building engines for growth.pdf

How Do SEZs and Industrial Clusters Drive China’s Rapid Development? 15the 54 ETDZs and the 54 HIDZs was about 5.35 million and 6.5 million,respectively (MOST 2009). Added together, the total employment of theseven SEZs, the ETDZs, and the HIDZs accounted for about 4 percent oftotal national employment (770 million). Of course, this picture is stillincomplete, because many subnational SEZs were not included, and if weaccount for only the share of SEZs in urban employment, that numbershould be more than 10 percent. Currently, about half of China’s laborersare still employed in rural areas. SEZs absorbed mostly the high-end,skilled workers in China.Contribution to high technology. The SEZs are also the hotbed ofChina’s new and high-technology firms. In 2007, the 54 HIDZs hostedabout half the national high-tech firms and science and technology incubators.They registered some 50,000 invention patents in total, more than70 percent of which were registered by domestic firms (Zhong et al.2009). They also hosted 1.2 million R&D personnel (18.5 percent ofHIDZ employees) and accounted for 33 percent of the national high-techoutput (Qian 2008). Over the 15 years since the formation of HIDZs,they have accounted for half of China’s high-tech gross industrial outputand one-third of China’s high-tech exports. In addition, the ETDZs arealso responsible for another one-third of China’s high-tech industrial outputand exports (rising from 31.3 percent in 2004 to 35.5 percent in2005). HIDZs are also quite R&D intensive: their expenditure on R&Din 2002 was RMB 31.4 billion and accounted for 24.4 percent of China’stotal R&D expenditure. Within the following four years, their R&Dexpenditure tripled to RMB 105.4 billion, and the share rose to 35.1 in2006 (Fu and Gao 2007).Although figures are not available, the seven comprehensive SEZs havealso undoubtedly contributed to the development of China’s technologyintensivesectors. For example, by 1998 with high-tech industries accountingfor almost 40 percent of industrial output, the Shenzhen SEZ setthe pace for moving toward a more technology-intensive, higher–valueaddedstage of development, a goal since the late 1980s. Many Chinesepatentedproducts have a large share of the international market, forexample, Huawei, ZTE, and Great Wall computers. In 2008, Shenzhenranked first among all Chinese cities, registering 2,480 new patents(Yeung, Lee, and Kee 2009). As this evidence shows, the various typesof SEZs, especially the HIDZs and ETDZs, are in fact the engines ofChina’s high-tech industries and contribute greatly to its technologyupgrade.