ABSTRACT
China is the country people most associate with SEZs. The Chinese zones were a prominent part of the country's reforms in the 1980s, and their success sparked a renewed interest in SEZs throughout the world. While not all Chinese SEZs have been successful, much points to the Chinese scheme as a whole having been beneficial, not least thanks to its dynamic effects. The SEZs were used by a minority of the Chinese elite to gradually change the incentive structure of other powerful officials. China's decentralized system solved the knowledge and incentive problems. Today, China is by no means a country free from corruption, but it is at least not severe enough to prevent further economic progress. For other governments with potential to reform, the Chinese success story provides a cautionary tale. While China demonstrates how SEZs can help pro-reformers in a minority to break out of a rent-seeking status quo, it does not give any guidance to pro-reformist central governments.
