A LEVEL – UNIT 3A – Theme 6a CHINA – 2 Changes in the economy

Theme 6a – Emerging Asia – China Key Question 1.1What are the main physical and demographic characteristics of the country of China? *A brief overview at the national scale of patterns of (i)climate; (ii)relief, drainage and water availability; (iii)natural resources; (iv)population distribution; (v)regional differences in levels of development. Key Question 1.2Why and how is the economy changing? *Changes in economic policies. *New industries in the changing economy. *Factors affecting the growth of new industries and the contrast between coastal areas and the interior. *Impact of the changing age structure on the economy. Key Question 1.3What are the economic and social challenges facing rural communities? *Changes in the organisation of agriculture and rural economic communities. *The effects of population policies in rural areas. *The impacts and challenges for rural areas of migration. *Social welfare services such as health and education. *Sustainable development.

Key Question 1.4What are the economic and social challenges facing urban communities? *Changes in the organisation of economic activities in urban areas. *Migration to urban areas and increasing social inequality. *Social welfare services such as health, education and housing. *Increasing rural-urban inequalities. *Sustainable development in towns and cities. Key Question 1.5What are the effects of globalisation on China? *The role of foreign firms in changing and developing the economy. *The importance of exports and the role of the WTO. *The economic and political impacts of China’s trade with the rest of the world. Key Question 1.6What are the environmental challenges and solutions facing China? *The cause and consequences of (i)soil erosion; (ii)industrial pollution; (iii)sustainable use of water resources; (iv)the need for energy supplies. *The balance between economic growth and sustainable development.

SPECIAL ECONOMIC ZONES (SEZs) IN CHINA Introduction -Small fenced-in areas specializing in manufacturing for exports -Modern version of export zones starting from Puerto Rico (USA), Shannon International Airport in Ireland in 1959 – latter considered the first one -India – Kandla in EPZs in Taiwan, S. Korea and other countries -Since 1979, most extensive, large and successful SEZs in PRC (China)

Common Features of SEZs -Duty-free imports of capital goods and inputs for production for Export -Liberal access to foreign exchange -Generous tax concessions esp. in early years -Flexible Labour Laws -Limitations on sales within the country -Better Infrastructure (Power, Transport & Communications)

Rationale for SEZs -Main benefits sought from SEZs are: *Faster economic growth *Employment generation on a large scale *Earning more foreign exchange *Infusion of modern technologies & their demonstration and spread effects *Economies in production due to clustering *Benefits can be there for the whole country if same policies are adopted everywhere. Economic, political, social reasons for restricting to certain places. SEZs as ‘second-best’ options to generalized liberalization. *Export-led growth and creation of fast-growing, employment- generating areas main objectives. *Advantages of coastal regions in export zones.

SEZs in China Development over the years -Started soon after beginning of reforms in Four SEZs started in 1979 – three in Guangdong adjacent to Hong Kong and one at Xiamen in Fujian -Established principally to test the effectiveness of alternative market- based export-led growth strategy, as in East Asian countries. -Heavy government investment in infrastructure. Each zone could introduce its own Regulation to growth investment, approvals and tax concessions. -Based on the success, in 1984, the SEZ benefits were extended to 14 coastal open cities. -Economic & Technology Development Zones (ETDZ) and High Tech and New Technology Industry Development Zones encouraged in coastal open cities. -In 1985, three development triangles – Pearl River Delta (PRD), the Yangtze River Delta (around Shanghai) and Minum Delta (around Xiamen) were designated as coastal open areas. -Hainan Island was declared as fifth SEZ in Since then, 52 cities (including all provincial capitals) have become open cities -Uncontrolled proliferation and later consolidation

SEZs in China Reasons for Success: -Unique locations – of the five SEZs, Shenshen, Shantou and Zhuhai are in Guangdong Province adjoining Hong Kong. Fourth, Xiamen, is in Fujian Province and nearer Taiwan. -Large size with government and local authorities providing improved infrastructure with foreign collaboration -Investment-friendly attitudes towards Non-Resident Chinese and Taiwanese! -Attractive incentive packages for foreign investment -Liberal customs procedures -Flexible Labour Laws providing for contract appointments for specified periods Emerging Challenges -Over-capacity -Heavy burden of non-performing laws -Declining competitiveness -WTO constraints

CHINA’S SEZ’S, COASTAL OPEN CITIES, AND OPEN ECONOMIC REGIONS