ProLogis Report Details Role of Economic Zone in Opening China

A new research report by industrial landlord ProLogis posits that China’s Special Economic Zones (SEZs) and Economic and Technological Development Zones (ETDZs) have been, and even continue to be, catalysts in that country’s economic transformation. The report, called “China’s Special Economic Zones and National Industrial Parks–Door Openers to Economic Reform,” credits the zones with attracting foreign companies to invest in China and thereby nurturing China’s economic revitalization in the last 30 years or so. Currently there are five SEZs and 54 ETDZs in China. Foreign enterprises establishing operations in these zones are granted tax breaks, the ability to repatriate profits and capital investments, below-market lease rates for land, government-financed hiring/training, employee housing and various customs exemptions. According to the report, these zones are particularly attractive to manufacturers, third-party logistics providers and other companies engaged in importing and exporting goods to and from China. The zones have their roots in the late 1970s, when the new leaders of post-Mao China began experiments with economic liberalization. In 1980, the first SEZs were created along China’s coast, most in proximity to the existing trading hubs of Hong Kong and Macao, which at the time were not under Chinese control. Though business infrastructure in the first zones was rudimentary at first, they proved so successful that others were created nationwide in the 1980s and early 1990s. In the decades since, China created its first specialized economic zones, the entire country has opened up economically, de-emphasizing the uniqueness of the zones. Still, the report notes, “the five SEZs and 54 ETDZs still account for substantial shares of China’s overall economic activity. In 2006, the five SEZs accounted for 5 percent of China’s total real GDP [and] 22 percent of its total merchandise exports. At the same time, the 54 national ETDZs accounted for 5 percent of total GDP [and] 15 percent of exports. “Inasmuch as total employment at these five SEZs and 54 ETDZs represents only about 2.5 percent of China’s total employment, it is clear that these economic and industrial zones are exerting a disproportionately large impact on China’s overall economy,” the report noted.