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China's First Special Economic Zone Public Disclosure Authorized DIRECTIONS IN DEVELOPMENT Public Disclosure Authorized Countries and Regions Building Engines for Growth and Competitiveness in China Experience with Special Economic Zones and Industrial Clusters Public Disclosure Authorized Douglas Zhihua Zeng Editor Public Disclosure Authorized Building Engines for Growth and Competitiveness in China Building Engines for Growth and Competitiveness in China Experience with Special Economic Zones and Industrial Clusters Douglas Zhihua Zeng Editor © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The bound- aries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8432-9 eISBN: 978-0-8213-8433-6 DOI: 10.1596/978-0-8213-8432-9 Cover photo: Tianjin Economic–Technological Development Area (TEDA) Archives/Jiao Yongpu Cover design: Quantum Think Library of Congress Cataloging-in-Publication Data Building engines for growth and competitiveness in China : experience with special economic zones and industrial clusters / edited by Douglas Zhihua Zeng. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8432-9 — ISBN 978-0-8213-8433-6 (electronic) 1. Industrial clusters—China. 2. Enterprise zones—China. 3. Industrial policy—China. 4. Economic development—China. 5. China—Economic policy. I. Zeng, Douglas Zhihua. HC430.D5B85 2010 338.8'7—dc22 2010017085 Contents Foreword xiii Acknowledgments xv Abbreviations xvii Currency xviii Chapter 1 How Do Special Economic Zones and Industrial Clusters Drive China’s Rapid Development?1 Douglas Zhihua Zeng Terms and Definitions4 SEZs and Clusters: “Top-Down” versus “Bottom-Up”?6 Special Economic Zones in China: A Testing Lab for the Market Economy8 Industrial Clusters in China: A Competitive Engine for the Local Economy 24 Reflections on the Experiences of China’s SEZs and Industrial Clusters 36 Challenges to the Sustainable Development of China’s SEZs and Industrial Clusters 39 Policy Implications 42 v vi Contents Conclusion 45 Annex A 46 Annex B 47 Notes 48 Bibliography 49 Chapter 2 China’s First Special Economic Zone: The Case of Shenzhen 55 Yiming Yuan, Hongyi Guo, Hongfei Xu, Weiqi Li, Shanshan Luo, Haiqing Lin, and Yuan Yuan Background on the Shenzhen SEZ 56 Development Achievements 58 Development Stages 66 Roles of the Government 72 Preferential Policies 77 Key Experiences 80 Challenges and Recommendations 81 Notes 85 Bibliography 86 Chapter 3 A Case Study of Tianjin Economic– Technological Development Area 87 Xiaoxi Li, Ruijun Duan, and Huanzhao Zhang TEDA’s Accomplishments 88 Background on TEDA 96 The Role of Government in the Construction of TEDA 101 TEDA’s Preferential Tax and Fiscal Policies 106 TEDA’s Success 109 Challenges Faced by TEDA 113 Lessons Learned from TEDA 117 Notes 120 Bibliography 120 Chapter 4 From County-Level to State-Level Special Economic Zone: The Case of the Kunshan Economic and Technological Development Zone 123 Jianming Wang and Ming Hu Contents vii The Major Achievements of KETD 125 Background and History of KETD’s Development 128 Preferential Policies for Foreign-Funded Enterprises 135 The Essential Experiences of KETD’s Development 139 Challenges and Some Policy Suggestions 145 Conclusions 149 Bibliography 149 Chapter 5 Industrial Clustering in China: The Case of the Wenzhou Footwear Sector 151 Jici Wang Overview of the Chinese Footwear Industry 152 The Formation of the Wenzhou Footwear Industry 156 The Structure of the Wenzhou Footwear Cluster 160 Success Factors and Challenges of the Wenzhou Footwear Manufacturing Cluster 166 Independent Innovation: The Road to Upgrading 175 Policy Suggestions for Upgrading the Footwear Industry in Wenzhou 176 Notes 178 Bibliography 178 Chapter 6 Cluster Development and the Role of Government: The Case of Xiqiao Textile Cluster in Guangdong 181 Jun Wang and Fangmin Yue An Overview of Industrial Cluster Development in China 182 Outline of Industrial Cluster Development in Guangdong 187 A Typical Textile Cluster in Xiqiao Town 195 Role of Government, Policy Instruments, and Their Implementation 201 viii Contents Evaluation of Government Policy and the Xiqiao Textile Cluster 209 Discussion, Conclusion, and Policy Implications 215 Notes 218 Bibliography 219 Index 223 Figures 1.1 China’s GDP Growth, 1980–2008 2 1.2 China’s Per Capita GDP, 1980–20082 1.3 China’s Exports of Goods and Services, 1980–20083 1.4 Output and Foreign Investment in Shenzhen’s Secondary Sector, 1979–2006 20 1.5 Output and Foreign Investment in Shenzhen’s Tertiary Sector, 1979–2006 20 1.6 Employment and Foreign Investment in Shenzhen, 1979–2006 21 1.7 Productivity of Selected Sectors in Shenzhen, 1993–2004 21 2.1 Growth Rate and Total Value of Exports in Shenzhen, 1979–2008 60 2.2 Actually Utilized Foreign Capital in Shenzhen, 1979–2007 61 3.1 Gross Regional Output and Gross Industrial Output of TEDA, 1986–2008 89 3.2 Growth of Gross Domestic Product and Gross Industrial Output of TEDA, 1996–2008 89 5.1 Formation of the Wenzhou Footwear Manufacturing Cluster, 1970s–Present 157 5.2 Annual Output of the Wenzhou Footwear Industry, 1990–2005 161 5.3 Structure of the Wenzhou Footwear Cluster 162 5.4 The Development of the “Chinese Shoe Metropolis,” 1999–2008 171 5.5 Development Stages of the Kangnai Company, Selected Years, 1980–2004 176 6.1 Distribution of Industrial Clusters in Guangdong, 2006 192 6.2 Public Platform of “One Platform and Five Pillars” for Upgrading the Innovation of the Textile Cluster 208 Contents ix Maps 1.1 Economic and Technological Development Zones, 2010 11 5.1 Shoemaking Companies in Wenzhou 164 6.1 Provinces, Autonomous Regions, and Municipalities 183 6.2 Industrial Clusters in Guangdong Province, 2004 191 Tables 1.1 Potential Benefits Derived from Special Economic Zones4 1.2 Markusen’s Typology of Industrial Clusters6 1.3 Performance of Initial Five Special Economic Zones and National Economic and Technological Development Zones, 2006 13 1.4 FDI Inflows in Five Comprehensive Special Economic Zones, 1978–2008 19 1.5 Cluster Employment as a Share of Total Employment in Guangdong Province, 2001–07 26 1.6 Performance of the Xiqiao Cluster Before and After the Establishment of the Technology Innovation Center, 1998 and 2003 32 1A.1 China’s State-Level High-Tech Industrial Development Zones 46 1B.1 China’s 15 Free Trade Zones 47 2.1 GDP and Per Capita GDP of Shenzhen, Selected Years, 1980–2008 58 2.2 Contribution of Industry to GDP Growth in Shenzhen, 1979–2008 59 2.3 The Changing Economic Structure of Shenzhen, Selected Years, 1980–2008 60 2.4 Growth of Shenzhen’s Foreign Direct Investment, Selected Years, 1979–2008 61 2.5 Output Value of High-Tech Industries in Shenzhen, Selected Years, 1991–2008 63 2.6 Value of High-Tech Exports from Shenzhen, 2001–08 63 2.7 Output Value of High-Tech Industries with Independent Intellectual Property, 2000–08 64 2.8 Labor Employed in Shenzhen, Selected Years, 1979–2007 66 3.1 Performance of Employees of TEDA, 1987–2007 90 3.2 TEDA’s Number of Exporters and Value of Products Exported, 1986–2007 91 xContents 3.3 Value of TEDA’s High-Tech Exports and Their Share of Total Export Value, 2001–07 92 3.4 Value of Exports to Six Countries, Economies, or Regions and Their Share of Total Export Value, 2007 92 3.5 Foreign Investment in TEDA, by Number of Approved Projects and Total Investment Value, 1985–2007 93 3.6 Foreign Investment in TEDA, 1988–2007 94 3.7 Value of High-Tech Products in TEDA and Percentage of Gross Industrial Output, 2001–07 95 3.8 Major Economic Indicators in TEDA, 1986–2007 96 3.9 Highest Educational Attainment of TEDA’s Labor Force, 2008 99 3.10 Proportion of Secondary and Tertiary Industry Production in TEDA, 1991–2007 117 4.1 Key Indicators for Kunshan and Other Major State-Level Development Zones in China, 2008 124 4.2 Key Indicators for the Jiangsu Kunshan Export-Processing Zone and Other Export-Processing Zones in Its Surrounding Area, 2008 127 4.3 Kunshan’s Export-Oriented Supply
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