DELHI METROPOLITAN EDUCATION

(Affiliated to GGSIP University, Delhi)

NAME: Diksha Raj
BATCH: BA. LL.B (A)(2018-23)
ENROLLMENT NO. :42251103818
PROFESSOR: -Dr.Isha Jaiswal.
ASSIGNMENT: Importance of Special Economic Zones in China.
Introduction
By considering the appliance of economic reform in 1976,the china economic refining is
admirable between the year of 1980 and 1995 by the annual rate of growth of 10 percent and
extending the Gross Domestic Product from 45.8 billion yuan to 5,826 billion yuan. This rate
was considered highest in Asia during this portion of time .This article is going to analyse the
concept of this zone of china and what are the importance in today era of world, as for the better
development of any country each country make an affordable efforts in consist of competing
level and tries to lift the economic approach of the country. This zone is the best solution to get
rid out of poverty and china was able to make it by making its model and by competing in today
era

What Are Special Economic Zones ?

Special Economic Zones is a term which covers a range of free Trade Zones, Export Processing
Zones and many more zones and the intend of this zone is to smooth the economic growth and
subject matter of this unique profitable directive which differs from other regions of the same
country.
According to a senior economist at the World Bank,
“Many academics, practitioners, and policymakers cite Shenzhen as the exemplar of zone
policies but the single-minded focus on this one example belies the tremendous heterogeneity of
outcomes in China.” 1
The Special Economic Zones were established in 1980 in the provinces of Shenzhen, Zhuhai,
Shantou in Guangdong province and Xiamen in Fujian province.
The largest zone is Shenzhen out of the four zones and undergo the most expeditious economic
and demographic growth.
New zones have been seen in various parts of parts of cities and regions. They are commonly
known as “special” as because of the rules and regulations which makes it contrast from the
other countries. The differences like the trade is generally on free market system, technology is
open, investment is uplifted.
The Importance of “Special Economic Zones”.
During the inception period, the zones of china were contemplated as “special" since China's
commerce was mainly supervised by the central government of the nation, and due to this the
slot for investors to do business in China in comparison with the non- intervention of the
government and with the liberty to execute economics was an inspiring new proceed.
The strategy in relation of Special Economic Zones of china was to encourage the foreign
investors by providing low-cost labor, by excluding the tax, maintaining the routes of ports and
airports so the exchange of goods and services can be traced easily and by various specification.
China has played a crucial role in the global economy and has made decisive step towards
economic development during the contemplated periods. Special Economic Zones were
considered as a tool in making China's economy in today world.

1
Ms. Herlevi interview; Washington ,DC; July 2015
Business owners operating out of these zones have certain incentives, such as SEZ tax benefits,
mostly for the foreign investment. Elimination of corporate tax under losses is one of the most
famous tax benefits, where if you neglect in generating a financial gain, then you are not avail to
pay taxes. An added benefit is the factor where once a company starts making a profit, the tax
rates are minimized.

This Zones minimized the income tax levels (e.g. 15% in Hong Kong), whereas the same tax is
generally as high as 33% in mainland China.

There are regulations aimed to encouraging exports in China, since its economy is heavily
dependent on export income.

Some of the regulations include companies having the ability to export duty free goods.

We saw that this held true for one of these first special economic zones, which was Shenzhen.
The city promptly grew from being a miniature fishing village to a mega-metropolis with a
inhabitant along with10 million in just a one or two decagon.

There is a very direct relationship between favorable trade zones, which are crucial in generating
mass-employment opportunities. This is turn plays an integral role in lifting livelihood level.

One of the most important objectives for setting up a special economic zone with an acceptable
development rate is integration and expansion into international trade.

This step, is phenomenal in achieving the purpose of growth. As seen in China's zones, they have
enticed foreign direct investments (FDI), which has caused an exponential improvement in the
overall economy.

And the credit of all these strategies goes to China’s export industry. These were the main
measures to acquire the obligatory expedient and in modernizing the economy at a sustainable
rate.

Moreover, another positive factor presents itself in the fact by initiating special zone strategy in
just this type of region, the result of said policies may be assessed and observed to draw a
conclusion which may then allow those same policies to be implemented nationally in a more
efficient manner.

Granted, stimulating development and modernization is indeed only of the primary objectives for
this type of zones to commerce, testing distinct regulations is too very practical.

This statement is backed up by examples such as those of the 1980s, when many companies
withdrew their investments within China. The reasoning behind the move was that the investors
found the country’s red tape too complicated.
So in 1982, a new adjustment was adopted which aimed at decomplexifying this process. It cause
to immediate improvements in overseas investment levels.

Strategy of SEZs: -
1. The Special Tax for foreign investments in the Special Economic Zones.
2. The non-intervene of the central government in the foreign business.
3. Economic characteristics are represented as "4 principles":
 “Construction primarily relies on attracting and utilizing foreign investment.
 Primary economic forms are Sino-foreign joint ventures and partnerships as well
as wholly foreign-owned enterprises
 Products are primarily export-oriented
 Economic activities are primarily driven by market forces”2
SEZs are recorded especially in the national and financial planning and government have power
to legislate.
A research on the role of special economic zones (SEZs) in adorning
Chinese and Indian economies and what are the result in growth of the economy.
“The results indicate that export and FDI growth have positive and statistically significant effects
on economic growth in these countries. The presence of SEZs increases regional growth but
increasing the number of SEZs has negligible effect on growth. The key to faster economic
growth appears to be a greater pace of liberalization.”3
Conclusion: -

The presence of Special Economic zones in china have befitted the companies in all around the
world by making the country to compete with the international level. The trade commerce
boosted the economic level of the country and have been noticed as impelling the growth in the
specified zones. The resilience provided by the creation of the, especial Economic Zones has
manifested indestructible results but though all the 54 designated zones had not been affluent,
but can be lifted the china Gross Domestic Product by up to 10 percent.
This zones is the best solution to get rid out of poverty and china was able to make it by making
its model and by competing in today era the main advantage for the boosting of this zones that
there is non-intervention of the government between the foreign investors if these will continue
like today than in the upcoming years it will increase and the substantial regional inconsistency
and income inequity in china.

2
http://en.wikipedia.org.
3
Leong (2012).
Bibliography
1. https://en.wikipedia.org/wiki/Special_economic_zones_of_China
2. https://www.worldbank.org/content/dam/Worldbank/Event/Africa/Investing
%20in%20Africa%20Forum/2015/investing-in-africa-forum-chinas-special-
economic-zone.pdf
3. https://intrepidsourcing.com/trade-wiki/special-economic-zones-sezs-
characteristics-benefits/
4. https://www.ide.go.jp/library/English/Publish/Periodicals/De/pdf/85_01_05.pdf