China's special economic zones : are they still 'special' after China's accession to the WTO?

Publication Type:
Thesis
Issue Date:
2009
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The policy of ‘reform and opening’ has brought drastic changes in the Chinese economy and society. One of the most important changes has been the establishment of Special Economic Zones (SEZs), which were designed to experiment with different market economy reforms and to act as the engine of growth in the country. These zones were granted several privileges, which in turn gave the SEZs full control of their own economy and were able to build up their local industry and develop strong economic capabilities. Nevertheless, many of those privileges were inconsistent with WTO Agreements, and since China’s accession into that organization the SEZs have been dismantling those privileges. Each step in China’s compliance with international standards precipitated changes and ripples throughout the SEZs’ legal structure. Nevertheless, the aim was to enter in order to induce and facilitate more investment within a sound environment. The WTO accession and implementation added momentum to a further opening up of China’s SEZs. Even though the biggest challenge for the SEZs was to adapt to universal principles, there is evidence of the use of particularistic contracting in the revised, amended or passed laws after WTO accession to facilitate compliance with WTO principles. Using this approach was prudent not only for the SEZs, but also allowed China’s legislative and administrative sectors to retain the flexibility to decide China’s own ways and pace for the implementation of the WTO Agreements. Overall trade and investment reform after China’s accession to the WTO has been positive for the SEZs, even though their original privileges have been eroded. In terms of policy, the SEZs have been a useful tool as part of an overall economic growth strategy to enhance industry competitiveness and attract FDI. Important aspects of the business environment of the SEZs have also been improved. Their rapid economic growth, their economic and political stability and commitment to market oriented reform have proven that the SEZs took concrete steps to achieve the best possible outcome.
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