More from 乌有之乡, this time an essay on “Why is creating SEZs a logical fraud? (为什么说搞“经济特区”是一个“逻辑骗局”?)” And yes, these thoughts have been expressed before, but they really do bear repeating. And then, it’s worth applying the analysis to other, non-Chinese spheres where legal exceptionalism remains the primary form of creating competitive advantage. As the anonymous author argues, governments have made it their business to help multinationals squeeze even more out of workers.
Why is Creating SEZs a Logical Fraud?
Key point: The original purpose and core intention of creating “Special Economic Zones (SEZs)” was to explore possible paths for reforming and opening China. However, the problem appeared with the character “special (特)”. If what is being created is a “special” zone, logically speaking it isn’t relevant to ordinary life. In other words, the paths that are suitable for a “special” zone are “special paths”, and not the ordinary path of reforming and opening China.
[translation note: 法律特权 literally translates as legal privilege, however, it functions analogously to the American English concept of legal exceptions — the rules don’t apply to me — and where appropriate that is how I have translated it. In most places, however, I’ve tried to stick to “privilege”.]
In foreign countries there are special zones, for example the Washington, DC. However, that is equivalent to the concept of independent cities (直辖市) in the Chinese administrative apparatus. All it means is that this is the seat of American administration, and not that it is a space of legal exceptions.
— China’s SEZ are spaces of political-economic legal exceptions.
— The Country gave SEZs beneficial policies to approve projects, to issue permits for staff to go to Hong Kong on business purposes, to determine exports, to manage foreign currency, and many other economic privileges, including authority over tax collection, foreign currency management, bank lending, labor laws and rights to leave and enter the country.
— In addition, Shenzhen and Zhuhai established a system of travel passes, going to Shenzhen once, it is necessary to get a special pass, giving a person the feeling that he is leaving the country.
Reasons given for establishing SEZs are:
— Foreign capital can be used to import technology, improve product quality, and strengthen product competitiveness;
— Foreign companies can be used to open commercial channels and adapt to international market needs and regulations, thereby increasing exports and generating foreign revenue;
— To facilitate the importation of advanced technologies and to have access to international business information;
— To facilitate study of modern management cases and to cultivate administrative talents;
— To enlarge our paths to the world and to open windows for the world to understand China’s Reform and Opening policies.
Development models from the SEZs include:
— “Seven connections, one leveling”, simultaneously connecting electricity, water, roads, postal service/internet, natural gas, sewage, and flood infrastructure, while leveling the land for future construction;
— Administrative standards (government efficiency, for example), conditions for operations (cash and price, foreign exchange management system, financing, information service, and accountability), population quality and markets, and government privileges (tax breaks);
— Organizations for mediating between foreign and domestic concerns, bringing into play the “four windows” (technology, knowledge, management, and foreign policy) and connecting both sides of the fan (domestic and international);
— Striving to establish a flexible and efficient special economic apparatus that adapted to international market rules. In order to achieve these ends, it was necessary to systematically reform the administration, enterprise management, basic infrastructure management, circulation, price fixing, human resources and salaries, as well as the financial system.
However, all this was predicated on “special” status. Baldly stated, SEZs allocated profits in the country’s name, whereby investment within the SEZ would enjoy legal exceptions and conveniences, tax exceptions and low tax rates, and all manner of cost reductions.
— In fact, already provinces and cities have their own development zones, which enjoy economic privileges. In a sense, these spaces are also special zones, but have not been recognized as such in law.
— Draw a line, establish a political world. Within the line there is one legal system, outside the line, there is another. Inside the line, it is unnecessary to pay taxes, but one millimeter beyond that line, you pay…
Imagine – if areas outside these special zones also had tax exemptions and reductions, would the national tax bureau and expenditures immediately collapse?
— In the last instance, the entire population is paying for and serving the special zones.
In fact, SEZ and every level of development area are interfering with national finance and allowing China to play the role of the country that doesn’t care about its citizens’ well-being. China has made itself a laughing stock for the world.
— Go to xxx Island and register a company, it’ll count as foreign… as foreign investment… hee hee hee.
— In fact, the real source of capital remains the rest of China, with domestic profits concentrated in the Special Zones. What’s the point of eliminating or reducing taxes? A country’s economic strength is relative to its parts: the more the SEZs get, the less the rest of the country has.
— The “Three imports, one supplement (三来一补 – importing materials, specs, and machinery for local production and supplementing commerce)” enterprises along with the “Three investors” companies have been the most common investment strategy in special zones. Under these systems, not only to Chinese labor get pitiful wages, but their wages influence wages throughout the world, influencing the place of labor internationally.
— Actually thoughts to improve technology and management are dreams. All you have to do is remember Foxcomm and its clear, their management system isn’t humane.
— Cheap made in China but having a foreign brand products have flooded the international market, even as China’s domestic markets have been more or less monopolized, even grain and cooking oils are monopolized.
Thus, eliminating every level of special economic zone and development area is of the utmost urgency!
— The Chinese people have no responsibility to pay for special zones!
— Every government policy is becoming more common. “SEZ” has lost its “special” significance.
–In an era of internet and globalization, the above reasons justifying the establishment of SEZs no longer hold.
— Special Zones have already lost their legitimacy and justification for existing.
The Shenzhen, Zhuhai, Shantou, and Xiamen Special Economic Zones should be eliminated and reinstated as ordinary dedicated region (地级市 – ranking between the province and counties) cities. All should be returned to the direct governance of their respective provinces and begin paying taxes in those provinces.
I think that every province would be eager to implement this policy…
— Of course, the biggest obstacle to eliminating SEZs are those who directly benefit from their privileges – the leaders and residents of the SEZs.