The Logic Behind China’s Special Economic Zones and Their Economic Effects Before 2001

Abstract

The Chinese SEZs are one of the most iconic symbols of the reform and opening-up era and are the shining beacon of Chinese economic progress, particularly before China’s entry into WTO in 2001. This study is an analysis of the logic and trend behind the creation of SEZs and their economic impact before 2001. A better understanding of the logic behind SEZ’s success can benefit many economies aspiring for growth. This study’s methodology is based upon review and analysis of official government ff les and academic research. This study concludes that China’s initial Special Economic Zones were carefully selected to serve as laboratories for reform which attracted foreign investment and tested market-oriented policies. They were also very effective from a economic standpoint, as evident in their rapid growth and foreign investment. This success was built upon a unique combination of policy autonomy, great geography, abundant labor, government support, and compelling privileges for foreign investors.