Derecho Fiscal

PRM Policy Note
Pakistan Resident Mission
November 2007

Series No. 2

Special Economic Zones and Competitiveness
A Case Study of Shenzhen, the People's Republic of China

Wanda Guo and Yueqiu Feng

www.adb.org/prm/publications.asp

Pakistan Resident Mission Asian Development Bank 1st Floor, OPF Building Sharah-i-Jamhuriyat, G 5/2 Islamabad. Pakistan © 2007

PRM Policy Note SeriesReview Committee Chair: Peter L. Fedon, Country Director, Pakistan Resident Mission Asian Development Bank Members: Emma Xiaoqin Fan, Senior Public Resource Management Specialist Safdar Parvez, Economist Coordinator: Khurram Butt

The PRM Policy Note Series is based on papers and notes prepared by PRM staff and resource persons. The series is designed to provide concise non-technical accountsof issues of policy importance to Pakistan. Feedback is welcome via e-mail (adbprm@adb.org). PRM welcomes submission of brief papers from both ADB staff and external contributors for the PRM Policy Note Series. The papers can be submitted to Ms. Emma Xiaoqin Fan (xfan@adb.org) and Mr. Khurram Butt (kbutt@adb.org). The views expressed in the series are those of the authors and do not necessarilyreflect the views or policies of the ADB.

PRM Policy Note
Pakistan’s Resident Mission
November 2007

Series No. 2

Special Economic Zones and Competitiveness
A Case Study of Shenzhen, the People's Republic of China

Wanda Guo and Yueqiu Feng

www.adb.org/prm/publications.asp
Dr. Wanda Guo is vice-president of the China Development Institute (CDI), and Ms Yueqiu Feng is director of theCDI's International Cooperation Department. This paper was presented at the Pakistan Development Forum in April 2007. The authors thank Peter L. Fedon, Emma Xiaoqin Fan, and Safdar Parvez for comments and suggestions; Maheen Pracha for copy editing; and Khurram Butt for coordinating the publication of this issue.

Contents
Abbreviations 1 2 3 4 5 6 Introduction SEZs compared toIndustrial/High-Tech Parks The Development of the Shenzhen SEZ Factors Underpinning Shenzhen's Success Key Policies Contributing to Shenzhen's Industrial Competitiveness Conclusion 1 3 5 7 9 11

Abbreviations
ADB FDI GDP PRC PRM SEZ Asian Development Bank foreign direct investment gross domestic product People's Republic of China Pakistan Resident Mission special economic zone

(i) In this paper, "$"refers to US dollars.

1. Introduction
Special economic zones (SEZs) have played an important role in advancing economic reform in the People's Republic of China (PRC) and, particularly, in opening up its economy to the rest of the world. The Shenzhen SEZ was the first SEZ to be set up in the PRC. Over the past few decades, Shenzhen has developed from being a small fishing village in GuangdongProvince into a major industrial and financial center, benefiting substantially from the liberal economic policies granted by the Central Government to SEZs. Shenzhen's rapid development has showcased the advantages of “open door” policies and market-oriented reforms, served as a “laboratory” for piloting policies, and propelled economic development in the rest of the country. This policy note brieflydocuments the experience of Shenzhen and analyzes the factors that have contributed to its emergence as a successful SEZ. There are useful lessons to be drawn from Shenzhen's experience by countries such as Pakistan in designing their economic reform policies. The major findings of this policy brief are summarized below. The experience of Shenzhen has demonstrated the important differencesbetween a “special economic zone” and an “industrial/high-tech park.” A SEZ is a comprehensive laboratory in which fully fledged economic reforms can be

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piloted, while industrial parks are a supporting component of SEZs, but with an industrial focus. SEZs in the PRC are authorized by the Central Government and cover large administrative areas such as an entire province or a city. In contrast,...