The history and challenges of development zones in China

In recent years, “siliconisation” has become an essential element in the development of regional economics worldwide1. Encouraged by the successful development of Silicon Valley in the U.S., Sophia Antipolis in France, and the Tsukuba Science City in Japan in the 1970s, the Chinese began to set up development zones in the 1980s in order to boost local industry.

Development zones were set up as “Special Economic Zones”. The first one was established in Shenzhen, Guangdong. Deng Xiaoping proposed the concept of the “Special Economic Zone” after visiting Shenzhen in 1979. He suggested the creation of a special zone with flexible political and tax concessions in order to attract foreign investment. During the same year, the Chinese government’s Standing Committee of the National People’s Congress [全国人大常委会] completed the legislative process for the development of these zones. Subsequently, Shenzhen became the first “Special Economic Zone” in China in 1980. There are two aspects involved in the establishment of “Special Economic Zones”. From the economic perspective, the establishment of a Special Economic Zone means that the Chinese government accepts the introduction of foreign capital. From the political perspective, the creation of a Special Economic Zone implies that the central government grants local governments the power to promulgate special policies and flexible measures that can accelerate local development2.

Because Shenzhen has geographical advantages, and because the government endorsed policies regarding land release and tax exemption, many people in Hong Kong invest capital in Shenzhen, thereby boosting the city’s development. In 1984 China decided to open up coastal port cities and set up “Economic and Technological Development Zones”.

There are differences between “Special Economic Zones” and “Economic and Technological Development Zones”, although both types of zones are designed to attract foreign investment. First of all, the “Special Economic Zone” is governed by individual administrative agents, such as the Shenzhen Special Economic Zone Government, whereas the “Economic and Technological Development Zone” is governed by the local government of the area where the zone is located. “Special Economic Zones” are comprised mainly of export processing industries. The objective of the “Economic and Technological Development Zone” is to develop advanced industrial technologies. After the successful establishment of “Special Economic Zones” and “Economic and Technological Development Zones” to develop local technology and high-tech industries, the State Council of China approved the construction of High-tech Industrial Development Zones in 1988.  At present, nearly 90 High-tech Industrial Development Zones exist in China.

Differences between Special Economic Zones, Economic and Technological Development Zones and High-tech Industrial Development Zones

If we look at the way the “Special Economic Zones”, “Economic and Technological Development Zones”, and “High-tech Industrial Development Zones” were set up, we observe that, initially, the Chinese government simply wished to attract foreign investment to China. However, in recent years, the Chinese government’s intention has been to develop high-technology individually. However, many studies have shown that, although the development zones in China have successfully attracted foreign investment, “Satellite-platform” development has been unsatisfactory, due to poor connections between multinational companies and local companies, resulting in little cooperation between firms and a low level of development. Studies of Suzhou3,  Wuxi4 and Shanghai5show that multinational companies do not help to enhance the development of local technology.

China’s domestic market has huge demands. Local manufacturers share a similar culture and language within the domestic market, and this is a competitive advantage that multinational companies lack. A few industries are able to develop their technology by satisfying the requirements of the domestic market – for example, the Mobile phone chip industry in the Zhangjian High Technology Park and the personal computer industry in Beijing Zhongguancun, However, most of the Economic and Technological Development Zones have limited development. Therefore, the Chinese government is confronted with the challenge of employing the resources of each development zone, with its individual characteristics and advantages, in order to improve locally developed technology, without creating situations of competition between development zones.

Cite this blog post
Chi-Han Ai (2013, March 12). The history and challenges of development zones in China. URBACHINA. Retrieved April 12, 2024, from

  1. Jessop Bob and Ngai-Ling Sum (2000), An entrepreneurial city in ation: Hong-Kong’s emerging strtegies in and for (inter) ruban competition, Urban Studies, 37: 2287-2313. []
  2. Zhongguo gongchandang xinwen中国共产党新闻, Zhongguo gongchandang xinwen, last accessed 12 March 2013. []
  3. Wei Yehua Dennis, Lu Yuqi and Chen Wen (2009), Globalization regional development in Sunan, China: does Suzhou industrial park fit a neo-marshallian district model?, Regional Studies 43(3): 409-427. []
  4. Jin jiahe and Zhouzhi long (2009), The development of Chinese self-technological industrial clusters: The Semiconductor case in Wuxi Jingsu, China, paper presented in the first annual conference on development studies. Retrieved from , last accessed 04 December 2012. []
  5. Wen hu and Ceng gang (2005), Study of global value chain governance and local industrial network upgrading- Case of Pudong integrated circuit industrial network, China industrial economy, 7: 20-27. []

Chi-Han Ai

Ph.D. candidate of EHESS ( École des hautes études en sciences sociales, Paris) focusing on regional economic development in China and Taiwan.

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2 thoughts on “The history and challenges of development zones in China

  1. Dr Shadreck Saili

    Dear Chi, this is a good topic,can you send me the your report after you have completed the study

    1. Chi-Han Ai Post author

      Dear Dr Shadreck Saili,

      Thank you for your interest in my article. I actually wrote another article following the previous one that you read. It adopted a rather microscopic point of view to analyze the development of Zhangjiang science parks, which is located in Shanghai. So, if you are interested in this subject, I can send the entire work to you;

      Looking forward to having your reply.

      Best regards,



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