ABSTRACT
In recent years, a debate has been taking place among some Chinese scholars and policy-makers in Beijing about the need to rebalance the Chinese economy so that it relies less on exogenous growth (through export of low-priced, labour-intensive, manufactured goods) and more on endogenous growth (through domestic investments focused on higher value-added production, skilled labour and domestic consumption).1 Perhaps in an attempt to support this initiative, the claim has been made that the Wenzhou SEZ (Special Economic Zone) in Zhejiang province experienced predominantly endogenous growth and that it outperformed the Suzhou SEZ in Jiangsu province whose growth is largely exogenous. This claim remains unsubstantiated. Therefore the main objective of the study discussed in this chapter was to
substantiate or refute this claim. It was also expected that valuable lessons might be learned regarding China’s options for more sustainable development policies and practice. Specifically, this study aims to discover whether it is true to say that the Wenzhou SEZ produced outcomes that are superior to and more sustainable than those achieved in the Suzhou SEZ. Second, if the basic hypothesis is true, the study seeks to identify the key factors that might account for Wenzhou’s superior performance. Third, the study aims to uncover the role that law might have played in the socio-economic performance of the SEZs. Finally, it speculates on the sustainability of the chosen development path of each SEZ. The study was undertaken during 2007-9. It was caught in the commercial
peaks and troughs of abundant optimism followed by deep recession as the world economy lurched from boom to bust, led by the United States of America (USA), which is China’s main market for consumption of lowpriced manufactured goods. As I write this chapter, economists claim that the economy’s deep dive, into the worst recession the world has experienced since the 1930s, has been halted so that a depression has been averted. However, on 1 January 2010, unemployment in the USA was still at an unprecedented 10 per cent, or nearly 17 million jobless. Furthermore, despite a seeming recovery in the stock markets, where, for instance the Dow Jones touched
10,500 on 2 December 2009, the jobless rate is expected to remain high. Commentators talk about a jobless recovery – which to some observers of the US economy must seem like an oxymoron. The situation is no better in the European Union (EU), whose member states form China’s second largest export market. Therefore, as previously lucrative world markets experience a deep reces-
sion and foreign demand plummets for China-made goods, further depressed by deep concerns about the safety, integrity and quality standards of those goods, China’s manufacturing base is facing its biggest challenge since 1979 when the SEZ-driven FDI (foreign direct investment) experiment was announced by the Chinese government. It was probably not the best year for China to experience such humbugs since 2009 marked the sixtieth anniversary of the founding of the People’s Republic with its allegiance to communism and a closely controlled planned or command economy. But 2009 was also the thirtieth anniversary of the start of the open-door policy with its focus on the SEZ experiment and China’s move towards an open market economy, or capitalism. However, 2009 might also mark another essential turning point for China: from an FDI, export-driven, ‘made in China’ economic development model to one that is domestic-led and domestic-invested, where a substantial percentage of the ‘made in China’ goods are also ‘invented in China’, and ‘consumed in China’. Of course, this domestic-led, domestic-invested model is already enjoying
success in the Wenzhou SEZ, or so some Beijing policy-makers and scholars would have us believe. However, it is fair to note, at the outset, that this study was unable to substantiate that claim. Furthermore, it seems to be a Chinese conundrum that, like in their well-known practice of mis-measurement or mis-reporting of many domestic statistics, especially at the provincial and municipal levels, some Chinese policy-makers tend to conflate aspirations with facts.2 Sometimes they simply confuse aspirational goals with achieved or achievable goals. In a way, this practice is nothing new and the phenomenon can be witnessed in several spheres of Chinese society: for example, many Chinese laws begin life as vague, programmatic or aspirational goals. The Equity Joint Venture Law 1979, discussed below, is a good example of this. The important point to note, and one that is worth celebrating, is that some Chinese policy-makers and scholars seem to have recognized China’s need to rebalance or reinvent its economic development model. Indeed, having a vision of the future and a willingness to experiment and be tolerant of ambiguity seems to be characteristic of many Chinese policy-makers. But it is not only Chinese scholars and policy-makers who have recognized
that China is ripe for policy changes in this area; some Western economists also argue that China’s economy is poised for a fundamental structural adjustment (Ferguson and Schularick 2009; Klein 2008; Krugman 2009; Pettis 2009: 8-13). Thus the thirtieth anniversary of communist China’s first step to opening up to the Western world, coinciding as it does with the West’s first major recession in sixty years, might spur China’s policy-makers to revisit
the rebalancing story and seek to strengthen the tenuous links between sustainable economic development and its own rapidly rising domestic middle class. It might be time to shelve its exogenous SEZ-driven economic development model and encourage a more sustainable model which China must also develop in order to rescue the millions of laid-off factory workers and millions of migrant labourers who are left jobless as export-driven factories close and the rate of building construction slows.3 Obviously, the construction frenzy prior to the 2008 summer Olympics ended with a thud and due to the recession in the West, the anticipated post-Olympics dividend with masses of construction-craving FDI never materialized. The majority of jobless migrant workers have therefore been returning to the countryside, which remains tough, unforgiving and largely unchanged from when they left years earlier to seek their fortunes in the SEZs and other coastal areas that promised economic prosperity and improved quality of life. And to be sure, improved quality of life and prosperity are the prime motivators for China’s job-seeking citizens both in the rural and urban areas. These, rather than bare gross domestic product (GDP) or gross national product (GNP) figures, also become the measures of success for government policies – including SEZ policies. GDP and GNP are crude and sometimes unreliable tools for measuring
and describing the performance of a nation if the quality of life and wellbeing of its people are to be taken into account. This charge is even more apt when the measure concerns the GDP of a specific region or area within a nation. Therefore, in its methodology, this research seeks to go beyond the usual quantitative analyses of GDP and GNP. Instead it attempts to compare the prosperity or general betterment of the people in the two SEZs by examining the extent to which social and environmental effects were enhanced positively or negatively by economic development in each zone. In other words, cognizant of the GDP measures for the two SEZs, this study seeks to answer this question: to what extent did higher GDP result in increased living standards for the people of the two SEZs? To help deconstruct ‘increased living standards’, the United Nations’ (UN) Human Development Index (HDI) was adapted and used to ascertain performance in areas such as health care, education and skills training, wages and labour conditions, life expectancy, environmental protection, and ownership of capital goods (such as cars, mobile phones and access to the Internet). However, as an essential theoretical background to this study, it is
acknowledged that China as a whole seems to have progressed quickly through the Investment Development Path (IDP; Dunning and Narula 2004), which theorizes that there exists a systematic relationship between the degree of internationalization of an economy (measured by inward and outward direct investment) and its degree of economic development (measured by gross domestic product per capita). It is through this IDP lens that observations and analyses of development in the two SEZs are made – together with the added enquiry into the well-being and prosperity of the local people.
