Andrew Moody: Zones may not sound exciting but they changed the world

September 03 , 2020

“Special Economic Zones” does not sound particularly exciting. It conjures up industrial parks, bonded warehouses and other such basic infrastructure of a sealed-off commercial area.

Yet China’s first four SEZs, which are celebrating the 40th anniversary of them being established, are and never have been just any ordinary trading areas.

The zones in Shenzhen, Zhuhai and Shantou in the coastal southern province in Guangdong and at Xiamen in Fujian province on the east coast, that were launched in 1980, have changed the world in a fundamental way.

They were the first tangible sign of Deng Xiaoping’s reform and opening-up launched almost two years earlier at the end of 1978.

They provided the platform for China to become the manufacturing workshop of the world and transform itself from a poor agrarian economy to the world’s second largest.

Over recent weeks, I have been speaking to a number of experts and economists to gauge their opinion on the significance of the creation of the SEZs and it was interesting to hear some of their recollections.

Edward Tse, now in his 60s and one of China’s best known management consultants, had just returned to Hong Kong, then under British rule, from studying at the Massachusetts Institute of Technology when the SEZs were launched just over the mainland border.

He said although there was interest in what was going on, nobody would have then wagered on what has transpired.

“Until then, China had a largely top-down planned economy. Society was very poor and these zones became a hot bed of experimentation in terms of creating a vibrant private sector,” he told me.

Wang Huiyao, president of the Center for China and Globalization(CCG), the Beijing-based independent think tank, was a second-year student at the Guangzhou University of International Studies at the time and can remember it being an exciting time.

“The whole mood in China was changing. The year before, in 1979, we had had the opening of diplomatic ties with the United States. The SEZs, however, were the real opening up. They changed everything,” he said.

“They were an experimentation ground for all kinds of concepts from the way companies were formed to private ownership of real estate.”

Some have tried to argue retrospectively there was nothing special about China’s SEZs and they were largely copying from the four Asian tiger economies, Singapore, South Korea, Hong Kong and Taiwan.

Koh King Kee, president of the Centre For New Inclusive Asia, a Kuala Lumpur-based think tank, said they were much more significant than what had happened in the rest of Asia.

“It was China’s first test ground for a market economy while the rest of the country remained very much planned. It was the embodiment of Deng Xiaoping’s development strategy of ‘cross the river by feeling the stones’,” he said.

While the other SEZs have been successful in their own right, it is Shenzhen that has been the true miracle.

The city’s GDP has grown by a factor of 10,000 from 270 million yuan ($39.51 million) in 1980 to 2.69 trillion yuan last year.

I too witnessed and was impressed by some of the early development there when I made my first visit to the Chinese mainland in 1997.

Yet it would have been difficult to envisage then the megalopolis the city has become today, certainly rivaling China’s great municipalities of Beijing, Shanghai, Chongqing and Tianjin.

It is the only city in the world that has full 5G access and is, of course, home to telecommunications giant Huawei and Tencent Holdings, which owns the WeChat social messaging app.

Over the next decade or so, it is not inconceivable it could become a more significant technology hub than Silicon Valley given its strengths in artificial intelligence and digital technology as well as China’s ambition to become a global technology leader by 2035.

I think that President Xi Jinping is certainly one who recognizes the role played by Shenzhen and the other SEZs in the story of China’s development. He also sees the interplay between Shenzhen and Hong Kong as vital for the success of the Guangdong-Hong Kong-Macao Greater Bay Area, which could be one of the most dynamic areas of Asia over the coming decades.

The SEZs were the fundamental basis of China’s reform and opening-up, but for this great nation to continue its success, the journey will and must continue.

Keyword Andrew Moody