Special Economic Zones and Cluster Dynamics: China

Abstract

Clusters of specialized firms are now coming to be recognized as an important level of integration and organization in successful industrial economies. Such clusters, among which are industrial districts, were prominent in nineteenth-century European industrial development (in Italy, Britain, and Germany) and in the United States, and then in Japan, and are now viewed as being central to successful industrial development in the twenty-first century in China and India, where they are specifically promoted through ad hoc policies. In designating special economic areas, such as geographic clusters of firms or special economic zones (SEZs), national and regional authorities aim to attract and stimulate economic activities in specific, bounded areas of the country, where business-friendly rules can apply. After presenting the rationale and main features of SEZs, the article illustrates the experience of China, and in particular Guangdong Province and the Pearl River Delta, where SEZs based on Shenzhen and other urban centers have played a prominent role. A careful analysis of the policies adopted in the country to kick off and manage the transition process highlights a central concern of the government to manage the spatial patterns of industrial development. Specific tools have been developed in order to shape the geography of industry: cluster promotion has been pursued while also managing a number of SEZs with the specific aim to concentrate the early stages of industrial development in confined areas, learning from the prior experience of industrial districts in Europe, the United States, and Japan. In China, and especially in Guangdong, the development of SEZs and the promotion of clusters of firms have gone hand in hand to achieve long-term industrial development objectives.