Three years have passed since the authorities in Mainland China announced their decision to establish four Special Economic Zones in the provinces of Kuangtung and Fuchien. Despite the stated importance of these zones, there has not been a systematic study done covering the motives behind and the special features, possible economic effects, and likely future developments of these newly set-up institutions.
This paper is designed to fill this gap. It seeks to identify the salient characteristics of the four new zones, based on the motivation behind their establishment, the selection of their locations, and the laws and regulations that have been devised to direct their operations, in order to both assess their future economic effects and to speculate on their future outcomes.
The following is a short list of some of the conclusions reached in the study:
(1) These zones have been established for both economic and political reasons.
(2) Theoretically, the establishment of the zones in these two provinces is in line with Mainland China’s comparative advantages, largely due to the considerable surplus labor existed in Kuangtung and Fuchien.
(3) Irrespective of comparative advantages, the design of the new zones is geared towards the structure of Hong Kong economy. This means that the prosperity of the former will hinge upon the future prosperity, or decline, of the latter.
(4) Two of the zones (in Shenchen and in Chuhai) depend upon the “export of land” to attract foreign capital funds. The resultant higher rents from this practice may actually discourage foreign investments in the long run. In the short run, Chinese communists themselves may not be able to significantly materialize the backward linkage effects that they expect to have from these new zones, because of the geographical location of the zones & because they are located in regions lacking complementary raw material.
