With the development of Special Economic Zones in China, the country has progressed from being a follower to being a leader.

A Preamble to the Constitution

“China and Latin America” was the title of my first piece published in The European Financial Review in 2012,

which served as the launchpad for this magazine’s “China & the World Series.” Almost immediately after its formal launch in 2013, the Belt and Road Initiative (BRI) transformed “China and the World” into a globally relevant issue of public discourse as well as academic study and policy debate, according to the World Economic Forum. The problem has remained regularly and prominently in the news, with the impact of the US-China trade war over the last year and a half exaggerated even more, and it has spawned a huge and rising body of published study and media commentary on the subject in recent years. I have taken the reader on a journey around the world through the 13 articles that have been published so far in this series with a variety of co-authors, including a number of undergraduate students from Trinity College in Connecticut, to see China’s presence and influence in every region of the world. But, more importantly, I have attempted to shed light on “China and the World” by drawing meaningful connections between local and regional development and transformation deep within China and their echoes and extensions throughout the world, regardless of where they originate or where they are extended from. The article that follows goes into greater depth about the trans-local dimension of “China and the World” by tracing how China has progressed from being a follower to a leader in the construction of special economic zones (SEZs) within its borders earlier on, and how it has extended this experience and expertise to other developing countries more recently.

In recent decades, special economic zones (SEZs) have been employed as a significant national development tool in a variety of countries all over the globe. China distinguishes itself not only by having established the greatest number and diversity of special economic zones, but also by having constructed several SEZs in other developing nations. In this essay, I first examine the history of special economic zones (SEZs) into separate and overlapping forms throughout the last four decades, demonstrating how SEZs have evolved and continued in their own existence as well as in their responsibilities in encouraging development. Second, I examine China’s transformation from a national follower to a worldwide leader in the creation of the world’s biggest number of special economic zones (SEZs), the diversification of those SEZs on a local level, and the expansion of those SEZs abroad. Finally, I take important lessons for poor nations from China’s development experience with special economic zones.

An Age-old Story Continues into the Twenty-First Century

According to The Economist (4 April 2015), the first free trade zone (FTZ) was established in ancient Phoenicia around 3,000 years ago. In 2012, Keller Easterling traced the origin of the term back to the Roman port of Delos in the Aegean Sea, which prospered in the first millennium B.C. It is possible to go ahead in time from the FTZ-like Hanseatic League of the 13th to 17th centuries to the first modern zone, which was established at Shannon International Airport in Ireland in 1959. South Korea and Taiwan, employing export processing zones (EPZs) to jump-start their export-oriented industrialisation in the 1960s and early 1970s, were the next countries to do so. With the establishment of four SEZs (Shenzhen, Zhuhai, Shantou, and Xiamen) along China’s southeast coast in 1980, the SEZ approach to development was elevated to a new level. These SEZs were significantly larger than the earlier EPZs and were located in or near existing cities, thereby raising the overall level of development.

From an estimated 500 in 1995, the number of Special Economic Zones (SEZs) has increased to 5,400 zones operating in 147 countries as of today (UNCTAD, 2019).

Because of the enormous number of SEZs and the variety of forms of SEZs, the success of each one varies greatly. China is the world leader in special economic zone development, having established the greatest number of SEZs and the widest range of SEZ kinds with the greatest degree of success. In contrast, Special Economic Zones (SEZs) in India and Africa have typically performed poorly, for a variety of reasons including poor infrastructural links, excessive bureaucracy, and opposition to land acquisition, among others (ADB, 2015; UNDP, 2015). Other deciding or assisting elements that influence the varied success of SEZs include the timing of their formation and the governance structure in place. I revise my earlier categorization of special economic zones (Chen, 1995) to provide a more dynamic assessment of the current SEZ scene today.

Table 1 depicts four different kinds of SEZs that are divided into three major phases. In the industrial upgrading process,

free manufacturing zones (FMZs) serve as a transition point from the start-up of labor-intensive and export-oriented manufacturing to the start-up of knowledge-intensive and innovative manufacturing. Since hosting far earlier services such as storage for duty-free products in free trade zones (FTZs), free service zones (FSZs) have evolved through time to include a greater range of more contemporary and high-end services, such as logistics, in their offerings. While sector-specific zones (SSZs) and free trade zones (FTZs) share certain similarities, they have a shorter history and contain more specialized economic roles and activities that are increasingly heralding the future. Cross-border and extraterritorial special economic zones (SEZs) are the newest form of SEZ, with the broadest geographical extent, and which are really border-intensive and transnational in function. They are also the most expensive to establish. This table aims to remap Special Economic Zones (SEZs) as subnational units of economic development with a variety of roles onto the development ladder of climbing or sliding national economies based on shifting comparative advantages in order to remap SEZs as subnational units of economic development.