China's industrial reform and foreign economic development : a case study from the Xiamen Special Economic Zone

Abstract

This thesis seeks to advance the study on China's Special Economic Zones (SEZs) by exploring two important issues untouched by previous researches --- the reasons for the problem of policy inconsistency, ambiguity and unpredictability in the SEZs, and the effectiveness and significance of their experimental function as a laboratory for China's ongoing industrial reform and open-door policy. The Xiamen SEZ, rarely investigated by Western scholars, is chosen as the object of this case study because of its unique suitability. It is hoped that the findings from this thesis will significantly enhance the understanding of the difficulty and complexity of the reform and openness in China in general and in the SEZs in particular. This thesis approaches the two issues from three perspectives, which reflect three most important relationships regarding the development of the SEZs --- the one between the economic reform and the Special Policy, the one between the local economic development and foreign direct investment (FDI), and the one between the SEZs and the domestic economy. It examines the enterprise reform, transformation of the local industry through utilizing FDI, and the relationship between the foreign trade reform and the price reform, in the Xiamen SEZ in its first decade of the 1980s. In particular, it includes a detailed analysis of the characteristics and effects of Taiwan investment in Xiamen in recent years and hence represents one of very few, if not the first, serious studies, at the moment, on the subject. It concludes that the policy problem in Xiamen has been caused mainly by 1) the confusion of the economic reform and the implementation of the Special Policy, 2) the increasing dominance of Taiwan capital on the local economy, and 3) the close institutional link between the SEZ and the domestic economy. Also, it finds that a decade of the reform and development in Xiamen has produced few innovative and applicable experiences which could benefit the domestic reform and open-door. Thus, the effectiveness and significance of the SEZ's experimental function has so far been very limited.