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David Dodwell

Outside In | China is the world leader in special economic zones but the results are erratic at best, with many being underused or failing to benefit the wider economy

  • In a country where liberalisation is contentious and vested interests are many, SEZs have provided Beijing with avenues for experimentation. As a result, China has more than half the world’s total special economic zones, with dozens in Shanghai alone

Reading Time:4 minutes
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Construction workers are seen inside the Gigafactory of US electric carmaker Tesla, inside Shanghai’s free trade zone, on June 9. Photo: Reuters
Just a week ago, Beijing announced an ambitious expansion of its Shanghai Pilot Free Trade Zone in the Lingang New Area, underpinning “a new round of reform and opening up”.
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Since the first free economic zone launched in Taiwan in 1966 (quickly followed by Singapore in 1969 and South Korea in 1970), special economic zones have proliferated across the world – from 79 in 1975, to almost 5,400 last year, according to the United Nations Conference on Trade and Development (UNCTAD) in its latest World Investment Report. Over 1,000 zones have been launched over the past five years, and a further 500 are being planned.

Today, an estimated 147 countries host special zones of one kind or another, but none has taken them so firmly to the heart of their development strategy as China. As of last year, it was home to 2,543 zones – more than half the world’s total.

Asia boasts more than three-quarters of all special zones, putting it at the epicentre of global growth strategies based on foreign investment and export processing. It is also the principle platform for development of the complex international supply chains created by the world’s leading multinationals, which are being so vilified by the US administration.

It’s ironic, therefore, that the US has one of the world’s largest populations of special zones – over 260 – which are in most economies emblematic of state-driven economic growth strategies. In the US, they are often called “opportunity zones” and mainly developed by city and state governments rather than Washington.

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