding where they would be established. Both transportation and proximity to Taiwan and Hong Kong were considered. The Pearl Delta region and Min Delta region are convenient locations for these two Asian economic powerhouses to attract talent and connect to mainland China. Today, most development zones are located in coastal areas with access to ports, allowing multiple forms of transportation.

Finally, the Chinese government needed to ensure that SEZs would promote entrepreneurial and innovative culture to ensure their success. To generate such an environment the Chinese government attracted immigrants and foreign corporations by relaxing visa procedures as a means of aiding their migration. The Shuzhen SEZ grants a five-day visa to foreigners upon arriving at a port of entry into China. By recognizing the importance of foreign workers and ideas, SEZ visas enable workers to seek business opportunities in China.

Despite the high level of economic activity, citizens living within SEZs face an array of problems. As the communities within SEZs have expanded, local governments have often been unable to cope with the rapid influx of new residents. Some communities have been unable to provide adequate public services for transportation, health, and education, while other SEZs are completely isolated from cultural and leisure activities, making it undesirable for talented individuals to move to these areas. Better urban planning in the future may help offset the challenge of providing more livable communities for citizens.

Other community concerns surrounding China’s SEZs are environmental destruction and the waste of materials. The areas where SEZs are located typically undergo dramatic landscape changes in order to provide the necessary infrastructure and raw materials to support the incoming investments. Often the growth of an SEZ creates a short period of high demand for materials, which results in a wasted surplus once demand begins to plateau. However, international pressure on China concerning pollution will continue to encourage the administration of SEZs to be forward-thinking in terms of environmental conservation and renewable energy sources.

The Open Door Policy and Special Economic Zones exemplify China’s active desire to become an economic superpower. SEZs will continue to be a crucial tool for expanding China’s international influence. This promise can been seen with the international expansion of the SEZs through the new Chinese development zones in the continent of Africa and in Costa Rica. Through such measures, China has demonstrated that it is willing to challenge aspects of its own culture and reshape the role of its government.   

By Gentry Allen

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