Sez in China

E particular stinting regularize A finical stinting partition off(SEZ) is a geographical region that has sparing and opposite rights that argon much(prenominal) degage-market-oriented than a do primary(prenominal)s typical or issue justnesss. Nationwide laws may be suspended inner a finicky stintingal regularize. The category SEZ c everywheres, includingfree trade sways(FTZ), ex larboardation bear on Z matchlesss (EPZ), free Zones (FZ),industrial parksor industrial e soils (IE),free ways,free frugal zones,urban enterprise zonesand other(a)s.Usu completelyy the goal of a structure is to increaseextraneous direct enthronisationby contrasted investors, typically aninternational furrowor amultinational corporation(MNC), assumement ofinfrastructureand to increase the employment. Currently, the most prominent SEZs in the country atomic number 18Shenzhen,Xiamen,Shantou, andZhuhai. It is nonable that Shenzhen, Shantou, and Zhuhai atomic number 18 all inGuangdo ng province, and all argon on the southern brim of chinawargon where sea is very access codeible for transferralation of goods.An analysis of the performance of these SEZs in chinaw are versus those in India in self-aggrandisingizing the Chinese and Indian economies and their pertain on frugal growth was conducted byLeong (2012). This paper investigates the character reference of finicky frugal zones (SEZs) . The policy adjustment to a more(prenominal) liberalized thrift is identified using SEZ variables as instrumental variables. The results indicate that trade and FDI growth assimilate positive and statistically signifi atomic number 50t effects on stinting growth in these countries. The presence of SEZs increases regional growth me desire increasing the number of SEZs has trifling effect on growth.The key to faster frugal growth appears to be a greater railway yard of liberalization. circumscribed scotch zones of the sights republic of china limited fru galal Zones of the Peoples body politic of china(SEZs) arespecial scotch zoneslocated inmainland chinaware. The disposal of the Peoples Republic of mainland Chinagives SEZs special (morefree market-oriented) sparingal policies and flexible governmental measures. This allows SEZs to utilize an economic management system that is e peculiarly conducive to doing bank line that does non exist in the rest of mainland China.History Since the late 1970s, and especially since the 3rd Plenary Session of the el nonwith defendingth CPC interchange Committee in 1978, the mainland China government has unflinching toreform the national economic get alongup. The basic sound out policy has foc employ on the formulation and implementation of overall reform and on the fence(p)ing to the outside military personnel. During the 1980s, the PRC passed several stages, ranging from the establishment of special economic zones and expand coastal cities and areas, and designating open inland and coastal economic and technology development zones.Since 1980, the PRC has established special economic zones inShenzhen,ZhuhaiandShantouinGuangdong ProvinceandXiameninFujian Province, and designated the entire province ofHainana special economic zone. In August 1980, theNational Peoples Congress(NPC) passed Regulations for The Special Economy Zone ofGuangdongProvince and officially designated a portion ofShenzhenas the Shenzhen Special Economy Zone (SSEZ).In 1984, the PRC foster exposed 14 coastal cities to overseas commitDalian,Qinhuangdao,Tianjin,Yantai,Qingdao,Lianyungang,Nantong, kidnap,Ningbo,Wenzhou,Fuzhou,Guangzhou,ZhanjiangandBeihai. Since 1988, mainland Chinas opening to the outside macrocosm has been ex cardinalded to its b stage areas, areas along the Yangtze River and inland areas. First, the extract decided to turn Hainan Island into mainland Chinas biggest special economic zone ( delight ind by the 1st session of the 7th NPC in 1988) and to enlarge the other qu adruple special economic zones.Shortly aft(prenominal)wards, theState Councilexpanded the open coastal areas, extending into an open coastal belt the open economic zones of theYangtze River Delta,bone River Delta, Xiamen-Zhangzhou-QuanzhouTriangle in south Fujian,Shandong Peninsula,Liaodong Peninsula(LiaoningProvince),HebeiandGuangxi. In June 1990 the PRC government opened thePudongNew Area in Shanghai to overseas investment, and special cities along the Yangtze River valley, with Shanghais Pudong New Area as its dragon head. Since 1992, theState Councilhas opened a number of duck cities, and in addition, opened all the capital cities of inland provinces and sovereign regions. In addition, 15 free trade zones, 32 severalize-level economic and technological development zones, and 53 new and ripe(p)industrial development zones tolerate been established in large and medium-sized cities. As these open areas adopt several(predicate) preferential policies, they play the dual spot s of windows in growth the conflicting-oriented miserliness, generating immaterial exchanges by means of exporting products and importing advanced echnologies and of radiators in accelerating inland economic development. Primarily geared to exporting processed goods, the quintette special economic zones are opposed-oriented areas which integrate science and industry with trade, and benefit from preferential policies and special managerial systems. In 1999, Shenzhens new-and sophisticated industry became one with best prospects, and the output value of new-and high-tech products reached 81. 98 meg yuan, making up 40. 5% of the citys total industrial output value.Since its founding in 1992, the Shanghai Pudong New Zone has do great progress in both absorbing unconnected capital and accelerating the economic development of the Yangtze River valley. The state has extended special preferential policies to the Pudong New Zone that are not yet enjoyed by the special economic zones. For instance, in addition to the preferential policies of reducing or eliminating Customs duties and income task common to the economic and technological development zones, the state besides permits the zone to allow outside business wad to open financial institutions and run tertiary industries.In addition, the state has given Shanghai permission to mend up astock exchange, expand its examination and approval authority over investments and allow outside(prenominal)-funded banks to engage inRMBbusiness. In 1999, theGDPof the Pudong New Zone came to 80 trillion yuan, and the total industrial output value, 145 billion yuan. In May 2010, the PRC designated the city ofKashgarinXinjianga SEZ. Kashgars annual growth rate was 17. 4 percent from 2009, and Kashgars designation has since increasetourismandreal estate pricesin the city.Kashgar is close to Chinas border with the independent states of causalitySoviet Central Asiaand the SEZ seeks to capitalize on international trad e links between China and those states. nominate of SEZs As part of its economic reforms and policy of opening to the world, between 1980 and 1984 China establishedspecial economic zones(SEZs) inShantou,Shenzhen, andZhuhaiinGuangdongProvince andXiameninFujianProvince and designated the entire island province ofHainana special economic zone.In 1984 China opened 14 other coastal cities to overseas investment (listed north to south)Dalian,Qinhuangdao,Tianjin,Yantai,Qingdao,Lianyungang,Nantong,S hanghai,Ningbo,Wenzhou,Fuzhou,Guangzhou,Zhanjiang, andBeihai. Then, first in 1985, the central government expanded the coastal area by establishing the adjacent open economic zones (listed north to south)Liaodong Peninsula,HebeiProvince (which surroundscapital of Red ChinaandTianjin),ShandongPeninsula,Yangtze River Delta,Xiamen-Zhangzhou-QuanzhouTriangle in southern Fujian Province,Pearl River Delta, andGuangxi.In 1990 the Chinese government decided to open thePudongNew Zone inShanghaito ove rseas investment, as swell as more cities in the Yangzi River Valley. Since 1992 theState Councilhas opened a number of border cities and all the capital cities of inland provinces and autonomous regions. In addition, 15 free-trade zones, 32 state-level economic and technological development zones, and 53 new and high-tech industrial development zones switch been established in large and medium-sized cities. As a result, a multilevel change pattern of opening and integrating coastal areas with river, border, and inland areas has been formed in China.Type City Province Special economical Zone, City Shenzhen Guangdong Zhuhai Guangdong Shantou Guangdong Xiamen Fujian Kashgar Xinjiang Special stinting Zone, Province No city Hainan Coastal maturation Areas Dalian Liaoning Qinhuangdao Hebei Tianjin Tianjin Yantai Shandong Qingdao Shandong Lianyungang Jiangsu Nantong Jiangsu Shanghai Shanghai Ningbo Zhejiang Wenzhou Zhejiang Fuzhou Fujian Guangzhou Guangdong Zhanjiang Guangdong Beihai Guangxi - Hainan Special economical ZoneHainan became a special economic zone in 1988 later on the other 4 zones had already established themselves as being successful and scalable. For current foreign investment normals for the Hainan zone please seeHainan Special Economic Zone, Foreign Investment Regulations - Economic policies of SEZs 1. Special assess incentives for foreign investments in the SEZs. 2. Greater independence on international trade activities. 3. Economic characteristics are exhibited as 4 principles 1. social organisation primarily relies on geting and utilizing foreign capital 2.Primary economic forms are Sino-foreignjoint venturesand partnerships as well as wholly foreign- leted enterprises 3. Products are primarily export-oriented 4. Economic activities are primarily driven by market forces SEZs are listed separately in the national planning (including financial planning) and rescue province-level authority on economic administration. S EZs local congress and government have legislation authority. Leong (2012) investigates the parting of special economic zones (SEZs) in liberalizing the Chinese and Indian economies and their impact on economic growth.The policy change to a more liberalized economy is identified using SEZ variables as instrumental variables. The results indicate that export and FDI growth have positive and statistically signifi jakest effects on economic growth in these countries. The presence of SEZs increases regional growth tho increasing the number of SEZs has negligible effect on growth. The key to faster economic growth appears to be a greater pace of liberalization. Chinas Special Economic Zones Xu Dixin The Chinese Government has set up four special economic zones.They are located in the cities of Shenzhen, Zhuhai and Shantou of Guangdong Province and the city of Xiamen of Fujian Province . Politically, the special economic zones are based on assurance of Chinas state sovereignty and gover ning authority is entirely in Chinas hands. Economically, they are essentially based on state capitalism. APPROXIMATELY 300 special economic zones have been established in to the highest degree 75 countries and regions in the world today (some are called free business zones, some bear on-exporting zones and some evaluate-free trading zones).Practices vary between countries. Special economic zones are set up when a country delimits a special area where, through exemption of customs duty duty, it formulates various(a) preferential conditions and brooks public facilities so as to attract foreign investors to set up factories whose finished products are mainly for export. Insofar as capitalistic social systems are cin one caserned, few problems arise for those countries which set up special economic zones because the characteristics of such zones are essentially compatible with the development of capitalism.Some people wonder why China, a socialist country, has set up special zone s which permit the manoeuvre of foreign capital. They ask Concessions were eliminated a long time ago, why are a few areas with foreign investment being processd in the manner of concessions? They to a fault want to k this instant whether the four special economic zones represent a resurgence of the causality concessions. Although crucial, such concerns are oversimplified and superficial. The situation can be best under(a)stood within scene of the past and the nations present state of development.At the end of the 19th century, foreign capital poured into China. This was a result of infringement by imperialist powers which used gunboat diplomacy to impose unequal treaties on China and infringed upon its state sovereignty. The foreign capital presently being invested in China is not based on unequal treaties, simply on the assurance of Chinas state sovereignty. The special economic zones do not represent the revival of former concessions because authority over them is entirel y in Chinas hands.Be they joint ventures with Chinese and foreign investments set up in the special zones or enterprises run exclusively by foreign or overseas Chinese capital, they moldiness ob facilitate the Chinese Governments decrees and regulations, pay business and income revenuees correspond to provisions and abide by Chinas fatigue laws. Although they represent a minor change in state economic policy, the special economic zones are not in basic conflict with Chinas socialist economic system. The economy in the special zones continuees the socialist state economy, the collective economy and the individual economy, save state capitalism has the lions share.Processing materials for foreign countries, compensatory trade, co-operative enterprises and joint ventures are all state capitalist economic activities. Strictly speaking, the enterprises run by foreign or overseas Chinese capital relieve oneself a kind of capitalist economy, but the activities of such enterprises are subject to contain and regulation by the governments of the special zones. As a result, they are special kinds of capitalist enterprises. Lenin clearly utter State capitalism is capitalism which we shall be able to restrict, the limits of which we shall be able to fix. This provides us with a supposititious explanation of the nature of the enterprises financed by the piece in the special zones. Some people worry that the capitalists pull up stakes put to work the surplus value of the labourers. It should be admitted that some exploitation does exist in the joint ventures or individually financed enterprises in the special zones. According to Chinas regulations, joint ventures or enterprises individually financed by foreign capital or overseas Chinese capital can remit their share of winnings abroad after they have paid their income tax revenue agree to relevant provisions and with the approval of the authorities concerned.The clamss remitted abroad and the profits retaine d for reinvestment in the special zones obviously represent the surplus value of the labourers. But allowing foreign or overseas Chinese capital to gain profits is, in a sense, a policy of repurchase (that is, a policy of slackly nationalizing the means of payoff of the exploiting classes at a certain price). Shortly after the founding of the Peoples Republic, the government pick out a redemption policy towards the national bourgeoisie in order to win its co-operation.at once we are employing a redemption policy to win the co-operation of foreign and overseas Chinese capital. This is necessity for the development of the economies of the special zones. One of the characteristics of special zone economies is the fact that they open the door to foreign countries. take for given Shenzhen and Zhuhai for example, their economic ties with Xianggang (Hongkong) and Aomen (Macao) are much closer than with the interior. This situation may result in the close kindred and mutual-effect be tween the role of regulating production according to market demands and the market fluctuations of Xianggang and Aomen. inwardly the special zones, it cannot be say that the regulation of production by state planning does not exist or does not function. However, if regulation of production by planning is made to counterbalance too large an area, if it see outs the main body of the economy of the special zones, then it will be dis utilityous to absorbing foreign capital and growth the economies of the special zones. Newly built harbour in the Shekou industrial area managed by a Xianggang (Hongkong) company. Special Zones FunctionsBecause the special economic zones in Guangdong and Fujian Provinces have only been established for a short catch of time, their role has not been brought into full play. The following points address the concerns most frequently expressed regarding their operation They serve as bridge over for introducing foreign capital, advanced technology and equip ment and as classrooms for training personnel capable of mastering advanced technology. some(prenominal) in the process of production and circulation, and in the joint ventures with Chinese and foreign investments in the special zones, we can l master the latest techniques and scientific methods of management.To develop the national economy and expedite Chinas enterprise production and management, it is imperative form to promote argument between regions, between trades and with-in a certain trade. In the development of the economies of the special zones -and during their opposition with Xianggang and Aomen it is possible to win in the competition by l weeing how to pack comparisons regarding the regulation of production according to market demands. improve the quality of goods, develop new products and reduce production costs. It is possible to absorb ample amounts. of foreign exchange.It is also possible to transfer part of the foreign capital, technology and equipment throu gh the special zones to other regions concerned and set up new enterprises thither. The countrys special zones can serve as experimental units in economic structural reform and as schools for learning the law of value and the regulation of production according to market demands. By developing the economies of the special zones, it is possible to employ many young people waiting for conjectures. Some people wonder why it is shootful, more than 30 historic period since the founding of the Peoples Republic, to set up special economic zones.They also wonder whether the special zones signify that China is seeking admirer from capitalist countries. Such concerns are understandable, but unwarranted. Since its establishment, New China has scored brilliant achievements in many fields of work, including economic construction. But it has also traversed a tortuous path. Compared with the worlds most advanced nations. Chinas level of production is in time sort of low. Its funds and techno logy are incompatible with the requirements of the modernization drive.Furthermore, while implementing its policy of self-reliance in economic construction, China does not exclude co-operation with capitalism. Facts will prove that through developing the economies of the special zones, we will be able to take for use of foreign and overseas Chinese capital, as well as state capitalism, to develop Chinas socialist economy. Economic construction in the special zones will possibly become a special form of supplement to the development of Chinas socialist economy. The total economies of the special zones will only constitute a very small portion of the national economy.Although the socialist economy will continue to dominate, the role of the special zones must not be overlooked. Japanese technician passing on technical know-how to a Chinese worker at a joint Sino-Japanese TV company. Policies and Measures 1. The development of the special economic zones requires emphasis on the word sp ecial. For instance, in opening the door to foreign countries, it is necessary to simplify procedures for entry and exit and make things easy for visitors. In tax rate, it is essential to give preferential treatment to imported goods in customs duties. Tax exemptions for some goods are needed.A portion of the profits gained by foreign financed enterprises is allowed to be remitted abroad. 2. The essence of developing the special economic zones lies in the import of foreign capital making foreign capital serve Chinas socialist modernization drive. Given this, the lives of the people residing in the special zones are bound to change. Capitalist political orientation is bound to increase. This will require us to devote special attention to the ideological education of people in the special zones. Of course, education and training in science and technology should not be neglected, either. 3.The gold used in the special economic zones is mainly Renminbi (peoples currency), the use of foreign currencies is limited to designated areas. Renminbi represents the currency of the Peoples Republic of China, but in view of the characteristics of special economic zones, it may prove necessary to issue contrastive currency for them. This is a very complicated problem which calls for further study. 4. It would be impossible for the special zones to develop without the support of Chinas interior regions. Only when they see to it in cooperation with the interior can the special zones gain necessary materials.Of course, such cooperation is based on mutual benefit. And it can be successful only when the special zones arrive at commodities needed by the interior. This co-operation must be carried out in a planned way. Chinas capital controls The more special economic zone The landscape of capital-account liberalisation Jul 7th 2012 QIANHAI from the print magnetic variation * Where in that holes muck ELSEWHERE in the developing world, towns grow before the infrastructure is sort of ready to support them. Things are different in Shenzhen, Chinas original Special Economic Zone (SEZ), a stones throw from Hong Kong.The subway station at Qianhai bay, on the citys west coast, is spick and span, with a full complement of signs, announcements and billboards, including one for a performance by the BBC National Orchestra of Wales, sponsored by Classy Kiss milk. But only one exit is open. And it surfaces in the sum of a wasteland of dirt, scrub and puddles. It is, surely, the best connected nowhere anywhere. In this section * Powering down * The more special economic zone * Rollercoaster * Duncan dough notes * The Oracle of Boston * Move over Reprints Related topics * Hong Kong * China This empty spot is, however, full of big ambitions.It is one corner of a 15-square-kilometre zone earmarked for experimentation by Chinas cabinet. The zone has licence to try policies that are more special than those prevailing scour in an SEZ. It aims to attract modern assist industries rather than big-box manufacturers. It will charge only 15% corporate-profit tax and levy no income taxes on the finance professionals, lawyers, accountants and creative people it hopes eventually to attract. These cosmopolitan folk will live in a waterfront city, says James Corner, whose firm won a competition cardinal years ago to design the bays future landscape.Over the next couple of years, he explains, the city will build a system of water fingers, large parks that collect, retain and purify the streams that full point from the hinterland, allowing water to enter the bay clean and clear. Water is not the only time period Qianhai aims to collect and retain. It also wants to attract some of the offshore yuan that have pooled outside mainland Chinas borders. Over 550 billion yuan ($87 billion) now sits in Hong Kong deposit accounts some other 60 billion yuan sits in Singapore, and 35 billion more resides in customer deposits in London, according to an April study b y Bourse Consult.These yuan cannot flow freely back into mainland China, however. shores can invest a limited amount in the mainlands inter-bank bond market. Companies that raise yuan outside China can seek permission to invest the notes in their operations inside the country. But the money can easily become bogged down in Chinas exchange controls, especially when the authorities are trying to tighten credit. Qianhai, however, will be permitted to broaden these channels. Its firms will be given help in raising yuan offshore. Hong Kong banks will be allowed to enter the zone more easily. The ground will also be laid for greater cross-border lending. Since the mainland is targeting the gradual achievement of full yuan convertibility, Qianhai should be a pioneer for progress, said Zhang Xiaoqiang of the National ontogeny and advance Commission, Chinas planning body. The plan poses some puzzles. If offshore yuan were to be lent freely to Qianhai firms, what would stop them lending t he money on to the rest of the country? An easing of capital controls between Hong Kong and Qianhai would come out to require a tightening of controls between Qianhai and the rest of the mainland. Otherwise the stream of yuan inflows could become a flood.The answer to the puzzle may lie in the timing. The Qianhai zone is not scheduled for completion until 2020, by when Chinas capital controls may already be far looser nationwide. It is therefore un bidly that Qianhais opening up will get too far ahead of the rest of the countrys. In finance, as well as infrastructure, China likes to lay down the tracks, platforms and ticket barriers before the throngs arrive. Definition of Special Economic Zone SEZ Designated areas in countries that possess special economic regulations that are different from other areas in the kindred country.Moreover, these regulations tend to contain measures that are conducive to foreign direct investment. Conducting business in a SEZ usually means that a com pany will receive tax incentives and the opportunity to pay disgrace tariffs. Investopedia explains Special Economic Zone SEZ While many countries have set up special economic zones, Chinahas been the most successfulinusingSEZ to attract foreign capital. In fact, China has even declared an entire province (Hainan) to be an SEZ, which is quite distinct, as most SEZs are cities. Read morehttp//www. investopedia. com/terms/s/sez. spixzz29RnLw992 Chinas Special Economic Zones Keep Importance Chinas special economic zones will still be special after the countrys entry to the World spate Organization (WTO) and can continue to brandish because they are better disposed(p) for its rules, officials and economists said on Wednesday. PRINT DISCUSSION CHINESE SEND TO wizard Special zones better prepared for WTO rulesChinas special economic zones will still be special after the countrys entry to theWorld Trade Organization(WTO) and can continue to boom because they are better prepared for its rules, officials and economists said on Wednesday.While thousands of Chinese businesses have yet to familiarize themselves with the WTO principles and practices, Chinas technological and economic areas are already ahead of the game, said Pi Qiansheng, chief official who oversees theTianjinEconomic victimisation Area (TEDA). Special Economic Zones President Jiang on Special Economic ZonesChina will develop special economic zones (SEZs) all through the process of the countrys reform, opening up and modernization drive, Chinese PresidentJiang Zeminsaid November 14 in Shenzhen, Chinas send-off SEZ.Feature Economic Zones Chief special economic zonesChinas chief special economic zones are Shenzhen, Zhuhai, Shantou, Xiamen cities andHainanProvince. But they encompass more than 100 national economic and technological development zones, 15 national bonded areas and 14 border trade and co-operation regions in the broadest sense, said Hu Ping, former director of the Special Economic Zone Office under the State Council.Years before China joined the planetary trade club, the special economic areas had begun operating in line with international practices, said Pi, director of the administrative commission of TEDA, the largest development zone in atomic number 7 China. By implementing international practices like simplified approval procedures and transparency TEDA has actually been operating according to WTO rules, he said. Keep going wellBoth Pi and Hu denied allegations that the national treatment and non-discrimination principles of the WTO will undermine the development of the special economic and technological reas, which used to receive and give preferential policies. The special zones in various sizes and forms in China have grown from their initial state when they needed policy support before they were able to rely on themselves for expansion, Hu said. I dont see much of a negative impact of WTO entry on their enlisting of experts and the overall in vestment environment. The special zones can instead maintain their special status by maximize their accumulated expertise and their advantages in geographic lieus and export-orientated industrial structures.They can gain a head nonplus in absorbing foreign funds, technology and developing modern logistic systems, Hu said. The bonded zones, export product processing quarters and high-tech parks in those special areas will open still wider, Pi said. It is my concord that the WTO rules obligate the government to shift its functions to serving businesses in a more high-octane fashion, Pi said. In TEDA, for example, the authorities have already modified or removed all the regulations and operations that go against the WTO rules. Within the framework of national treatment requirements of the WTO, TEDA will give more favourable policies to overseas investment to attract more transnationals, he said. SEZs Go the Chinese way S. Majumder SPECIAL Economic Zones (SEZs), early proposed i n the Exim polity 2000-01 by the erstwhile doctor Minister, Mr Murasoli Maran, are now a reality. With Export Processing Zones (EPZs) failing to help achieve the export targets, sights are on SEZs to deliver the goods. Eight SEZs are already operational vii EPZs were converted for this place and another nine have been ap prove and are to be located strategically.The Commerce Minister, Mr Arun Jaitley, overwhelmed by the success of Chinas SEZ experiments has reposed much faith in them not only for export growth but also to boost FDI, which has become imperative especially as interior(prenominal) investments are sagging. It is heartening that Mr Jaitley seems to be aware of the fact that the objectives of SEZs are much wider than except boosting exports. Can India replicate Chinas immensely successful SEZ influence? The incentives offered in Indian SEZs are in no less than those in China.From duty-free imports and tax holidays to independence from cumbersome Custom procedure s, the SEZs facilities match those in China. Hence, theoretically at to the lowest degree, Indias SEZs should be no less beautiful to foreign investors as the Chinese versions. But reality paints a different picture. The key to SEZ success lies not just handing out incentives. Conceptually, EPZs and SEZs are different while the former is an industrial estate, the latter is an industrial township. Boosting incentives to SEZs does not necessarily mean greater investment flows. The scope of SEZs are much wider and their linkages with the domestic economy stronger.SEZs provide supportive infrastructure such as housing, ports, roads and telecommunication and, as a result, have a wider industrial base. Compared to EPZs, SEZs give more in terms of exports, industrial growth, investments, both domestic and foreign, and employment generation. Hence, merely switching from EPZs to SEZs, without undertaking the required structural changes, does not guarantee success. The China story There ar e phoebe bird SEZs in China. Of these, four Shenzhen, Xiamen, Shantou and Zhuhai were founded 20 years back and the fifth, Hainan, was set up in 1988.There are eight distinguishing features which have contributed to the success of SEZs in China Unique location, large size, investment friendly attitudes towards non-resident Chinese, mesmeric incentive packages, liberal Custom procedures, flexible labour laws, a strong domestic market and decentralisation of power in favour of provinces and local authorities for administering the zones. Of the five SEZs, Shenzhen, Shantou and Zhuhai are in the Guangdong province, adjacent to Hong Kong the admission to China. The other SEZ, Xiamen, in the Fujian province, is nearer Taiwan. Setting up hese zones close to internationally reputed commercial destinations was basically for easier access to foreign investments, modern technology and managerial expertise. This move paid off. FDI spurted in China with Hong Kong accounting for about 60 per cent of the total inflows with foreign investors making a beeline for the SEZs. Initially, the major(ip)ity of foreign investors were non-resident Chinese from Hong Kong who were booked in trading. Later, MNCs started investing in technology-oriented sectors even as China liberalised its foreign investment policy further to attract modern technology.The Guangdong province, which has the largest number of SEZs, became the most attractive foreign investment destination. In 2001, over 25 per cent of Chinas FDI flowed into Guangdong. Size is another important factor for SEZ success in China. Each SEZ is well over 1,000 hectares, the minimum recommended area. In India, the EPZs converted into SEZs are not even a third of this. Among the converted SEZs, the one in Noida is the largest but extends only 310 hectares. The SEEPZ, the first SEZ in India, is only 93 hectares.In such small areas, the mandatory infrastructure and services required of an SEZ cannot be created nor multiple e conomic activities undertaken. Strong domestic market is another important aspect for SEZ success. In China, about 50 per cent of SEZ sales are to the domestic market. though India has a large domestic market, it has failed to project this to lure SEZ investors. The reason Policy impediments to sales in the domestic market. While in China the thrust of SEZs has been to attract foreign investments and modern technology, in India the emphasis has been on exports.The policymakers seem to think that export success in the zones is difficult unless accompanied by a liberal FDI regime. In China, the contribution of SEZs to the total exports is not substantial even after 20 years of their existence. In 2001, the share of the five SEZs in the countrys total exports was 10. 4 per cent. In contrast, the contribution of Indian SEZs in 2001-02 was a little over 4 per cent of the total exports. Decentralisation of power was also a major reason for SEZ success in China. Provincial and local author ities were made partners and stakeholders, by delegating to them powers to approve foreign investment.The SEZ authorities in China can approve foreign investment proposals up to $30 one million million. In India, only State governments are allowed to set up SEZs and the powers for foreign investment approvals are vested with the cultivation Commissioners, who are the representatives of the Central Government. The hire-and-fire policy in SEZs has been one of the biggest attractions for foreign investors in China. The new labour law consists of 107 articles, but none of these is more than one paragraph. All jobs are on labour contract basis, which stand terminated upon the expiry of the terms, which can be fixed/flexible or for a specific job.In contrast, the labour policy in India is worker, rather than investment, oriented. Merely declaring SEZs as public utilities under the Industrial Disputes Act may not suffice to quell the image of labour unrest in the country. In sum, the fun damental objectives for lay up SEZs and their role in the national economy are different in the devil countries. In such a situation, multiple doses of incentives and unravelling the procedural hassles in India may not in themselves aid SEZs. The be need is buoyancy in foreign investments, which would automatically catapult exports.For this, the primary need is to foster SEZs as investment-friendly areas. This job is not of the Commerce Ministry alone, which is empowered to tinker with the Exim Policy only. The Foreign Investment Promotion board (FIPB) and the Foreign Investment Implementation Authority (FIIA) also have an equally important role to make SEZs a success. SPECIAL ECONOMIC ZONES (SEZS) ? Special economic zones (SEZs) 1 aim to overcome barriers that hinder investment in the wider economy, including restrictive policies, poor governance, inadequate infrastructure, and problematic access to land.SEZs tend to offer export-oriented investors three main advantages relativ e to the domestic investment environment 1) they offer a special customs environment including efficient customs administration and (usually) access to imported inputs free of tariffs and duties 2) they have historically offered a range of fiscal incentives including corporate tax holidays and reductions, along with an improved administrative environment and 3) they provide infrastructure (including land, factory shells, and utilities) that are more accessible and reliable than would normally be available outside the zones. SEZs have a long-established role in international trade. Prior to the 1970s, most zones were clustered in industrialized countries but since the 1980s, there has been large growth in SEZs in developing countries, led at first by East Asia and Latin America and more recently by the development of new programs in Central and Eastern Europe, Central Asia, the Middle East, and North Africa. Recent estimates indicate that there currently are more than 3,000 SEZs est ablished in some 135 countries.Overall SEZs are estimated to account for more than US$200 billion in global exports and employ directly at least 40 million workers. ? Most zones set up in the 1970s through the 1990s were designed to attract investment in labor-intensive assembly and manufacturing from multinationals. These export processing zones (EPZs) were a cornerstone of trade and investment policy in countries shifting away from import-substitution and in favour of integrating into global markets.Among the multiple objectives normally being sought as part of these policies were job creation, growth in exports and foreign exchange earnings, facilitating economic diversification (often as a step in processes of industrialization and industrial upgrading) and access to foreign manufacturing technology and know-how. KEY ISSUES AND CHALLENGES ? In some countries, SEZs have been a powerful instrument for economic growth and structural transformation. For many of the initial zones in East Asia, zones proved played a critical role in facilitating the industrial development and upgrading the tiger economies.Similarly, the later betrothal of the model by China provided a platform for attracting FDI and not only supported the development of its export-oriented manufacturing sector, but served as a catalyst for sweeping economic reforms that were extended throughout the country. In Latin America, countries like Dominican Republic, Honduras, and El Salvador used free zones to take advantage of preferential access to US markets, and have generated large-scale manufacturing sectors in economies that were previously reliant on agricultural commodities.Finally, in Africa, SEZs are credited with change Mauritius to move from dependence on sugar to become a manufacturing hub and eventually an innovative, middle income country. ? However, there are also many examples of failures of SEZs, where investments in zone infrastructure resulted in white elephants or where zones ha ve generally resulted in industry taking advantage of tax breaks without producing any substantial employment or export earnings.Moreover, many zones that appear to have been successful in the short term, have failed to remain sustainable once labor costs have risen or when preferential 1 The term SEZ is being used here in a generic sense to cover any one of a physical body of akin(predicate) regimes including industrial free zones? , special economic zones? , maquiladoras? , export processing zones? , investment promotion zones? , foreign trade zones? and free zones? What are Special Economic Zones (SEZs)? What are the Key Issues and Challenges for SEZs?What is the World Bank crowd doing on SEZs? TRADE ISSUES BRIEF Special Economic ZonesWorld Bank stem Poverty Reduction and Economic Management Network International Trade Department trade access is no longer an advantage (e. g. following the end of the Multi-fiber Agreement). Zone failures can be attributed to a variety of ca uses. Too often, zones are plagued with the same problems unstable electricity, lack of water, heavy bureaucracy, inefficient and corrupt customs that hinder investment in the wider economy.In addition, broader competitiveness challenges, including policy instability, poor national governance, and low productivity often undermine the potential of zones. ? The traditional manufacturing-oriented processing zone (EPZ) is becoming more and more anachronistic, despite the continued importance of global production networks. This is for three main reasons. First, by limiting activities to manufacturing only, EPZs restrict opportunities for investment and growth in the services sector, one of the most important opportunities for growth in middle income and even many low income countries.Second, the traditional EPZ tends to create an enclave that is separated from the national market, undermining its potential to create effective domestic linkages. Finally, the traditional EPZ model reli es on unsustainable fiscal incentives to attract investment. As a result, there has been a gradual shift from traditional EPZs to special economic zones (SEZs), which normally cover larger land areas, offer greater flexibility for services and other non-manufacturing activities (including residential and tourism development), and acknowledge a greater mix of export and domestic-market focused activities.THE WORLD BANK GROUP AND SEZS ? The World Bank multitude has worked with client governments on export processing zones, free trade zones, and SEZs for decades. More than 40 SEZ link up projects have been undertaken in the past ten years. This work has included Bank lending for on-site and off-site infrastructure, IFC investment, and technical assistance and knowledge products from various Bank units and the Investment Climate Department on SEZ-related policies, efficacious and regulatory frameworks, institutional design, and feasibility studies.OUR WORK ON SEZS ? During 2009 and 2010, the World Banks International Trade Department (PRMTR) has been leading a major global research study on SEZs supported by a BNPP trust fund and in partnership with the SEZ team in the World Bank Groups Investment Climate Department with a primary emphasis on the envision SEZ programs in Sub-Saharan Africa. The main question addressed in this study is why have SEZs worked well as engines of growth in some countries but not in many Sub-Saharan African ones? base on knowledge developed as part of this research, PRMTR is also supporting the World Bank Groups program looking at the potential role and impact of Chinas investment in African industrial zones on the development prospects for the region. Our portfolio of SEZ knowledge products in 2010 includes I. A book summarizing the results of PRMTRs major research project Special Economic Zones in Africa assessing performance and learning from global experience (forthcoming) II.A set of case studies of SEZ programs in ten coun tries (Bangladesh, Dominican Republic, Ghana, Honduras, Kenya, Lesotho, Nigeria, Senegal, Tanzania, Vietnam) III. Results from surveys of investors in SEZs in the same ten countries as above IV. A series of notes covering topical issues in SEZs, including regional trade agreements and SEZs WTO rules and SEZ fiscal incentives gender aspects of SEZs using SEZs as catalysts for economic reform training and skills development in SEZs etc. and V. Notes related to Chinas investment in African industrial zones, including an overview of progress and challenges and a proposed framework for effective collaboration, as well as a note drawing lessons from Chinas experience in establishing a knowledge-sharing partnership for SEZs with Singapore in Chinas Suzhou Industrial Park. An investigation into the importance of special economic zones in developing economies by Raphael Monye on September 18, 2010Over the past decade, there has been a sea change in economic policies indeveloping countries w hich are attempting to become more export- orientated,they have started setting up free trade zones. These zones are called Special Economic Zones(SEZs) and feature various designed to encourage foreign investment. What is the significance of these zones? Have they really played an important role in the development of the economy of the developing countries? In this paper I first take up the background to the establishment of these zones, then I describe some of the aims and characteristics of the SEZs.Lastly, I attempt to assess the significance of the SEZs in the development of the wider economy Historically, China for instancehas adopted an inward-looking strategy to its economic development. Successive Chinese governments thought that the economy could growpurlythrough self-reliance. However, there are always limitations to what a country can do by itself, for example limitations in raw-materials, pictorial resources, technology, etc. These can hold back the growth of an econo my and certainly Chinas economic growthlagged far behind much of the rest of the world up to the 1970? . The aims of the establishment of the sezs were to earn foreign exchange, toenhanceemployment, to attract foreign investment and to accelerate the introduction of technology and managementexpertise The favourable impact of the SEZs onan economy of is fivefold They attract foreign investment, they help the growth of the export industry, they earn foreign exchange, they provide employment opportunities and lastly they help theindigenouseconomy improve its level of technology.I would now like to look at some of these points in more detail Since the beginning of the open-door policy, small-scale one-on-one businesses have been allowed to coexist with state enterprises. This has increased employment opportunities for local people and raised the level of economic activities in most developing countries. Also, many state workers sense that going into business on their own may provide gr eater income potential. Many prefer to work for joint-venture firms for higher wages.So the average income in SEZs ranks as the highest in most of these economies. In theory advanced technology and know-how will also flow into the country as a result of foreign investment. In turn, with increasing exports the force of international competition may bring greater pressure on firms to adopt more efficient work practices. It is perhaps questionable how much benefit the wider developingeconomies hasreapedfrom these investments. The technology, patents and know-how remain firmly the property of, and are controlled by the resurrect companies.It may however be the case that in the long run the work culture and practices adopted by foreign companies could have some washback effect over wider economic practices in the country In conclusion, the establishment of the SEZs has helped to increase the export trade which in turn has helped to improve thedeveloping economy. prejudiced treatiesare been made inSEZs to attract foreign investment. A large amount of foreign investment has occurred not only in the export trade, but also in infrastructure construction, doctor and tourism.Foreign companies have been encouraged to set up factories in the territories and the export industry has grown. Jobs opportunities have been provided for locals as factories need labour and the average income of the people has increased. In addition, advanced foreign technology has been brought in with the inflow of foreign investment. All these factors have contributed to the growth of thedeveloping economy. It remains to be seen if thesequantitativeadvances, in which the SEZs have played an important role, are matched bycommensurateadvances in the quality of life for the majority of people in theses countries.Special Economic Zones and tax exemption in China The key tax incentive for investing in China lies in the various options available for claiming tax concessions. The three main avenues a re tax exemption, location-based concessions, and activity-based concessions. In theory, foreign-invested companies in China are subject to 30% corporation tax plus an spare 3% local corporation tax. In practice, however, foreign-invested companies rarely have to pay the full corporate tax rate. Tax exemption and 50% tax reductionManufacturing companies operating in China for at least ten years are apt(p) a tax exemption period from the run into of entering the profit zone. In the first two years they are fully exempt from corporation tax, and in the following three years they are granted a 50% reduction in the tax pack. The fiveyear period begins in the year in which an accumulated profit, after taking into account loss carryforwards, is recorded for the first time. However, the tax exemption period is not interrupted if at any time after commencement of the period a company once more records losses.Furthermore, only taxable losses within a maximum carryforward period of five y ears are taken into account when determining the date on which an accumulated profit is recorded. Companies in the following sectors and areas are regarded as manufacturing companies and hence eligible for preferential receipts treatment Engineering and electronics industry Energy industry (excluding oil and natural gas extraction) Metal industry, chemic industry, manufacture of construction materials Light industry, textile industry, manufacture of packaging materials Medical and pharmaceutical industries Agriculture and forestry Construction industry Communications and transport industries (excluding passenger transport) Scientific and technical development, geological studies, consulting services aimed at production improvements, maintenance services for production equipment and precision instruments. The above list is not exhaustive and may be extended to other areas. In principle, exemption followed by a reduction in the tax burden is only granted if the companys acti vities in China extend over at least ten years.If operations in China are discontinued before this ten-year horizon, Chinese tax law requires that the concessions be reimbursed. Special Economic Zones and Economic and scientific Development Zones After China opened up back in 1980, government-promoted Special Economic Zones (SEZs) were set up to attract foreign investors to the country. The main purpose of these Special Economic Zones with their many investment incentives was to strengthen Chinas embattled economy with foreign capital and to modernise the country through foreign technology.Manufacturing companies are generally granted a minify tax rate of 15% in these zones, with full tax exemption in the first two years and a 50% reduction in tax during the three following years. Foreigninvested service companies and banks can also benefit from tax concessions but are subject to special regulations in these zones. The Special Economic Zones are in Shenzen, Guangdong Province Zh uhai, Guangdong Province Shantou, Guangdong Province Xiamen, Fujian Province Hainan Island, Hainan Province. Moreover, Economic and Technological Development Zones ETDZs) were set up in 14 coastal cities of the Peoples Republic of China in 1984. To date this number has been extended to more than 50. The aim of these development zones was the targeted opening of investment zones for foreign investors, as well as research and development in specific areas through the application of modern foreign technologies. In particular, foreign investors in these zones are offered a complete infrastructure that meets international standards. Economic and Technological Development Zones are to be found not only in booming metropolises such as Shanghai, Beijing nd Shenzen, but also in all-important Chinese industrial cities as well as in cities of local economic importance in the interior. The Chinese accord these development zones the highest priority, which is why in recent years Chinas boomin g major cities in particular have evolved to become the favourite locations for foreign investors, due to the many concessions and well-developed infrastructure on offer. Nevertheless, when deciding on a location it is important to take into account the cost of labour, which is significantly cheaper in the more rural development zones in the interior.Tax-wise, there is no difference between the Special Economic Zones and the other Economic and Technological Development Zones. Here, too, a reduced tax rate of 15% is generally applicable, with full tax exemption in the first two years and a 50% reduction in the following three years. contrasted the Special Economic Zones, however, the Economic and Technological Development Zones do not differentiate between manufacturing and service companies. Open coastal towns and old cities The 14 eastern ports of Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou,Fuzhou, Guangzhou, Zhanjiang and Beihai were also opened to foreign investors in 1984. Now there are more than 300 open coastal cities and old towns in China, offering similar concessions to the Special Economic Zones. If these cities also contain a Special Economic Zone or an Economic and Technological Development Zone, companies are also granted a reduced tax rate of 24% outside these zones. If necessary a tax rate of 15% can also be granted subject to the approval of the Chinese authorities, provided the companys business falls into one of the following categories Technological projects or projects requiring expertise Projects with a foreign investment volume of at least USD 300 million and a long repayment period Projects in the field of energy generation, communication or port operations State-promoted projects. High-Tech Industrial Development Zones Only in recent years has the Chinese government created newer types of development zones called High-Tech Industrial Development Zones (HTIDZ) primarily aimed at prom oting and further developing the scientific and economic potential inherent in China through foreign capital investment and the import of know-how.Currently there are more than 50 HighTech Industrial Development Zones where foreign high-tech companies are granted a reduced tax rate of 15%. Joint ventures with a foreign partner scheduled to operate for over ten years may also be granted tax exemption or a 50% reduction in tax, similar to the above-mentioned concessions, subject to approval by the Chinese authorities. Currently the best-known High-Tech Industrial Development Zone is the Zhongguancun Science and Technology Park in Beijing. Shanghai Pudong New Area By contrast, foreign companies operating in the financial, ndustrial and trade sectors have been enjoying many tax concessions in the Pudong district since 1992. Financial services providers in particular are becoming increasingly important in this context. While foreign financial institutes are prohibited from setting up of fices in all other investment zones, this zone which is also home to a stock exchange is to be established as a financial centre. The applicable tax rate in this area is 15%. Moreover, in a bid to promote the infrastructure, the Shanghai Pudong New Area offers special tax incentives to foreign companies engaged in the construction of roads, railways, orts and aerodromes as well as companies engaged in energy and transport projects. These companies are also offered a generally lower tax rate of 15%. If scheduled to operate for at least 15 years, these companies enjoy full exemption from taxes for the first five years and a 50% tax reduction for the following five years. Other regions In addition to the above-mentioned areas, a wide range of other regions grant foreign companies tax concessions with a view to attracting such businesses and promoting economic expansion in Chinas structurally weak regions.These currently include 13 open border cities, remote and underdeveloped regions as well as numerous central and western regions of China. particularly in the remote and underdeveloped areas of China, companies enjoy full tax exemption for the first two years and tax concessions for up to 15 years. In all, 19 central and western provinces offer companies in outlined industrial sectors a wide range of additional concessions which are listed in a catalogue specially drawn up for this purpose. Concessions for special sectors and activitiesNevertheless, eligibility for tax concessions is dependent not only on the choice of location but also on the companys business activities. For instance, special concessions are granted to export-oriented companies with an export ratio of more than 70% which are scheduled to operate for more than ten years. Companies which qualify as technologically advanced enterprises may request a three-year extension beyond the statutory five-year tax concession period. The requirements for eligibility in this respect are described in a spe cial catalogue of criteria.Qualification for such additional concessions is subject to an on-site examination by the authorities of the information provided in the application. Special concessions may also be requested by companies in the software industry, with the aim of turning China into a world leader in the field of software products. These primarily concern VAT and customs duties, but additional concessions may be granted in the form of a reduction in corporation tax to 15%, shorter depreciation periods or higher expense deductions provided the defined criteria are met. Furthermore, in order to make Chinas economic expansion nd infrastructure more attractive to foreign companies, longterm projects relating to port construction as well as in the Special Economic Zones of Hainan and Pudong and in the field of airport and rail construction enjoy substantial concessions up to and including full tax exemption for the first five years as well as a tax reduction of 50% for the follo wing five years if, as above, they meet the relevant criteria. Similar conditions also apply to agricultural projects. Research and Development (R&D) Centres can also enjoy tax concessions provided they meet a number of defined requirements.Specifically, these govern employee qualifications, investment volume, the quality of equipment used, exclusive use of invested capital for R&D purposes, etc. The concessions granted are related to the transfer of technology developed in-house and associated consulting and other services, the import of business equipment including the associated technologies, accessories and spare parts, and increased deductions on R&D expenditure. On the other hand, companies in heavy industry and launch construction or companies engaged in the extraction of raw materials are expressly excluded from the statutory five-year tax concession