2.1 The first generation of special economic zones in China, 1980–92

the first was approved in shanghai in 2013. three more free trade zones were approved in 2015 and another seven in 2017, followed by one in 2018, six in 2019, and three in 2020. each of the twenty-one zones is named for the province or municipality where it is located.

in addition to the seZs created by the central government, many prefecture-level and county-level development zones have been established since the 1990s. in 2019, China had 219 national etDZs, 169 national high-technology industrial development zones, 17 national border economic cooperation zones, 63 national export-processing zones, 66 bonded zones, 21 national free trade zones (as of 2020), and more than 1,000 provincial seZs. the numbers continue to grow. there have been three generations of seZs since 1980. as noted, the first generation consisted of the four formed in 1980 in shantou, shenzhen, Xiamen, and Zhuhai. these zones encompassed large areas within which the objective was to pursue pragmatic and open economic policies, serving as a testing ground for innovative policies that, if proven effective, would be implemented more widely across the country. the emphasis on forward links with the world, especially through liberalization of foreign investment and trade with capitalist countries, and backward links with other parts of China was part of the rationale for their establishment. the four seZs created in 1980 are similar in legal structure to etDZs, the difference being one of scale (Zeng 2012). the comprehensive seZs span an entire city or province. From 1984 to 1988, 14 etDZs were established in coastal cities, and later in cities in the pearl river Delta, the Yangtze river Delta, and the Min Delta in Fujian. in 1988, the entire province of hainan was designated as the fifth comprehensive seZ. in 1992, the government opened 11 border cities and 6 ports along the Yangtze river. Map 2.1 shows the development of the first generation of seZs.

MAP 2.1

The first generation of special economic zones in China, 1980–92

The second generation of SEZs, such as the Shanghai Pudong New Area and Tianjin Binhai New Area, were developed in a different context, though based on the experience of the first generation. From 1992 to 1994, the State Council launched a second round of national ETDZ establishment, during which 18 new development zones were approved. Regional development became a central goal of this generation of ETDZs, which were designed to develop new strategic growth poles and thereby to trigger a diffusion effect. An additional objective was to stimulate knowledge-intensive and technology-intensive industries. The third generation of SEZs, those established after 2000, were issue oriented. For example, the Chengdu-Chongqing pilot zone focuses on coordinated urbanrural development.

Overall, SEZs have had a positive effect on China’s economic development, trade, and technological development (see Wang 2013; Wei 2000; Wu, Jiuli, and Chong 2021; Yeung, Lee, and Kee 2013; Zeng 2011, 2015). The first four had an almost immediate impact. In 1981, they accounted for 59.8 percent of total foreign direct investment in China, with Shenzhen accounting for the lion’s share (50.6 percent) and the other three about 3 percent each. Three years later, the four SEZs still accounted for 26 percent of China’s total foreign direct investment (Yeung, Lee, and Kee 2013). Shenzhen developed from a small town with 30,000 inhabitants in 1980 to 800,000 inhabitants in 1988 and 7 million in 2000. The new residents include the best-trained professionals in the country, attracted by high salaries, better housing, and educational opportunities for their children. During this period, GDP per capita grew more than 60-fold (World Bank 2009). Regions within China with multiple SEZs have enjoyed greater economic growth than those having only one. Furthermore, the regions where SEZs were established early on have experienced greater economic benefits than regions where they were created later (Crane et al. 2018).

The huge impact of the SEZs and the resultant widening of regional disparities—with much greater development in coastal regions—prompted the designation of SEZs in the capital cities of all interior provinces and autonomous regions. Yet poor accessibility of these SEZs to foreign markets limited development of the interior provinces until the 2000s, when the Chinese government introduced its Go West policies. Those policies included huge infrastructure investments and the Belt and Road Initiative, which aims, among other things, to improve the international connectivity of China’s interior regions through better rail connections between China, the Central Asian countries, and Europe.

China’s more recent regional development policies have focused on forming urban agglomerations. The designation of an area as an urban agglomeration affects its ability to attract economic activities. To obtain urban agglomeration status, city clusters are evaluated on the basis of seven quantitative criteria and nine specific indicators (including number of cities, number of cities with a population of more than a million, overall population size, urbanization level, GDP per capita, economic density, and the ratio of agricultural to nonagricultural output). The twenty urban agglomerations identified to date fall into three categories: five of national-level importance, which receive top construction priority; nine of regional-level importance that require stable investment and support; and six local urban agglomerations, mostly in the interior provinces, that require significant support because they have not fully developed into urban agglomerations yet. Most of China’s urban agglomerations lie within wellestablished transport corridors providing port access (map 2.2).