China experiments with modernisation

13
China experiments with modernisation: the Shenzhen special economic zone Author(s): D. R. Phillips and A. G. O. Yeh Source: Geography, Vol. 68, No. 4 (October 1983), pp. 289-300 Published by: Geographical Association Stable URL: http://www.jstor.org/stable/40570723 . Accessed: 02/07/2013 23:39 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. . Geographical Association is collaborating with JSTOR to digitize, preserve and extend access to Geography. http://www.jstor.org This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PM All use subject to JSTOR Terms and Conditions

Transcript of China experiments with modernisation

China experiments with modernisation: the Shenzhen special economic zoneAuthor(s): D. R. Phillips and A. G. O. YehSource: Geography, Vol. 68, No. 4 (October 1983), pp. 289-300Published by: Geographical AssociationStable URL: http://www.jstor.org/stable/40570723 .

Accessed: 02/07/2013 23:39

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].

.

Geographical Association is collaborating with JSTOR to digitize, preserve and extend access to Geography.

http://www.jstor.org

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

China experiments with modernisation: the Shenzhen special economic zone

D. R. Phillips and A. G. O. Yeh

ABSTRACT. The paper begins with a discussion of recent modernisation trends in China's economy. Part of the emphasis has been on the creation of four special economic zones which will be favoured in internal investment terms and in their regulations which permit overseas enterprises to operate in them. The largest and most developed of these zones is Shenzhen, to the north of China's border with Hong Kong. The paper examines its development since 1979, its structure and the types of investment which it has attracted, and wishes to expand in the future. By means of these special economic zones, China hopes not only to attract foreign capital and technology but to be able to observe the operation of Western manage- ment and industrial expertise and to gain experience in how better to manage and modernise her own economy. This is an important experiment in modernisation which should be monitored in view of China's increasing involvement in the world economy.

In recent years, a number of special economic zones have been created in China with the intention of promoting foreign investment and assisting modernisation. This represents a drastic change in economic policy from the Mao period, with its emphasis on "self-suffici- ency" and "walking on two legs", to the post-Mao period, which is characterised by the drive for the so-called "four modernisations" - modernisation in agriculture, industry, national defence and technology (Baum, 1980). The drive for "four modernisations" was first advo- cated by the late Premier Zhou Enlai but was suppressed until the downfall of the Gang of Four in October 1976.

Foreign investment, it is now realised, can play an important role in China's "four modernisations" performance, especially since it will involve the introduction of advanced production technology and management techniques which China at present largely lacks. Modernisation and economic restructuring will, in fact, require continued growth in imports of technology as well as hardware from the rest of the world. This was realised by the World Bank which, in a major report on the Chinese economy published in June 1981, suggested that optimum performance in the future will come from light manufacturing industry, as a counterbalance to the 75 per cent of total employment which is currently in agriculture. However, this will require high levels of borrowing and serious attempts at energy conservation this decade, implying an increased involvement in world trade and the international market. At present, China's agricultural output cannot grow much faster than

Dr. Phillips is Lecturer in Geography at the University of Exeter, and Dr. Yeh is Lecturer in the Centre of Urban Studies and Urban Planning at the University of Hong Kong. © The Geographical Association, 1983.

289

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

290 GEOGRAPHY

population and gains will have to be made in industry, where serious infrastructural bottle- necks arising from past planning failures have hampered growth.

China's command economy, in which resources are allocated and outputs determined largely through the directives of a central planning authority, has performed moderately well in the first phases of modernisation, largely through mobilising impressive amounts of savings and manpower to build a heavy industrial base. However, in common with other centrally- planned economies, China's economy has proved to be less successful in meeting the needs of a more complex consumer-orientated society such as that which is currently developing. The World Bank endorsed the undertaking of reforms which would enable greater initiatives and control, but early steps were faltering and, in the late 1970s, they led to the inception of many ill-conceived projects without adequate consideration of matter such as transport availability, energy needs or raw material supplies. This emphasised the management weak- nesses as well as technological gaps in China's economy, and it is increasingly recognised that modernisation will involve greater links with the West, requiring imports of "know-how" as well as goods. Some authorities go so far as to state that China is a generation behind the industrialised countries in some sectors, owing to the damages caused to education and training in the Cultural Revolution (Delfs, 1981; Bonavia, 1981). It is, in fact, now realised that Vice-Chairman Deng Xiaoping favours modernisation and wishes to set about repairing the damage done to education and training during the Cultural Revolution (Nation, 1981).

Special economic zones

Related to the modernisation drive is the special economic zones programme. The aim of these zones is to attract foreign investment by minimising discouragement caused by bureau- cratic "red-tape". Four special economic zones are at present in the course of creation and, to facilitate negotiations and bolster overseas confidence, a set of investment and policy regulations has been created, applicable only in these zones.

Special economic zones (SEZs) are defined geographical areas within China which are favoured both in terms of the internal resources which are being allocated to their develop- ment, and in terms of their relatively liberal regulations and favourable credit availability designed to encourage overseas firms to invest in them. They can also be used by China to control and manage foreign investment within constrained zones, so as to minimise the overspill to other parts of China of what are regarded by the authorities as the undesirable side effects of western influence and economic policies. As stated by the Chinese govern- ment, the main objectives of establishing special economic zones are to "develop external economic co-operation and technological exchanges and promote the socialist modernisation programme". They may be thought of as almost "laboratories" within which the operation of capitalist enterprise can be observed and understood, and in which different economic policies may be experimented with which might be of use in China's future economic development. They will also assist China to acquire much-needed modern technology and management methods. Therefore, owing to the constrained and carefully defined nature of the SEZs, from China's point of view there is plenty to gain and relatively little risk involved.

There are a number of special economic districts elsewhere in the world which are somewhat similar to the special economic zones of China for attracting foreign investment. Depending on their sizes and functions, their names vary from export processing zones, free trade zones, investment promotion zones and industrial estates (UNIDO 1978a, 1978b; Vittal, 1977). Most of them concentrate on industrial development, either processing or manufacturing. They attract foreign investment by tax concessions, lower customs duties, cheap labour and power supplies and established infrastructure (Currie, 1979). However, the special economic zones in China are more ambitious (Wong, etal 1982). At present, they are not only promoting foreign investment in industry, but also in housing, agriculture, mining and tourism. As a result, their effects may be more far-reaching in economic and social terms

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

GEOGRAPHY 291

than anticipated, and they certainly seem to represent an exciting development in China's attitudes to, and relations with, the West.

The four special economic zones were declared in China in August 1980, three in Guangdong province - Shenzhen, Zhuhai and Shantou - and one in Fujian province - Xiamen (Fig. 1). Except for Shenzhen, which lies to the north of the Hong Kong-China border, the others are coastal ports. As Wong et al (1982) point out, they have been chosen as special economic zones principally because they are close to Hong Kong, one of the most important industrial and commercial centres in Asia and in the future of which China has considerable political and economic interest. In addition, the Guangdong and Fujian provinces also have a long history of emigration, at times substantial, to different parts of the world, especially to Hong Kong and Southeast Asia (Chang, 1968). These two provinces thus have a strong intrinsic appeal and attraction to many overseas Chinese businessmen whose families may have originated in them. Such individuals may well be inclined to invest in industry and housing to help China to achieve the objective of its "four modernisations".

The four cities on which the zones are based are small to medium-size, southern Chinese cities that do not have much previous industrial development. It is thus easier to control and monitor the development of foreign industries in these small cities than in the well-estab- lished industrial centres of, for example, Guangzhou (Canton), Fushan or Jiangmen. There, existing plants, methods, infrastructure and settlements could make an assessment of the impact and contribution of new techniques and external capital much more difficult. Presum- ably, too, the spread effects would be more difficult to control in areas of substantial estab- lished population.

Shenzhen Special Economic Zone

Shenzhen Special Economic Zone (Fig. 1.) is not only one of the largest special economic zones in China but also one of the largest in the world. Because of its closeness to Hong Kong, it has become the most rapidly developing special economic zone in China, and it has received the greatest attention both in China and abroad via Hong Kong contacts. Located immediate- ly to the north of Hong Kong, it formed part of the Shenzhen Municipality, previously known as Bao'an Xian (County), which was upgraded to municipality status under the direct rule of the Guangdong Provincial Government in March 1979 in anticipation of its future importance. Its southern boundary is the Hong Kong-China border, but there were various proposals for the inland northern boundary of the Shenzhen SEZ before it was finalised in September 1980. These ranged from suggestions which would have incorporated the whole of the Shenzhen Municipality (some 2 020 km2), to those which would have restricted the zone to a small portion of the municipality centred around the Shenzhen town on the Hong Kong border. As now defined, the zone's boundaries begin at Beizai Cape at Dapeng Bay (Mirs Bay) in the east, extending south-westwards, passing Luohu, Shenzhen town and ending at Shekou and Nantou at the Pearl River mouth in the west. To the north, it is bounded by ridges of Wutong Mountain and Yangtai Mountain. The north-south extension is about 7 km and the east-west extension is about 49 km. It has a total area of 327-6 km 2, that is about one-sixth of the area of Shenzhen Municipality and equivalent to about one-third of the total area of Hong Kong. Since 98 km2 of the land are suitable for urban development, this represents a very sizeable area for potential businesses to thrive in for investors from land-hungry and expensive Hong Kong.

The Shenzhen SEZ is at present basically rural, with the exception of Shenzhen Town and Luohu. Luohu is the principal customs check point on the border between China and Hong Kong and is a major entrance for Western and Chinese travellers going into China by land via the Kowloon-Canton Railway. In 1981-82, a total number of 8-4 million people entered China through Luohu. However, before being designated as part of the SEZ, Shenzhen and Luohu were only stop-over places for travellers and were basically market towns serving the needs of nearby villages and providing some daily labour to Hong Kong when the border was

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

292 GEOGRAPHY

^^ Shenzhen S.E.Z. ^' (Be'"n9> ^T? 'p* r

···· Boundary of Shenzhen / & municipality '

s f z s jn CH(NA ; L

= Boundary street (Kowloon) i ] Xjamen ! V

International boundary I 2 Shantou ' ^shangha, <^z : 3 Shenzhen j <^z 0 2 4 6 8 10km j 4 Znunai j 3

Chungking FoochowJ Ta)pei

' aO°* 2 j/ ( JtAIWAN ..···: β··'·: ' ; o^CanOx ·* *· · to Canton

' / 4*^hONG KONG

(Guangzhou) '"I ^-^~7 ^r ^ : ' Vc-Tä ^r

Π c Η ι ·. Ν A ' ^ulaosc ( C/Hrn e (

····-.. .-.' ' ''

' THAILAND t^YVs sour, "j&* *. .-.' •

'' Κ

THAILAND ^ ^

Cw/V/, ^^ • . J

Κ Bangkok/-^, |' ) SEA

I h 's

( · . . M ru' chea / ) I

' . ·Ι - k_j c - s_ 1

' Xl1'

R-^t) BuJ' ) Shenzhen^^_ ^ Xiaomeisha^ ̂

^_^^

^'- - =Shahe^=~' ShangbuJ^ygEE^ Sha^râuTôk^ f^l· §^* Mirs Bay ^

^^^ Cheqongmiao^ . "' ̂ ' «-«^ L~rZ^ jy /"^| Deep Bay ^"^'

"' leSheungShui S^^pC-^

Ç S ~'(Houhai Wan) S~

N^Fanling L ^/

^

^/"^^ NEW TERRITORIEsJy H /^

^Taio an aU S'

^> ^3^ ^- HONG KONGj λΛ c3

Fig. 1 . - Shenzhen Special Economic Zone and its relationship to Hong Kong. Inset: Special Economic Zones in China.

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

GEOGRAPHY 293

open. In future, they will grow into an important commercial, industrial and dormitory focus for the central part of the SEZ as well as retaining key functions as a major entry point across the present border.

Investment and regulations

To ease and encourage foreign investment in Shenzhen SEZ, government departments related to industry, trade and land development were organised into two companies. This was done to reduce the complexity of government machinery that foreigners would have to deal with. One of the companies is the Shenzhen Special Economic Zone Development Com- pany, responsible for promoting foreign investment and for negotiating with foreign inves- tors. The other is the Shenzhen Special Economic Zone Construction Company, responsible for land-use planning and land-use approval, for building construction and the provision of infrastructure. That they were called "companies" and not departments is a reflection of new flexibility in the economic policy of "self-responsibility for profits and losses" by state enterprises. A Special Economic Zone Liaison Department of the Guangdong Province was set up in Hong Kong, frequently the entry point and itself a main source of investment, to facilitate discussion and negotiation with foreign investors.

The actual form of investment in the SEZ is quite varied and includes sole proprietorship by foreign investors as well as various types of collaborative ventures with the Chinese government. These range from straightforward joint ventures between China and foreign investors (through co-operative production in which China provides land and utilities and the foreign investor provides the capital, machinery, wages, transportation and marketing) to intermediate processing of materials in Chinese-owned plants in which processing fees are charged by China. Table I provides examples of the forms of investment and types of venture involved in each. It may be seen that, by the end of 1981, some one thousand contracts had been agreed, although only a small proportion of undertakings are actually in operation at the present.

In order to facilitate and nurture foreign investment, to gain the confidence of foreign investors and to "manage" these investors efficiently, four provisional regulations on the

Table I Projects in Shenzhen using Imported Funds, According to Types of Investment (end of i98i)

No. of Contracts Percentage Form of Investment Trade (type and items) signed

Intermediate Processing Electronics, vehicle repairs, hardware, machine (Processing and assembling parts, garments, knitwear, household with supplied material) appliances, food, canned food, furniture, arts

and crafts 600 61-7

Compensation Trade Vehicle maintenance, crop cultivation and animal stock breeding 5 0-5

Joint ventures/ Housing building, tourism (construction of vacation Co-operative Undertakings villas, clubs, tourist resorts), transportation, service

trade, household appliances and building materials 82 8-4 Sole proprietorship The Asian Recreational and Sports Centre, real (Undertakings solely run by estate, agriculture, commerce and industry Η . Κ . , Macao and foreign investors) 16 1-6

Co-operative Production 60 per cent are undertakings of fish and shrimp (Breeding with supplied farming stock) 270 27-8

973 10000

SOURCE: China Economic News, 24th May, 1982.

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

294 GEOGRAPHY

registration of enterprises, visas, labour/wages and land usage were announced in November 1981. Preferential treatment is given to investors according to their type and amount of investment. The entry/exit process has been considerably simplified for all foreigners, overseas Chinese and what are termed "compatriots" from Hong Kong, Macau and Taiwan. Foreign investors can operate their enterprises independently in the special economic zones, and employ their own specialist foreign personnel for technical and administrative work. Other staff and workers have to be employed through the Special Economic Zone Labour Service Company which recruits workers from all over China. However, within limits, foreign investors have the right to set wages and to dismiss workers. As an inducement to investment, production machinery and equipment are exempt from import duties. In addi- tion, land tenure has been formalised so that a leasehold system that ranges from 20 years to 50 years, depending on land use, has been created in Shenzhen SEZ, with land-use fees charged according to type of usage (Table II) . The use of land is under the strict control of the

Table II Lease Period and Fees for Various Land Uses in Shenzhen SEZ

Standard Annual Lease Period Land Use Fees

(years) (RmbY/m2) £(b)

Industrial 30 10-30 £3 - £9 Commercial 20 70-200 £21 -£61 Residential 50 30-60 £9 -£18 Educational, Scientific

Technological, Medical and Health 50 (a) Tourism 30 60-100 £18 -£30 Agriculture and Animal Husbandry 20 (a) a = will be determined on individual application b = rate of exchange October 1982, £1 = 3-35 RmbY SOURCE: Provisional Regulations on Land Control in Shenzhen Special Economic Zone (Guangdong Provincial Administration of Special Economic Zones and Wen Wei Po, Hong Kong, 1981).

Shenzhen Special Economic Zone Construction Company to prevent land speculation and private transactions and, to ensure that land will be developed in accordance with the master plan, developers have to apply for a "land-use certificate" from its Planning Department. Although formal, the terms have been spelt out in such a way as to give foreign investors confidence yet to enable ultimate control to remain in Chinese possession.

A social-economic development plan and a master plan have been drafted for the SEZ. They have been approved by the SEZ authority, but have to be finally approved by the State Council of the central government because of the special nature and sensitivity of the special economic zone. The draft master plan at present is used as a guideline for interim land-use control in the SEZ and is the basis upon which most current development is proceeding. As is quite common in much Chinese planning, the emphasis tends to be on physical land use with social planning playing a less noticeable role, although the motivation to improve economic performance is clear in the plans (Yeh, 1983).

Internal planning and development of the SEZ

As most parts of the Shenzhen SEZ are, at present, rural and undeveloped, the fundamental importance of infrastructure provision in attracting foreign investment in industry and housing was recognised in the early stages of its planning and development. In the planning and growth of the Shekou industrial zone, one of the earliest developments to be emphasised in the SEZ was the provision of basic infrastructure or the so-called "five linkages and one

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

GEOGRAPHY 295

levelling" (the building of a road network, electricity supply, water supply, navigation and telecommunication facilities plus land levelling). The "five linkages and one levelling" have so far included the construction of a road linking Shekou to the main highway from Guang- zhou to Shenzhen old town; the arrangement of electricity supply from the China Light and Power Co. Ltd. of Hong Kong since internal power capacity would be inadequate; the construction of a water treatment plant and the laying of water pipes; the building of a cargo handling wharf and dredging of a channel for passenger ships and freighters; the installation of a microwave telecommunications system; and the levelling of land for buildings and factories. Future infrastructure development includes the construction of more customs check-points along the border between Hong Kong and Shenzhen, a proposed Guangzhou- Hong Kong expressway that will pass through Shenzhen, and an east-west transportation network within the SEZ. All this activity is at present underway and indicates the extent of the commitment of the Chinese authorities to this part of their modernisation drive.

The draft master plan of the Shenzhen SEZ has been prepared taking into consideration the relief of the area and its special locational relationship with regard to Hong Kong. Morphologically, Shenzhen SEZ can be divided into the hilly area and the lowland area, with the 50m contour more or less demarcating the boundary between the two. The upland area mainly occupies the north of the SEZ and the east of the Shenzhen Reservoir. As it is too hilly and lacks a good transportation network, it is not suitable for urban or industrial develop- ments to any extent. The main planning strategy for these districts has therefore been to utilise their natural resources of minerals, water, beaches and scenery. Tourism and quarry- ing have thus become major developments and, indeed, the potential for recreation, espec- ially for Hong Kong visitors, seems considerable. Most of the lowland areas lie close to the border with Hong Kong, and mainly comprise the coastal plains of Shenzhen Bay (Deep Bay). Because of their proximity to Hong Kong and the level topography, the planning strategy for the lowland areas has been to develop them for industry, commerce and housing; and it is in these districts that tremendous construction activity is to be seen at present.

The draft master plan of Shenzhen can be divided into three major sectors - eastern, central and western. The names of the planning districts, their major functions, usable land areas, target populations and average densities are in Table III, with Fig. 2 showing the

Fig. 2. - Proposed planning districts in Shenzhen SEZ.

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

296 GEOGRAPHY

üJ

§ υ

ο §

<

| ι ζ

I I s

Sj|

bu Ο

Ο

!

I û

ο

I ο

Sis S 8 8 838883 ^ 2 £ 8 8 2 8 8 ω g Ο m ^ ~ (Ν

c ο ο

3 3 « j.

a î. î î 1 j.

1 111 -a ΐ 5 1 1 "i .2. -a a -5 ·§ s -S u u "δ ι î „· a ^23 .S. S -ë^Si^ u u g-c-c^ ce

il il ,1511 JIII .55 Ml|| ! ! 1 I I I I ft I 1 I 1 Jill! ilill ll'i'il 111

δ ? 1 | s ■Β -S S g a iS | § I l « - ί il ι J? I ! î ! ! « f . ï Ι ι Ι Há ' ÏIIÏ ! ! ! II1H III

I I I 1 ε ε Ι ε δ ε .2 S Β S δ ω ?Ρ 2 2 rS Β tÕ tõ <U Cd CO . Β «ι rt) « <U « Cd ω CO . » Β

^ «ι

^ rt)

Ι

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

GEOGRAPHY 297

Fig. 3. - Workers' housing, heavily state subsidised, at Shangbu.

locations of the planning districts. The target population for the whole of Shenzhen SEZ is some 800 000 by the year 2000, whilst today's population is approximately 100 000, so enormous growth (almost all by in-migration) is envisaged.

The eastern region comprises the area east of the Shenzhen Reservoir. It is hilly but the beautiful beaches along Dapeng Bay (Mirs Bay) have great potential for development as weekend water-recreation areas for people from Hong Kong. At present, a joint venture between the SEZ and a Hong Kong firm has developed Xiaomeisha for camping, swimming and water-borne recreation. The central region is bounded by the Shenzhen Reservoir in the east and extends approximately as far as Chegongmiao in the west. The major planning districts of this region include Shenzhen old town, Luohu, Shangbu and Futian. Most of the construction is at present occurring at Luohu and Shangbu (Fig. 3). Luohu will eventually be

developed as a commercial-residential district, mainly because it is the major entrance between China and Hong Kong. There are plans to redevelop the Shenzhen town, which contains many old dilapidated houses, into an exhibition and shopping complex for displaying Chinese products. The offices of the People's Government of Shenzhen Municipality have

recently moved to impressive new buildings in Shangbu where they function as the admini- strative centre for the SEZ. The Futian district, which is at present largely unpopulated and mainly rural, is to be developed by a property company from Hong Kong into an important new town of some 400 000 inhabitants. Because of its closeness to Hong Kong, the central region will be the major focus of light industry and commercial development of the SEZ in the future.

The western region extends from Chegongmiao in the east to the Pearl River Mouth, west of Nantou. It includes the Xili Reservoir Holiday Camp and the settlements of Houhai, Shahe, Nantou, Chiwan and the Shekou industrial zone. The planning strategy for this region is that it should be mainly an industrial region, especially one for heavy industries. The most

rapidly developing area in the region is the Shekou industrial zone which is developed by the China Merchants Steam Navigation Co. Ltd. (Fig. 4). At present there are a number of very new factories. A container plant (opened in September 1982) is a joint venture between

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

298 GEOGRAPHY

Fig. 4. - Creating an industrial infrastructure: foreshore development at Shekou.

China and Denmark; additionally there are an oxygen manufacturing factory, steel and aluminium rolling plant, a flour mill, and many additional factory buildings under construc- tion. Chiwan, located south-east of Shekou, will eventually be developed as a ship repair and maintenance base for what is potentially a bonanza industry, off-shore oil drilling in the South China Sea. The sea-bed will be dredged to 13 m deep for 10 000 ton ships and there are hopes that a container terminal will be developed, although the shallowness of the estuarine waters presents considerable problems.

The development of Shenzhen SEZ has been very rapid; indeed its population grew from 68 000 in 1978 to 98 000 in 1982. Quite similar to the new towns across the border in Hong Kong (discussed in Phillips, 1980; Leung, 1980; and Sit, 1981). Shenzhen can be described at present as almost an enormous construction site. The construction of roads and buildings is going on everywhere, although development is mainly focused on Shekou industrial zone, Shangbu, Luohu and Shenzhen old town. Building construction, road works and site prepara- tion are common in these areas, using an interesting mix of labour-intensive manual methods plus modern mechanisation, often side-by-side.

The total amount of foreign investment in 1981 was about HK $2 500 million (approxi- mately £250 million), relatively modest but growing rapidly. Sixty-five per cent of the contracts are currently in manufacturing but, in terms of amounts invested, housing and tourism have the largest share. They accounted for 68 per cent of the total investment whilst manufacturing only accounted for 16 per cent. The most common form of investment was co-operative production, which constitutes 56 per cent of the total investment. The majority of overseas investment came from Hong Kong although, as with the Danish container venture, there are considerable hopes that European and American firms, and especially regional firms from south-east Asia, may be attracted by the favourable terms and conditions when the zone becomes fully established.

A large, and undoubtedly impressive, variety of developments have taken place in the SEZ since its designation in 1980. A quarry at Wushigu has an annual production of 500 000 cu. metres. It is located 700 m from the Hong Kong border and rocks are transported by conveyor belt to Hong Kong. Industrial developments range from basic light industries, such as textiles and clothing, electronics and light metals, to industries that require more advanced tech- nology such as motor vehicle assembly, printing, container manufacturing and machine repair, in line with the World Bank hopes for development through industrialisation. It will be

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

GEOGRAPHY 299

evident that some of these have quite extensive land requirements, and it is the availability of tracts of cheap land in the SEZ that is attractive to investors from Hong Kong. Holiday camps for weekend tourists from Hong Kong with camping, archery, rifle ranges, rowing, horseback riding, fireworks displays and sports facilities are now well-established as at Xili reservoir. A beautiful beach at Xiaomeisha along the Dapeng (Mirs) Bay has developed into a recreation camp also principally for Hong Kong weekenders. Housing mainly for foreign businessmen and Hong Kong "compatriots" has been built around Shenzhen Reservoir and Luohu, close to the border and available at prices of between one-fifth and one-tenth of those for comparable properties in Hong Kong. All of these developments suggest the flexibility of the SEZ concept as currently being implemented.

Low land rents and wages are the biggest attraction for foreign investors in the SEZ. Land rents are cheaper than those regionally and particularly those of Hong Kong and this factor is very attractive to land-intensive industries requiring large amounts of storage and production space. Wage rates are on average about 50 per cent lower than in Hong Kong. The average wage of workers in the SEZ is HK $750 (£75) per month, which, although twice as high as the normal wage of workers in other parts of China, is very cheap compared with the average wage of HK $1 ,500 (£150) of Hong Kong workers.

The future of Shenzhen and other SEZs

Although land and labour are cheap, the past political instability of China, its volatile nature, and uncertainty about future economic policies, are major stumbling blocks to the ability to attract to the zones the foreign investment on which their future development is heavily dependent. Another main hindrance to the development of SEZs, and the Shenzhen SEZ in particular, is the lack of external communications. Shenzhen lacks a deep-water port through which to ship raw materials and finished products. Luohu, the major land entrance, operates only for limited hours and is always overloaded because it not only serves travellers and businessmen to Shenzhen but to other parts of China as well. The opening of more customs check-points along the 25 km long border between SEZ and Hong Kong has been supported by Hong Kong's previous governor Sir Murray MacLehose, and by the new governor, Sir Edward Youde. This might partly relieve the problem and facilitate easy entrance and exit for investors in the SEZ and needs to be introduced speedily. Labour, on the other hand, is relatively cheap in the zones but its quality and efficiency are lower than in Hong Kong. The inexperience of Chinese officials in management and administration of foreign investment may also weaken confidence in the SEZ, and add to frustrations and increase caution, at least in the early stages.

The Shenzhen SEZ has been promoted by some Chinese officials on several occasions as the future model of a Hong Kong under Chinese administration and, if it is successful, the Hong Kong-Chinese border could become of little relevance since two-way trade and communications will in theory be very free. The developments are, however, barely three years old and few enterprises are fully operational as yet. Although it is too early to evaluate its impact on China and Hong Kong, however, this and the other zones have certain political implications for the future of Hong Kong after the lease on most of the Territory expires in 1997, details of which topic may be found in Endacott (1958) and Miners (1980, 1981). In particular, they indicate China's willingness to collaborate with, and to learn from, the West. However, it may be questioned whether the SEZ concept is consistent with China's under- lying and important political philosophy and whether the economic, social and cultural exposure which accompanies foreign investment in the SEZ may cause undesirable social and economic impacts. Nevertheless, the special economic zones certainly represent an interest- ing and exciting development in China. Because of the scale of developments and because of the increasing importance of China as a political and economic force in world affairs as she emerges to seek modernisation, this experiment must be carefully followed by the rest of the world this decade.

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions

300 GEOGRAPHY

REFERENCES

Baum, R. (ed.) (1980) China's Four Modernizations: The New Technological Revolution, Boulder, Col- orado: Westview Press.

Bonavia, D. (1981) "The shou-fang syndrome in Chin- ese planning", Far Eastern Economic Review, 113 (34), pp. 56-57.

Chang, S. D. (1968) "The distribution and occupation^ overseas Chinese", Geographical Review, 58, pp. 89-107.

Currie, J. (1979) Investment: The Growing Role of Ex- port Processing Zones, London: Economic Intelli- gence Unit.

Delfs, R. (1981) "A new kind of planning", Far Eastern Economic Review, 113 (34), pp. 48-50.

Endacott, G. B. (1958) Λ History of Hong Kong, Lon- don: Oxford University Press.

Leung, C. K. (1980) "Urbanization and new town dev- elonment". in Leune. C K._ Cushman. J. W. and

Wang, G. (eds.) Hong Kong: Dilemmas of Growth, Occasional Papers and Monographs, No. 45, The Centre of Asian Studies, The University of Hong Kone, pp. 289-308.

Miners, N. J. (1980) "China and Hong Kong's future", in Leung, C. K., Cushman, J. W. and Wang, G. (eds.) Hong Kong: Dilemmas of Growth, Occasional Papers and Monographs, No. 45, The Centre of Asian Studies, University of Hong Kong, pp. 13-29.

Miners, N. J. (1981) The Government and Politics of

Hong Kong, 3rd ed., Hong Kong: Oxford University Press.

Nation, R. (1981) "A vision redefined by changing times", Far Eastern Economic Review, 113 (34), pp. 55-56.

Phillips, D. R. (1980) "New towns bring new hope for expanding Hong Kong", Geographical Magazine, LIII (3), pp. 180-187.

Sit, V. F. S. (1981) "New towns for the future", in Sit, V. F. S. (ed.) Urban Hong Kong, Hong Kong: Summer- son Eastern Publishers, pp. 142-159.

United Nations Industrial Development Organisation (UNIDO) (1978a) The Effectiveness of Industrial Estates m Developing Countries, New York: United Nations.

United Nations Industrial Development Organisation (UNIDO) (1978b) Guidelines for the Establishment of Industrial Estates in Developing Countries, New York: United Nations.

Vittal, N. (ed.) (1977) Export Processing Zones in Asia: Some Dimensions, Tokyo: Asian Productivity Organ- isation.

Wong, K. W. (1982) (ed.) Shenzhen Special Economic Zone, Hong Kong: Hong Kong Geographical Assoc- iation.

Yeh, A. G. O. (1983) "Physical planning and land dev- elopment in Shenzhen Special Economic Zone", China Building Development, 1, pp. 32-41.

The Tyneside Branch of the Geographical Association

ONE-DAY CONFERENCE FOR TEACHERS

Theme: Geography in the Middle Years 9-1 3 Date: Tuesday, 8th November Place: St. Mary's College of Education, Newcastle upon

Tyne Further details can be obtained from: Mr. S. Watts, Head of Social Studies, Blyth Wensleydale Middle School, Dent Street, Blyth, Northumberland, NE24 3ED (Tel: Blyth 661 87)

Geography ©

This content downloaded from 161.200.255.101 on Tue, 2 Jul 2013 23:39:26 PMAll use subject to JSTOR Terms and Conditions