ABSTRACT
In July 1979, as part of the general re-orientation of economic policy toward the outside world, Communist China's State Council authorized the provinces of Guangdong and Fujian to establish special economic zones (SEZ) "where foreign trade and investment are granted broader facilities than elsewhere in the country." The SEZs, despite many caveats and restrictions, are capitalist conceptual constructs and capitalist engines of development. In Taiwan, the break between the zones and the rest of the economy was primarily technical. In mainland China, it is both technical and systemic: The SEZs there operate on economic principles that are qualitatively different from those which govern the operation of the bulk of the domestic economy. The government of mainland China reserves the right to exercise a far-reaching control over the activities of the SEZs. The SEZs offer a number of inducements to potential foreign investors that are, in general, somewhat better than the concessions granted to foreign investors outside the zones.
