Address by H.E. Mr. Song Deheng

Consul General of the People's Republic of China in Mumbai

On Conference of "Special Economic Zones: Growth Drivers of Maharashtra"

June 5^th, 2006,

World Trade Centre, Mumbai

 

 

Mr. Y. R. Warerker, Director of WTC,

Distinguished Guests,

Ladies & Gentlemen,

Good Afternoon!

 

It is my pleasure to attend the Conference and Exhibition organized by WTC, which offers me a good chance to exchange views on economic development of our two countries. I sincerely wish to share some experiences from China with and learn more about Special Economic Zones from you present here.

 

Firstly, history of the Development of Chinese Special Economic Zones.

As we know, the development of Special Economic Zones is one of the highlights of remarkable Chinese economic achievements. At the beginning, I'd like to briefly introduce the Development of Chinese Special Economic Zones in past 20-odd years. It is different from Indian practice: SEZ in China is classified in two levels by their scales. SEZ is the whole city even whole province opened to special financial, investment and trade policy, while Economic and Technological Development Zones (ETDZ) is a relatively small piece of land earmarked in coastal and other open cities for industry and trade development.

As early as 1980, under the opening-up and reform policy, the Chinese Government set up the first group of Special Economic Zones in Shen Zhen, Zhu Hai, Shan Tou and Xia Men, all of which are located in costal areas of Southeast China, followed by other 10 costal cities, Hai Nan Province and Pu Dong area in Shanghai as the second group. To further open to the outside world and to spread successful experiences of SEZs, at the beginning of 1984, the government decided to establish Economic and Technological Development Zones (Hereinafter referred to as ETDZ) along coastal line on the basis of successful experiences of and favorable policies granted to the SEZs in the previous period. Consequently, China's first group of 14 National Economic and Technological Development Zones (NETDZ) were established from 1984 to 1988 successively. Since then, SEZ in China has been developing greatly following 3 dimensions: extending from SEZs to ETDZs; stretching from east costal region to inland middle and west region; upgrading from fundamental industries to hi-tech industries. To date, there are 54 national-level ETDZ, among which, eastern coastal regions 33, Middle West regions 21. Besides the NETDZs, hundreds of provincial and municipal ETDZs have been established all over China. 

Secondly, the practices and achievements of SEZs and ETDZs in China.

In retrospect, the original intention and plan to set up national development zones were very clear. Further opening the 14 coastal cities was based on the establishment of SEZ. It's a part of the opening-up strategy after the successful trial of SEZ. According to the original plan, the SEZs or NETDZ's are pivot economic regions of China with main function of developing industry; introducing urgently-needed advanced technologies; absorbing FDI; establishing Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures, solely foreign-invested enterprises and Sino-foreign contractual research institutes; developing joint production, research and design; developing new technologies, manufacturing high-grade export oriented products; providing new-type materials and key components to the inland area, and spreading new techniques and technologies and scientific managerial experience. The supporting policies are also made mainly for industry development. SEZs or NETDZ is required to become the trial park in exploration of China's industrial modernization. Some development zones should have been turned into international trade bases. The government offers supports in the fields of land, revenue and finance and makes special arrangements in economic and legal system, rights and important project examination and approval. Their advantages and characteristics are:

? Economic regions with foreign investment most centralized.

The jurisdiction of examination and approval of foreign-invested projects could be further relaxed and implemented generally. The 54 ETDZs have developed a total area of around 400 to 500 square kilometers, which is only a small portion of the country with their accumulated foreign direct investment accounting for 15% of the whole country. In some cities, 30% to 40% FDI is generated in ETDZ. Statistics show that over 200 world famous transnational enterprises have invested more than 400 industrial projects and received generous returns.

? Regions with economic developing most rapidly.

It is widely recognized that SEZs and ETDZs have become new economic platforms. Throughout the past years, the major economic indices remained rapid increases, much higher than the average increases of the country. For example, In the year of 2002, 49 China's NETDZs scored a GDP of US$ 40 billion, up by 29.4% than 2001; industrial value added of US$ 28 billion (Accounting for 71% of GDP), up by 28.3%; total industrial output of US$ 100 billion, up by 25.5%; tax revenue of US$ 6.2 billion, up by 23.1%; foreign trade value of US$ 53.6 billion, up by 36%, of which export composed US$ 27.5 billion, up by 33.8%, contractual foreign investment of US$ 15 billion, up by31%, actually-utilized foreign investment of US$ 7.7 billion, up by 23.4%; 10 to 20 percentage points higher than the national growth margin respectively. The growth rate is obvious in 16 middle and western ETDZs in particular, even 10 to 20 percentage points higher than eastern ETDZs. In some cities, half of the economic growth is provided by ETDZs.

? Regions with capital and technology intensive enterprises, hi-tech industries in the leading place.

SEZs and ETDZs lay emphasis on capital-intensive, technology-intensive, hi-tech and export-oriented enterprises. The investment scale of every project in the zones is twice than that of the whole country. A large number of investment projects are large projects with investment capital over 10 million US$, some of which over US$ 30 million or even over US$100 million. Hi-tech production value occupies a large proportion in some ETDZs. The industrial structures become increasingly reasonable. At present, industrial chains are taking shape and all kinds of hi-tech industrial park and business pioneering park are emerging. Most of zones have established incubator, business-pioneering center. Moreover, some set up science and technology venture fund to support hi-tech projects.

?Regions with most development potential and obvious geographic advantages. SEZs and ETDZs are located in the major economic cities and transportation pivots, boasting an apparent geographic advantage, convenient transportations, rich energies, water and human resources. These provide a profound base and huge development potential.

 

?     Regions with advanced infrastructures and sound support system.

Over 20-odd years' development, the infrastructures in the zones are increasingly improved. An international standard investment environment and one-stop service system has been established. A large number of zones have passed the attestation of ISO140000. Moreover, the legal system in the zone is taking shape and all the service and social functions are becoming mature. On the basis of "7 Circulations and 1 Level", the theory of "New 9 Circulations and 1 Platform" is presented. 9 Circulations are circulations of information, market, rules, fittings, logistics, capital, talents, technologies and services. 1 platform is China economic platform in 21 century. Many ETDZs have established their own websites and implemented online government service. Developing finance and modern logistics, strengthening human third party industries, optimizing human environment and protecting natural resources are important goals of ETDZ.

? Regions with good investment policies and legal environment.

According to Chinese law, all the productive foreign funded enterprises are levied by the income tax rate of 15% and allowed an exemption or deduction term. The provincial people's congresses have passed administrative regulations on economical and technological development zones, which provide a reliable legal guarantee for ETDZs. With the improvement of foreign economic and legal regulations, the legal environments in the ETDZs are optimized.

? Regions with good economic system advantages.

1.       SEZs and State-level ETDZs are approved and authorized fully by the government. It serves as "Windows and Bases" in the fields of opening-up, capital attraction, export enlargement, hi-tech development and regional economy promotion.
2. As an assigned organization by municipal government, the administrative committee employs the economic rights, enjoying a comparative large limit of authority.
3. SEZs and ETDZs set up streamlined organs, heighten working efficiency and economize administrative expenses.
4. The administrative committee focuses on economy, taking projects as lifeline and thinking everyone as investment environment.
5. SEZs and ETDZs renovate the concept of land using and try out the way of land-using charge. They also have a solid financial basis to indirectly compensate high land exploiting costs.
6. SEZs and ETDZs lay emphasis on their service function. All kinds of One Stop services have come out. At present, many SEZs or ETDZs are established online foreign investment promotion and online government service system to create a real international investment environment.
7. SEZs and ETDZs made reforms in labor management. A set of new measures has been carried out in the zone, which also fundamentally changed people's ideas of choosing a job. The profound transforms in ideology bring a huge potential for the sustained development of SEZs.
8. In environment protection, a portion of SEZs and ETDZs has passed ISO14000 environment management authentication standard, becoming regional environment protection demonstration zones.

9. To make full preparation for the entry into WTO, SEZs and ETDZs positively carry through the transformation of government functions to meet the requirements of WTO rules.

? Regions in line with international practice and regions of high standard of opening-up.

SEZs and ETDZs have grown up in the market economy, more adaptive to the rules of market economy and WTO. Under the macro guidance of the central government, ETDZs take a different economic operation mode to ensure enterprises in the zone have full freedom to determine their management. After China's entry into WTO, ETDZs further perfect their economic operation system, predigest approval procedures, reduce administrative fees, reinforce the role of intermediate agencies and enhance the service function of government organs. ETDZs have become regions in line with international practice and of high standard of opening-up.

 

Here,

I feel appropriate to say a few words on the issue of so-called "completed market economy of China". A recent survey shows that the freedom degree of Chinese market reached 73.8%, which not only much higher than 60%, the critical point of market economy, but also higher than some other transformation countries or developing countries that recognized by European Union and U.S.A as "market economy". At present, more than 50 countries in the world have recognized China as a "completed market economy", but to my disappointment India is not on the list. I regard this gimmick an ostrich attitude, with which some countries are able to wield the big stick of "anti-dumping" to protect their local low-competitive products. It is nothing but a shortsighted protectionism and unfair pan-politicization. Protectionism, double-standard and politicization of trade issues, these are tricks of Western big powers. I wonder why India, a country similar to China, takes the same mentality? I persuade you people think it again and again before you label China as a non-market economy.  As a matter of fact which most people agree, China is more open an economy than India. Why is India but isn't China a market economy? Is this fair and free of prejudice? Judgement is yours, think of it.
To know more about the achievements gained by SEZs in China, I now take the instance of Shen Zhen as a study case. Before 1980, when it began to be set up a SEZ, Shen Zhen was a small village with hundreds fishermen living. In 1990, 10 years after it became the SEZ, Shen Zhen explored a medium city with GDP of US$ 2 billion, multiplied 70-odd times; in 2002, after another 10 years, Shen Zhen grew as a major city with 10 million population, its GDP of US$ 43.8 billion and trade volume of US$ 18.4 billion ranked No. 1 among Chinese major cities. Today, "the speed and efficiency of Shen Zhen" is well known as portraiture of Chinese SEZs' successful development.

 

Ladies and Gentlemen,

India is progressing in a fast economic development. To develop SEZ might be one of choices to accelerate this progress. Especially Maharashtra State, which is similar to those SEZs in China geographically and historically, could be an ideal region to develop SEZ. Indeed, due to the differences between our two economies and societies, the experience from China may not be taken as an example for you. But I do believe that Maharashtra's people are wise enough to create even a more successful model of SEZ with your own characteristics. I wish you a success.

Thank you for your patience.