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16 Building Engines for Growth and Competitiveness in ChinaBy every account, most of the SEZs in China, though differing in performanceand speed, are quite successful. Together, they have formed apowerful engine to drive China’s reform process and economic growth.Let us now examine how these SEZs grew out of a then severely constrainingregime and succeeded beyond the most optimistic expectations.Major Factors for Success and Lessons LearnedMany factors contributed to the success of China’s SEZs, and in every case,the situations and factors might be different. However, their success drawson some common key elements and points to some common lessons.Strong commitment to reform and pragmatism from top leadership.Despite the high uncertainty at the beginning, the top leaders weredetermined to make changes, through a gradualist approach. Such adetermination ensured a stable and supportive macroenvironment forreform and for the new Open Door policies to prevent political oppositionand temporary setbacks from undermining the economic experimentwith the special economic zones. Deng’s southern tour in 1992clearly demonstrated his determination to reassert the government’scommitment to market-oriented reforms in the face of much opposition.Meanwhile, China did not simply copy ready-made models for reformbut instead explored its own way toward a market economy, incorporatingcharacteristics that fit China’s unique situation as a country with acivilization more than five thousand years old. At a time when the ideologicalwars were prevalent, China decisively abandoned such debates andembraced a practical path toward development. This sentiment is vividlycaptured in Deng’s famous saying: “No matter if it is a white cat or ablack cat, as long as it can catch mice, it is a good cat.” Such pragmatismis crucial for achieving any successful reform.Preferential policies and institutional autonomy. To encourage firms toinvest in the zones, the SEZs had in place various preferential policies,including inexpensive land, tax breaks, rapid customs clearance, the abilityto repatriate profits and capital investments, duty-free imports of raw materialsand intermediate goods destined for incorporation into exported products,export tax exemption, and a limited license to sell into the domesticmarket, among others (Enright, Scott, and Chung 2005). Favorable policieswere also in place to attract skilled labor, including the overseas diaspora,such as the provision of housing, research funding, subsidies for children’seducation, and assistance in “Hukou” 7 transfer, among others. 8
How Do SEZs and Industrial Clusters Drive China’s Rapid Development? 17In addition, the SEZs (especially the comprehensive SEZs and ETDZs)were given greater political and economic autonomy. They had the legislativeauthority to develop municipal laws and regulations along thebasic lines of national laws and regulations, including local tax rates andstructures, and to govern and administer these zones. At that time, inaddition to the National People’s Congress and its Standing Committee,only the provincial-level People’s Congress and its Standing Committeehad such legislative power. 9 That discretion allowed them more freedomin pursuing the new policies and the development measures deemed necessaryto vitalize the economy. For instance, SEZs were the first to establisha labor market. Companies operating inside the zones could enterinto enforceable labor contracts with specific term limits, could dismissunqualified or underperforming employees, and could adjust wage andcompensation rates to reflect the market situation (ProLogis 2008). Thesefactors were critical to attracting the right talent.In Shenzhen, the government was very pragmatic, and its policy innovationswere especially successful. In 1981, the Guangdong Provincegranted Shenzhen the same political status as Guangzhou, the provincialcapital; in 1988, Shenzhen was upgraded to the level of a province; andin 1992, the central government granted legislative power. 10 With thatautonomy, Shenzhen carried out many institutional innovations thatplayed a very important role in its remarkable success. For example,Shenzhen was the first to adopt wage reform, in which compensationwas based on three elements: base pay, occupational pay, and a variableallowance. It also adopted a minimum wage and a social insurance packagesuperior to anything previously available in China (Sklair 1991).Such a “free” labor market attracted many skilled workers. Shenzhen wasalso the first city to establish the system of government approval within24 hours, which greatly improved administrative efficiency. 11 In theTianjin Economic–Technological Development Area (TEDA), an ETDZ,the government also had the legislative power to experiment with variouspioneering reforms. One of the innovations of TEDA was to inviterenowned universities to establish campuses in the zone to conductvocational education and industry-related research. 12 This was an effectiveway to build university-industry links.Strong support and proactive participation of governments. The centralgovernment had tried to decentralize its power and help create anopen and conducive legal and policy environment for the SEZs. At thesame time, the local governments made a great effort to build a sound
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Page 20 and 21: xviiiAbbreviationsKETDLCDLtd.MISMNC
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CHAPTER 3A Case Study of TianjinEco
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A Case Study of Tianjin Economic-Te
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CHAPTER 6Cluster Development and th
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Cluster Development and Government:
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Map 6.2 Industrial Clusters in Guan
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203Table 6.5 Evolution of Local Gov
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Table 6.7 Xiqiao’s Clusters Befor
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IndexFigures and tables are indicat
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Index 225GDP contributions of, 13t,
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Index 227footwear manufacturing in,
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Index 229enhanced development phase
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Index 231Provisional Regulations on
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Index 233oral agreements of, 34in t
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Index 235service sector in, 108succ
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Index 237Zhejiang province, industr
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This book reveals fascinating insig
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