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Special Economic Zones in China and India: A Comparative Analysis Special Economic Zones in China and India: A Compar­ ative Analysis Yu Zheng and Aradhna Aggarwal The Oxford Handbook of Industrial Hubs and Economic Development Edited by Arkebe Oqubay and Justin Yifu Lin Print Publication Date: Jul 2020 Subject: Economics and Finance, Economic Development Online Publication Date: Aug 2020 DOI: 10.1093/oxfordhb/9780198850434.013.31 Abstract and Keywords This chapter compares and contrasts the SEZ experiences of China and India, two fastgrowing major economies of the world, by revisiting the evolutionary process, institution­ al arrangements, and performance of SEZs from a political-economy perspective. The ob­ jective is to reveal the contextual factors that determine the outcome of the SEZ policy. Our analysis suggests that it is the broader political and economic contexts within which SEZs are embedded that underlie the differences in the SEZ experiences of China and In­ dia. The study enriches the literature that focuses on the conditions determining success and failures of SEZs. Keywords: special economic zone, export processing zone, China, India, industrial policy, manufacturing, IT ser­ vice 31.1 Introduction INDIA was the first Asian country to recognize the effectiveness of SEZs in promoting trade when it set up an export processing zone (EPZ) at Kandla Port in Gujarat in 1965. But it was China that first demonstrated to the world the dynamic potential of SEZs as in­ struments of economic development and structural transformation. Starting in 1978, it used a home-grown model of SEZs as the lynchpin of economic growth that is unparal­ leled in world economic history. Inspired by the success of China, in 2000 India also up­ graded its EPZ scheme and adopted an adapted version of the Chinese model of SEZs to promote manufacturing. However, this met with limited success. While it failed to repli­ cate Chinese success with SEZs in manufacturing, it managed to propel service-sector growth, in particular IT and IT-enabled services, by leveraging its SEZs. The SEZ policy is one of the most contentious development policies, affecting a large number of interest groups with conflicting agendas, mandates, and concerns. The success of the policy hinges on the effective management of these conflicting agendas and the vested interests associated with the policy, which in turn is contingent on the political Page 1 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis economy that nations rely on. Using a political-economy perspective, this chapter shows how, although both China and India embraced SEZs in the early stages of development, they traversed vastly different paths, adopted different SEZ institutional arrangements, and met with diverse success due to the different contexts in which they operate. Under China’s single-party system, the political leadership, with a strong development focus, succeeded in aligning the interests of different political actors in favour of economic lib­ eralization and created a self-reinforcing mechanism that drove the expansion of SEZs. In contrast, India’s multi-party parliamentary democracy, where policymakers seek to serve various interest (p. 608) groups, imposed a great many constraints on the state’s capacity and incentive to promote SEZ development. 31.2 Evolution of SEZs China’s SEZs have experienced four stages of development since 1980. Stage 1 (1980–91): Early experiments with SEZs. China began by setting up four SEZs— Shenzhen, Zhuhai, Shantou, and Xiamen—as the central plank of its economic liberaliza­ tion. It defied the conventional export-processing model of ‘fenced-in small industrial es­ tates’ to set up large city-like open SEZs. These SEZs were deliberately located near Hong Kong, Macao, and Taiwan, not just to maximize locational advantage, but also to minimize potential risks being spread to Beijing should any problems arise during their operation. SEZs had an immediate impact on the national economy. They hosted more than half of equity joint-venture projects established in China. Shenzhen grew at a phe­ nomenal 58 per cent annually in 1980–4, against a national average annual GDP growth of roughly 10 per cent (Yeung et al. 2009). The early success of SEZs, particularly in Shenzhen, encouraged the Chinese government to expand the experiment. Between 1984 and 1986, fourteen smaller Economic Technological Development Zones (ETDZs) were set up along China’s eastern seaboard. In 1988, the newly created Hainan province became the fifth SEZ. In the same year, the Ministry of Science and Technology launched the Torch Programme (huoju jihua) with a mission to promote technological innovation and industrialization. Under the plan, the first high-tech industrial development zone (HTDZ) was established in the Zhongguancun area in Beijing, close to some of China’s most pres­ tigious universities and research institutes. The key selling point of the SEZs was a variety of incentives. Foreign firms enjoyed a preferential tax regime consisting of tax holidays, 50 per cent tax concessions for five years, and an exemption (or concession) on payment of import/export duties. Local gov­ ernments could offer desirable investors other incentives, such as tax rewards, accelerat­ ed depreciation, profit rollovers, and subsidies. Moreover, as part of the package, labour regulations granted foreign investors significant flexibility and reduced burdens relating to the employment of Chinese workers. The red tape associated with applications for and licensing of investments, establishing plants, and importing and exporting was reduced so that foreign firms could start and run their projects with minimal bureaucratic fuss. With these special arrangements, SEZs quickly became popular destinations for FDI. Page 2 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Stage 2 (1992–2008): Proliferation of SEZs. The development of SEZs experienced a set­ back in the wake of the Tiananmen incident. Although Shanghai Pudong New District was established in 1990, it was not until 1992, after Deng Xiaoping’s southern tour reaffirm­ ing China’s commitment to economic liberalization, that the Chinese government began to accelerate the expansion of the SEZ experiment to the national scale. At the national level, ministries competed with each other to create SEZs that fell under their jurisdic­ tion. The Ministry of Commerce (MOFCOM) approved eighteen more ETDZs in inland re­ gions and fourteen economic cooperation zones in border areas (BECZs). The Ministry of Science and Technology established fifty-three HTDZs with the mission to promote inno­ vation-led and high-end industrial clusters. The General Administration of Customs estab­ lished (p. 609) fifteen bonded zones, primarily used for the temporary storage of goods and to facilitate entrepôt trade. Despite their different supervising agencies and core functions, SEZs were granted similar privileges and special arrangements in pursuit of their policy goals. By the end of the 1990s, the original preferential policies attached to SEZs were about to expire. Instead of phasing out SEZs, the Chinese government decided to extend the pref­ erential policies for an indefinite period of time. In the meantime, the central government launched the Western Development Programme (WDP), through which Beijing committed to grant more resources and preferential policies to interior provinces. In 2000, the cen­ tral government approved sixteen ETDZs in inland provinces and offered them the same policy privileges to attract FDI. Between 2000 and 2006, the General Administration of Customs established fifty-eight EPZs in order to develop export-oriented industries and generate foreign exchange earnings. These moves essentially put an end to speculation over possible abolition of the SEZ policy. Encouraged by Beijing’s liberalization policy, local governments at every level rushed to create SEZs in their jurisdictions, resulting in ‘zone fever’. The total number of zones sky­ rocketed. By July 2004, there were 6,866 various SEZs across the country with a total land area of 38,600 km2. Concerned about the explosive growth of unauthorized zones, the central government decided to rein in the excessively decentralized experiments, and in 2006, it published a complete list of approved SEZs, including 222 national and 1,346 provincial SEZs (NDRC 2007). Stage 3 (2008–13): A level playing field for SEZs. Since the 2008 global financial crisis, China’s export growth has decelerated and FDI inflows have plateaued. It seems that the long-standing advantage in SEZs that stems from low cost of labour and land is no longer sustainable. Taking cognisance of this and to comply with its WTO obligations regarding subsidies, the Chinese government has implemented a rebalancing strategy for SEZ de­ velopment. On the one hand, with the establishment of the new enterprise income tax law and new labour law in 2008, the tax benefits given to SEZs have been rescinded. Foreign firms are no longer granted preferential tax rates. The new labour law aimed to increase worker protection in response to deteriorating employment relations. It restricts the use of fixed-term contracts and encourages open contracts for all firms. In line with the ad­ Page 3 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis justed national strategy, SEZs began to shift their focus to value-added industries and quality of economic growth. On the other hand, the Chinese government accelerated approval of SEZs. The number of national-level ETDZs increased from fifty-four in 2008 to 219 in 2018 and HIDZs in­ creased from fifty-three to 156. At the same time, many provincial-level zones were ele­ vated to national-level status. By 2018, China had 552 national-level SEZs and 1,991 provincial-level SEZs (Table 31.1). There are at least seven types and more than 2,500 na­ tional SEZs in China. Page 4 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Table 31.1 Expansion of SEZs in China Year Total nation­ SEZ ETDZ HTDZ al zones EPZ/ bonded BECZ FTZ zone 1980 4 4 1991 20 5 14 1 2006 227 5 49 53 73 14 2018 567 5 219 156 135 19 10 Other nation­ Provin­ cial al zones zones 33 1,346 23 1,991 Source: National Development and Reform Commission (NDRC) 2007, 2018. Page 5 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individ­ ual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Stage 4 (2013–): Establishment of pilot free trade zones. While the SEZs focused on the facilitation of FDI and exports, a new policy experiment was initiated when, in September 2013, China established the Shanghai Pilot Free Trade Zone (SHFTZ) to deepen econom­ ic reforms and promote financial liberalization. The SHFTZ aims to create a more invest­ ment-friendly environment for multinationals to operate in China by allowing foreign banks to directly establish a branch, wholly owned subsidiary, or majority-controlled sub­ sidiary with Chinese partners. In the following years, the Chinese government approved ten more FTZs in Fujian, Tianjin, Guangdong, Chongqing, Sichuan, Henan, Hubei, Liaon­ ing, Shaanxi, and Zhejiang. The major difference between FTZs and previous SEZs is that the former aim (p. 610) to promote new and reformed methods of economic development, not just to facilitate export and FDI. Just as in China, the evolution of India’s SEZs also underwent four different stages. How­ ever, the fact that the two countries rely on entirely different systems of political economy has had a significant impact on the evolutionary process of their SEZs through the four stages. Unlike China, policy change in India entails a gradual approach, dismantling exist­ ing institutions in a piecemeal manner while slowly adding new ones to modulate resis­ tance. The evolution in SEZ policy is no exception; it is also marked by scrutiny, caution, restrained policy experimentation, and a lack of focus and commitment. Stage 1: The EPZ regime (1965–2000). In 1965, India established its first conventional EPZ as a small, fenced-in industrial estate at Kandla. It took the government nine years to set up a second EPZ in 1974 in Santacruz in the port city of Mumbai, and after more than a decade, in the wake of a deteriorating trade balance situation in the mid-1980s, five more small EPZs were set up, spread across the country: Noida (North India), Falta (East India), Cochin (South India), Chennai (South East), and Visakhapatnam (South East). The total area covered under the seven EPZs was a mere 8.94 km2. This stands in stark con­ trast with China, which started with four large open SEZs clustered around the east coast covering around 6000 km2 and embarked on a fast-track strategy towards SEZs. Further, while China was able to insulate its SEZs from the institutional environment pre­ vailing outside them, India’s EPZs were tightly regulated, developed, and managed by the central government. Tax incentives were limited and their infrastructure was not neces­ sarily better; zone authorities had limited autonomy in day-to-day operations; and bureau­ cratic red tape was still high because there was no single-window clearance within the zone (Kundra 2000). These institutional deficiencies, along with the highly restrictive FDI policy, hindered the performance of EPZs. Major initiatives were launched by the govern­ ment to revamp EPZs in the 1990s, but these reforms were followed rather than preced­ ed by the economic liberalization process that was administered in the wider economy. Apparently, taking cognizance of the controversial nature of the policy, the government was highly cautious in its support of EPZs. Stage 2: Transition from EPZ to SEZ regime (2000–05). In the year 2000, India initiated a second phase of liberalization in the broader economy. In a major initiative to boost ex­ port-led industrialization, and motivated by the success of Chinese SEZs, the government Page 6 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis introduced a new SEZ policy and phased out the EPZ policy. While EPZs were industrial estates, SEZs were conceptualized as integrated industrial townships with social infra­ structure (p. 611) along the lines of the Chinese model. The SEZ policy envisaged the set­ ting up of SEZs in the public, private, and joint sectors or by the state governments. It of­ fered several other new features which distinguished SEZs from the existing EPZs. It was expected that FDI, which was getting diverted to other Asian countries, would be attract­ ed to India by these SEZs. But the policy evoked only a lukewarm response from private investors. Only eleven new SEZs were set up under the scheme. Eventually, all seven then existing EPZs were also converted into SEZs. Stage 3: The SEZ-Act regime (2005–11). In order to impart stability to the SEZ policy and signal the government’s commitment to it, the SEZ Act was enacted in 2005, which not only institutionalized the 2000 policy but further enhanced it. The Act, which came into effect on 10 February 2006, heralded a new phase in the evolution of SEZs and is said to have marked a paradigm shift from the EPZ policy by introducing radical changes in vi­ sion, objectives, size, ownership, and almost every aspect of SEZ design and operation. The enforcement of the SEZ Act, helped by a generous package of tax incentives and pri­ vate ownership, led to tremendous growth in India’s SEZs. Table 31.2 shows that on 10 February 2006, when the SEZ Act came into force, India had eighteen operational SEZs with a combined area of 18.18 km2 and 123,000 employees; in 2012 the number of SEZs had risen to 407, occupying over 496.2 km2 of land. In 2006, six of the eighteen SEZs (33 per cent) were privately owned; the share of privately developed SEZs shot up to 71 per cent in 2012. Almost all zones, with a few exceptions, were dedicated to manufacturing in 2006; over 60 per cent of SEZs in 2012 were in IT and IT-enabled services. Page 7 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Table 31.2 Structure of India’s EPZ/SEZ sector Ownership Sectoral distribution Period Total noti­ fied SEZs Central govern­ ment State govern­ ment Private zones Total area (in km2) Multiprod­ uct Sector specif­ ic Service (ITSEZs) FTWZ 2000 7 7 – – 8.94 6 1 – – 2006 18 7 5 6 18.18 8 8 2 (2) – 2012 407 7 110 290 496.21 24 n.a. n.a. 7 2019 373 7 80 286 430.38 21 126 221 (216) 5 Note: (*) not available. Source: Ministry of Commerce, various points in time. Page 8 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individ­ ual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Notwithstanding the above, there are marked commonalities between SEZs and EPZs. The typical administrative structure of new SEZs, for instance, remains almost the same as that of erstwhile EPZs. Just like EPZs, SEZs are also under the direct regulatory and administrative control of the central government. Investment approvals within SEZs and day-to-day operations of all SEZs, irrespective of their ownership, are overseen by cen­ trally appointed officials. Furthermore, just like their predecessors, processing areas of SEZs are secured by boundary walls for which strict norms are specified. Finally, with a few exceptions, (p. 612) most SEZs are comparable to EPZs in size. Of the 355 SEZs (as of 22 January 2019) notified after 2005, 274 are below 1 km2 in size and the median size is 0.20 km2. Decline of SEZs: 2011 onwards. The proliferation of SEZs triggered a fierce nationwide debate over their usefulness. Massive intellectual support for criticism of SEZs came from the media, activists, and academia. While the debate touched upon almost every aspect of SEZs—from macro-economic issues related to their impact on government revenue, em­ ployment, trade, and foreign exchange earnings to social issues including labour rights, regional inequities, and environmental protection—land acquisition emerged as the most prominent issue (Banerjee 2008). Unlike China where a flexible land management system for the conversion of agricultural land into industrial land facilitated the proliferation of large SEZs across the country, in India the institutional contexts led to country-wide protests against land acquisition for SEZs (Levien 2011). The government, fearful of los­ ing popular support, responded to the controversy by back-pedalling. It dissipated the re­ sistance to SEZs by diluting the tax incentives in 2011 and 2012. First it rolled back ex­ emptions from Minimum Alternate Tax (MAT) offered to SEZ units and developers, and dividend distribution tax (DDT) offered to SEZ developers without any amendment to the Act and with immediate effect. Then it introduced a ‘sunset clause’ on income tax exemp­ tions. Under the clause, from 31 March 2016, tax incentives to SEZ developers were with­ drawn and in 2020, SEZ tenants will lose all direct tax incentives. While SEZ benefits are being withdrawn, there has been an upgrading of incentives in the rest of the economy. Thus, SEZs are increasingly becoming less attractive for developers, investors, and com­ panies, and there has been a significant increase in the number of applications from com­ panies seeking denotifications of their SEZs or withdrawing their SEZ plans, and a de­ cline in the number of new applications (Mukherjee et al. 2017). Between September 2012 and January 2018, the area under SEZs declined steeply from 496km2 to around 430 km2. In sum, the evolutionary process in SEZ policy was conditioned by the political contexts of the two countries. While in China, a strong development state continued to drive SEZs in newer directions, in India policy changes remained path dependent. Despite the fact that new generation SEZs in India were inspired by the Chinese SEZs, they essentially re­ main in the traditional mould of EPZs in terms of design and governance. Further, while the SEZ evolutionary process in China was driven by a progressive approach as part of a broad spectrum of economic reforms aimed at economic transformation, in India policy changes had been in search of a model that could moderate the agendas of various inter­ est groups. Finally, unlike China, which placed SEZs at the centre of its development Page 9 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis strategy, India could not show commitment to this policy due to popular resistance. The government back-pedalled, succumbing to heavy criticism of SEZs that came from acade­ mics, NGOs, and political heavyweights. 31.3 Institutional Arrangement of SEZs The political contexts shaped not only the ways in which SEZ policy evolved over time but also their institutional arrangements. China’s strong political leadership, supported by a centralized and one-party system, allowed considerable experimentation with a de facto federal structure, even in the absence of legally based political and bureaucratic institu­ tions of (p. 613) federalism. Through fiscal decentralization, the central leadership provid­ ed local governments with the incentives and capacity to promote investments and indus­ trial activities. This functional federal arrangement, in the absence of a fully developed in­ ter-governmental governance structure and codified rules, is reflected in the institutional arrangements of SEZs. Thus, except for the three original SEZs in Guangdong province, which were subject to the Regulations on Special Economic Zones in Guangdong Province approved by the National People’s Congress (NPC), other SEZs have never established their legal status through national legislation. Instead, the regulatory framework for SEZs was established through various provisional directives created by the State Council and its ministries (i.e. Ministry of Commerce and Ministry of Science and Technology), which are not constitutionally binding. In the absence of legal status for SEZs at the national level, provincial governments were allowed to promulgate their own regulations to gov­ ern SEZs. The first provincial regulation was passed by the Tianjin municipal legislature in 1985. At present, most provinces have approved regulations for SEZs in their jurisdic­ tions. An important institutional arrangement for SEZ policy is to create a single-window agency to deliver streamlined, efficient services. In order to facilitate fast decision-mak­ ing, SEZs are managed by a quasi-governmental agency called the administrative com­ mission. The administrative commission’s primary mission is to expedite regulatory and administrative tasks to facilitate investment projects. Additional administrative powers in areas such as taxation, customs, and labour were granted to the administrative commis­ sion to allow them more freedom to create a capital-friendly environment. The administrative commission often follows two models. One is the autonomous model in which the administrative commission was appointed by the superior government and op­ erates independently from the local government where the zone is located. The other is the integrated model in which managerial functions are shared by the administrative commission and the local government. Under the autonomous model, the SEZ has an ad­ vantage in reducing bureaucratic red tape and facilitating fast decision-making, but its in­ centives tend to be in conflict with the local government. While the SEZ administrative commission pursues returns on its investment, the local government is responsible for the provision of public goods and services. Under the integrated model, both the administra­ tive commission and the local government are stakeholders of the SEZ. This model re­ Page 10 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis aligns the incentives of the two parties to support the development of the SEZ, thus miti­ gating the coordination problem despite the fact that having dual authorities means that the SEZ is likely to be subject to more bureaucratic barriers (Zheng 2014). In contrast, India, a constitutional democracy with formal federal arrangements embed­ ded in the constitution, is endowed with well-developed codified rules for inter-govern­ mental devolution of responsibility for revenue and expenditure. SEZs in India are strictly regulated within the constitutional provisions of federalism. Since international trade and investment is exclusively the responsibility of the centre, in particular the Ministry of Commerce, regulation of SEZs is highly centralized. Until 2005, India had no overriding EPZ legislation or EPZ authority, yet EPZ policy was contained within the foreign trade policy, while incentives and other facilities offered to EPZ units were implemented through various notifications and circulars issued by the relevant ministries or depart­ ments. State-level issues, such as state commercial taxes and duties, local taxes and du­ ties, land, power, water, environmental and pollution controls, labour, law and order, gov­ ernance rules and regulations, and company registrations, were covered by various state government provisions. (p. 614) The 2005 SEZ Act provides an umbrella legal framework for each of the three principal stakeholders: developer (and co-developers), operator, and tenant/units. The provisions of the Act override the provisions contained in any other Act of the central gov­ ernment, but do not cover subjects which are the exclusive legislative prerogatives of the state government. State governments are advised to formulate an SEZ policy or Act to cover such subjects, to be implemented through state and municipal government depart­ ments. Apparently, the overriding powers have not been used to reduce interference by different layers of government, so implementation of the policy is contingent upon politi­ cal cooperation between them. Since the state government may not necessarily be the po­ litical ally of the central government, party politics between them may also affect the im­ plementation of the policy (Jenkins et al. 2014). Furthermore, the federal administrative structure of SEZs has not been able to institute single-window facilities. Government agencies at the central, state, and municipal level need to be coordinated to operationalize a single window. However, there is no institu­ tional mechanism built into SEZ administration that ensures coordination amongst these administrative agencies. Evidence suggests that if state and municipal government de­ partments do not align their rules with SEZ rules, state officials override the latter due to lack of knowledge, and sometimes out of insecurity (Aggarwal 2012a). Finally, while state governments are empowered to enact laws on state subjects and the SEZ Act also grants them some powers over establishment of SEZs and investment ap­ provals, their regulatory powers over SEZs remain limited. Even the SEZs developed by them are managed by central government-appointed officials. The state bureaucracy feels alienated by this arrangement, which affects their involvement in its implementation (Ag­ garwal 2012a). The Act has not only been subjected to the vagaries of federalism but is al­ so exposed to vulnerabilities in terms of the lack of inter-ministerial coordination and co­ Page 11 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis operation. The top regulatory body is a nineteen-member inter-ministerial body chaired by the Commerce Secretary. In this horizontal set-up, inter-ministerial conflicts can cause serious disruption to the implementation of the policy. 31.4 Economic Performance The effects of SEZ policy and institutional arrangements are reflected in the performance of SEZs in the two countries. China seized the opportunity of participating in the global value chains of labour-intensive industries, used SEZs as the platform for leveraging its low-cost labour advantage, and rose to become the global manufactory. SEZs have made a disproportionally large contribution to the Chinese economy. China’s industrial value added has grown 53 times since 1978, reaching 28 trillion yuan in 2017 (Xinhua 2018). SEZs’ annual growth rate was more than twice that of national industrial growth. As shown in Figure 31.1, major SEZs’ share of national GDP increased from 7 per cent in 2001 to 25 per cent in 2017. Their share of national exports increased from 30 per cent to 52.5 per cent. Major SEZs—Shenzhen, ETDZs, and HTDZs—contribute a significant por­ tion of China’s industrial value added (43 per cent in 2016). Figure 31.1 Contribution of SEZs to China’s econo­ my, 2001–17 Source: China Statistical Yearbook, China Commerce Yearbook, China Torch Statistical Yearbook, Shen­ zhen Statistical Yearbook, various years. Notwithstanding the above, various types of SEZs differ in their contributions. Shenzhen, the flagship of SEZs, served as a catalyst for China’s economic transformation, linking the (p. 615) Chinese economy with global markets. In 1980, Shenzhen’s GDP was 270 million yuan, accounting for 0.05 per cent of China’s GDP. In 2018, Shenzhen’s GDP reached 2.42 trillion yuan (US$361 billion), surpassing that of Hong Kong for the first time (Chen and Leng 2019). Industrialization is the key driver behind Shenzhen’s miraculous growth. Its industrial output grew at 28.3 per cent annually during this period. The economic impact of Shenzhen on the Chinese economy has been far reaching. Compared with Shenzhen’s growth experience, ETDZs were not an immediate success. They had a relatively slow start but a steady growth trajectory. ETDZs’ contributions to the Chinese economy were mainly through attracting FDI and promoting exports. In 1986, fourteen ETDZs only re­ Page 12 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis ceived 2 per cent of FDI inflows to China. In 2017, 216 national ETDZs accounted for 11 per cent of China’s GDP, but they contributed 20 per cent of exports and 40 per cent of FDI inflows to China. With an organizational framework similar to that of ETDZs, HTDZs served primarily as a platform to promote technological innovations and upgrading. In 2017, 168 national HIDZs contributed about 11 per cent of China’s GDP, similar to that of 216 ETDZs, but HTDZs hosted more than one-third of China’s high-tech companies and contributed about 35 per cent of national R&D spending (People’s Daily 2018). Evidence indicates that firms located in an HTDZ tend to have higher productivity gains than firms located in an ETDZ, suggesting that industrial policies that focus on promoting technological upgrading are more effective than the ones that focus on promoting exports (Howell 2018). There is tremendous heterogeneity even within the five original SEZs. The economic per­ formance of Xiamen, Zhuhai, Shantou, and Hainan has been far from impressive (Yeung et al. 2009). However, empirical assessment of the performance of SEZs in China are gen­ erally positive. Wang (2013) finds that the SEZ policy increases per capita FDI significant­ ly. In addition, both foreign-owned and domestic firms have higher productivity in SEZs. Li and Shen (2015) find that SEZs have a more positive effect on industrial transforma­ tion when their goals are consistent with the specific comparative advantage of the re­ gion. Industrial parks featuring a higher level of human capital, a greater level of co-ag­ glomeration amongst (p. 616) firms within the park, and a smaller share of SOEs generate greater spillover effects (S. Zheng et al. 2016). The uneven development in China across both regions and sectors (Alder et al. 2016) is in itself proof that SEZs have been a dri­ ving force in the regional economic development of China. With the expansion of SEZs, the Chinese government’s industrial policy goals have also evolved. In the early stages of SEZ development, the government relied on direct inter­ vention to attract FDI, promote exports, and subsidize essentially labour-intensive indus­ tries. SEZs provided an important platform to implement these policies. As China opens further and approaches the technological frontier, many SEZs have redefined the priori­ ties of industrial development, aiming to accelerate the transformation and upgrading of traditional industries. While attracting FDI was the primary policy goal pursued by SEZs in their early stages, building production networks is now an important strategy for them to achieve sustainable development. In 2010, the Chinese government identified seven ‘strategic emerging industries’ (zhan­ luexing xinxing chanye) as the priority industries to be supported, with a target share in GDP for 2020 of 15 per cent.1 In line with this new industrial policy orientation, SEZs have adjusted their priority industries. Shenzhen earmarked a fund to support the strate­ gic emerging industries, and each priority industry has received subsidies of 500 million yuan each year since 2011. Private investors were also encouraged to invest in these in­ dustries. From 2010 to 2015, the total output of strategic emerging industries increased from 875 billion yuan to 2.3 trillion yuan, contributing 40 per cent of the city’s GDP (Shenzhen NDRC 2016). Shenzhen has moved beyond its reputation for making cheap Page 13 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis low-tech products and become a hub that connects innovation, manufacturing, and knowl­ edge all over the world. China leveraged the potential of SEZs, first to integrate with low value-added global val­ ue chains and then to shift to sophisticated production networks driven by R&D and inno­ vation. In 2015, China launched Made in China 2025, the industrial master plan that aims to turn the country into a manufacturing superpower by 2025. With a more active indus­ trial policy supporting domestic companies to pursue innovation-driven development, Chi­ na seeks to gradually replace foreign with Chinese technology at home—and to prepare the ground for Chinese technology companies entering international markets. India could not match the scale and success of China’s SEZs. The SEZs set up under the EPZ regime made a limited contribution to the Indian economy. In 2003–4 when they were completely phased out, all seven EPZs created under the regime together covered a mere 8.94 km2 and employed 88,700 workers (1 per cent of formal manufacturing em­ ployment). The contribution of EPZs to overall exports remained minuscule during the first fifteen years of their existence. It grew from 0.01 per cent in 1966–7 to 0.07 per cent by 1980–1. In 1978, a bilateral trade agreement between the former Soviet Union and In­ dia based on ‘rupee/ruble payment’ became effective. Several companies used Kandla and Santa Cruz EPZs as the base for exports to Russia. This led to a quantum leap in export growth for EPZs (Aggarwal 2004) and the share of these zones in total exports increased to 3 per cent. In the late 1980s when the USSR collapsed, several zone units shut down and the EPZ exports (p. 617) from these zones declined sharply (Figure 31.2). The setting up of more EPZs and the policy reforms after 1991 did not yield significant results. In 2002–3, the share of EPZs in total exports stood at 4 per cent. Figure 31.2 EPZ employment and share in manufac­ turing exports in India Source: The Ministry of Commerce, data compiled over years. In addition to the poor investment climate, the comparative advantage-defying develop­ ment strategy of promoting heavy industrialization adopted by the government also influ­ enced the contribution of SEZs. The government discouraged labour-intensive low-valueadded processing activities even within SEZs with a minimum value-added criterion un­ Page 14 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis der which EPZ tenants had to generate 40 per cent value addition domestically. In the ini­ tial phases, EPZs attracted mainly pharmaceuticals and engineering products, and tex­ tiles companies which were targeted at the former USSR. Their relative importance de­ clined after the collapse of the Soviet Union. India thus failed to benefit from the reloca­ tion to Asian EPZs of labour-intensive shoe, clothing, toy, and electric and electronics pro­ cessing plants that was begun in the late 1960s by mainly American investors. The role of SEZs in promoting new production sectors and exporting new products has therefore been rather limited in India in comparison with China (Aggarwal 2006). Amongst a few notable exceptions is the modern jewellery industry in India. Its foundations were laid in Santacruz EPZ in Mumbai in 1987–8. Over the years, diamond/gold jewellery has become one of the top five exports from India, with EPZs as the drivers of this export. In 2010–11, SEZs accounted for over 86 per cent of total gold jewellery exports from India. In 2017, SEZ exports of gold jewellery were nearly double those from DTA. Zones have also been instrumental in creating the basis of the growth of the electronics industry through tech­ nology transfers, spillovers, and demonstration effects. Until the early 1980s, electronic hardware exports originated primarily from EPZs. Even during 2000–02, the share of SEZs in total hardware exports was as much as 26 per cent (Aggarwal 2004). However, India could not come anywhere near the success stories of East Asia in the electronics sector. The enforcement of the SEZ Act in 2005 led to tremendous growth in the establishment and contribution of SEZs in India. In 2005–06 there were eighteen SEZs employing 134,704 (p. 618) people and contributing less than 5 per cent of exports. Within two years, by January 2008, 198 new SEZs had been added and employment almost doubled. By 2018, 373 SEZs employed 2 million workers contributing over 20 per cent of total goods and services exports (Figure 31.2). While the contribution of SEZs to employment, exports, and industrial diversification looks impressive at first glance, there is a significant gap between the actual perfor­ mance of SEZs and the potential of the sector. Of the 373 SEZs notified, only 64.6 per cent (241 out of 373) are operational. More importantly, however, a large chunk of land is lying vacant even in those SEZs that are functional. There is a significant gap between intended and actual employment. In eighty out of 223 operational SEZs, actual employment fell more than 50 per cent short of proposed em­ ployment. Overall, the actual employment is 700,000 short of the proposed employment, indicating the extent of under-utilization of the installed capacity. Furthermore, an analysis over time shows that the expansion of SEZs has slowed down (Figure 31.3). As of 17 July 2012, the number of newly notified SEZs stood at 389, cover­ ing an area of 478 km2, in addition to the eighteen SEZs which came into existence prior to the SEZ Act. Since 2012, due to the global economic downturn and the withdrawal of key benefits offered to SEZ units, the number of SEZs and the area covered have started declining (Table 31.2). There was a rush for de-notification after the sunset clause on tax breaks became effective. The situation was further aggravated by the fact that the incen­ Page 15 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis tives offered to exporters outside the zones were becoming increasingly attractive. Figure 31.3 shows that while SEZ investment and employment continued to increase due to an increasing number of SEZs becoming functional, their growth rates have declined. Figure 31.3 Trends in SEZ employment and invest­ ment growth rate in India, per cent Source: Ministry of Commerce, various years. One of the refrains held against India’s SEZs is that they could not attract FDI. In China, a principal reason for the establishment of SEZs was attracting FDI. However, this was never the key objective of the Indian EPZ/SEZ policy. The share of FDI in total EPZ invest­ ment was as low as 25 per cent in 2003. With the expansion of SEZ investment, the share of FDI has declined to 5 per cent. Domestic investment growth has also waned since 2011–12, and the level of investment in SEZs has even declined during the past year. Since the 2005 Act, the foundations of several new technology- and knowledge-based manufacturing industries have been laid in SEZs. These include the electronics manufac­ turing services industry (EMS), aerospace, semi-conductors, alternative energy, and biotech industries. Capital and scale intensive, these industries benefit immensely from ex­ ternalities (p. 619) associated with agglomerations such as lower input and services costs, access to skilled labour, and knowledge spillovers. However, the policy uncertainty ap­ pears to have dampened their future growth prospects. A disaggregated analysis of SEZs dispels some pessimism around their contribution to the Indian economy. It shows that while manufacturing did not show much momentum, the erstwhile EPZs became instrumental in launching India on the path towards software ex­ port-led growth when the Tata family established a unit in 1977 in Santacruz Electronics EPZ (SEEPZ) in partnership with Burroughs, an American company, to export software and peripherals. A breakthrough in the progress of the industry occurred when, in 1985, Citibank established a 100 per cent foreign-owned, export-oriented, offshore software company in SEEPZ (Heeks 1996). This company drew attention to the possibilities for off­ shore software development in India, even though a major breakthrough in software ex­ ports was achieved in the late 1990s when India came into prominence as one of the top destinations for outsourcing IT services. India’s competitive advantages in the IT sector are owed largely to the government policy of promoting higher education since the early stage of its development process, which Page 16 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis helped build a skilled labour force, and to a number of policies launched in the mid-1980s, including software technology parks which became instrumental in IT cluster development. A survey conducted by NASSCOM in 2004–5 found that the total value of outsourcing to India (US$17.2 billion) was as much as 44 per cent of the worldwide total (David 2005). In 2005, when EPZs were upgraded to SEZs, the latter became a power­ house of IT growth. Newly notified SEZs offered an opportunity to software companies and other developers to set up IT-specific SEZs and expand the scale of businesses to take advantage of economies of scale. Table 31.3 presents a comparative framework showing the contributions of the manufacturing and IT sectors to SEZ areas, employment, invest­ ment, and exports. It is clear that the IT sector alone contributed almost 90 per cent of employment and 41 per cent of exports in SEZs. If exports from Jam Nagar refinery, which inflates manufacturing exports, are excluded then the IT sector is found to con­ tribute over 51 per cent of total SEZ exports. Actual employment fell 85 per cent short of the target in manufacturing zones; in IT-SEZs this ratio is above one. Page 17 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Table 31.3 Status of manufacturing and IT/ITES SEZs in 2018 IT/ITES Notified after 2005 Manufactur­ ing 218 129 50.16 356.7 30.17 (132) 297.19 (84) Direct employment 1,363,509 (112) 158,281 (75) Proposed employment 1,382,769 (112) 981,910 (75) Ratio of actual to proposed em­ ployment 1.1 0.16 Exports share (2017–18) (%) 40.5 59.5 Exports share excluding Jam Na­ gar refinery (%) 51.4 48.6 Total area (km2) Area under SEZs reporting em­ ployment in km2 Note: (*) Covers only those SEZs for which data was available for both proposed and direct employment (number of zones in parentheses). Source: Ministry of Commerce, India. (p. 620) 31.5 Conclusion It can be seen that almost every aspect of SEZ policy in China and India, including the ob­ jectives, design, institutional characteristics, and economic outcomes, is shaped by their political economy contexts. China’s strong central leadership experimented with amor­ phous performance-based governance systems to leverage its labour-driven comparative advantage to drive miraculous industrial growth and transformation through its SEZs. In contrast, in India, fiercely competitive political systems, a highly structured administra­ tive machinery which is dominated by decision-making at the centre, democratic social changes, a rigid federalist governance structure, and the comparative advantage-defying economic strategy, all interacted together to create a context marked by policy inertia Page 18 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis and policy uncertainty regarding SEZs. A comparative analysis of their performance and growth trajectories in different contexts yields three useful lessons. First, SEZs build on the competitive advantage, rather than the static comparative advan­ tage, of the country. While both India and China have comparative advantages in labourintensive manufacturing, they followed different policies towards infrastructure, educa­ tion, R&D, and labour and capital markets, which have shaped their competitive advan­ tages differently. In particular, the institutions governing labour markets play quite differ­ ent roles in shaping competitive advantages in China and India. China’s pro-capital labour regulations and state-controlled trade unions reinforced the comparative advan­ tages to build competitive advantages in labour-intensive manufacturing. Building on China’s competitive advantage, SEZs serve as a platform that transformed China into a global manufacturing powerhouse and a primary destination of FDI. In contrast, despite its relative abundance in unskilled labour, India lost comparative ad­ vantage in labour-intensive production at an early stage of development due to highly re­ strictive labour regulations and powerful trade unions in the formal sector (Ahluwalia et al. 2018). Low labour mobility solidifies segmentation of the labour market, pushing up wages in the formal sector (Zheng 2016). However, over time India developed competitive advantages in the skill-intensive IT sector which was leveraged by the SEZs. Second, whether SEZs can generate positive externalities depends on both their distinc­ tion from the national regulatory environment and their integration into the global econo­ my. China’s SEZ policy served as a policy experiment to facilitate institutional innovations and structural transformation. Some controversial policies, such as tax incentives, land transfers, and labour-market liberalization, were first tested in SEZs before being imple­ mented nationwide. These experiments have created an unusual adaptive capacity that facilitated China’s economic transition (Heilmann 2008). From the very beginning, SEZs were viewed as windows of economic reform which would bring foreign capital and tech­ nology to modernize the industrial base of China into the twenty-first century. Attracting FDI and promoting exports have been the key objectives of SEZ development. India’s SEZs could not be insulated from their broader institutional contexts, and in fact, their regulations and deregulations followed economic reforms in the national economy. The policy was marked by caution and scrutiny to avoid conflicts amongst interest groups. The constitutional federalist governance structure created barriers preventing SEZs from generating significant momentum to reduce bureaucratic burdens and break the political gridlock. (p. 621) Third, the success of SEZ policy requires strong political will and alignment of in­ terests. SEZs can be the lynchpin of the growth process but this requires strong commit­ ment, a spirit of experimentation, legal and institutional frameworks, and a continuously unfolding and dynamic set of policies (Aggarwal 2012b). China succeeded in implement­ ing its SEZ-led strategy not just due to its strong development-state role, but also by moti­ vating local governments to engage in competitive liberalization. Having the interests of different political actors aligned in favour of economic liberalization created a self-rein­ Page 19 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis forcing mechanism that alleviated foreign investors’ concerns about the credibility of SEZ policy (Zheng 2014). In contrast, India adopted a cautious approach to SEZ policy in or­ der to moderate academic, political, and civil-society resistance. However, the SEZ policy sparked unprecedented turmoil due to the large scale of land acquisition for SEZs dis­ turbing the social and economic systems of rural areas. Amidst widespread public discon­ tent and misconceptions about the policy, the government became increasingly convinced that SEZs had no public appeal or political returns. Thus, instead of systematically ad­ dressing the challenges of carrying the policy forward, it started backtracking, creating uncertainty and confusion regarding SEZs. Zones lost their lustre once preferential tax benefits were withdrawn. A lack of inter- and intra-governmental coordination due to a rigid constitutional structure further affected the attractiveness of the policy. Foreign in­ vestors largely stayed away. Although the SEZ Act 2005 had created an atmosphere of positive investment growth, it soon gave way to pessimism. References Aggarwal, Aradhna (2004) ‘Export Processing Zones in India: Analysis of the Export Per­ formance’. ICRIER Working Paper No. 148, New Delhi, India. Aggarwal, Aradhna (2006) ‘Special Economic Zones: Revisiting the Policy Debate’, Eco­ nomic and Political Weekly 4143/44: 4533–6. Aggarwal, Aradhna (2012a) Social and Economic Impact of SEZs in India. New Delhi: Ox­ ford University Press. Aggarwal, Aradhna (2012b) ‘SEZ-led Growth in Taiwan, Korea, and India: Implementing a Successful Strategy’, Asian Survey 52(5): 872–99. Ahluwalia, Rahul, Rana Hasan, Mudit Kapoor, and Arvind Panagariya (2018) ‘The Impact of Labor Regulations on Jobs and Wages in India: Evidence from a Natural Experiment’. Deepak and Neera Raj Center Working Paper No. 2018–02, Columbia University. Alder, Simon, Lin Shao, and Fabrizio Zilibotti (2016) ‘Economic Reforms and Industrial Policy in a Panel of Chinese Cities’, Journal of Economic Growth 21(4): 305–49. Banerjee-Guha, Swapna (2008) ‘Space Relations of Capital and Significance of New Eco­ nomic Enclaves: SEZs in India’, Economic and Political Weekly 4347: 51–60. Chen, Elaine and Sidney Leng (2019) ‘Hong Kong Economy Surpassed by Neighboring Shenzhen for First Time in 2018 as China’s Hi-tech Hub Soars’, South China Morning Post, 27 February. Available at https://www.scmp.com/economy/china-economy/arti­ cle/2187949/hong-kong-economy-surpassed-neighbour-shenzhen-first-time-2018. David, Stephen (2005) ‘India Controls 44 Per Cent of Global Outsourcing’, India Today magazine, 22 August. Available at https://www.indiatoday.in/magazine/economy/sto­ Page 20 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis ry/20050822-india-controls-44-per-cent-of-global-outsourc­ ing-787160-2005-08-22. Heeks, Richard (1996) India’s Software Industry: State Policy, Liberalization and Industri­ al Development. New Delhi: Sage Publications. (p. 622) Heilmann, Sebastian (2008) ‘Policy Experimentation in China’s Economic Rise’, Studies in Comparative International Development 43(1): 1–26. Howell, Anthony (2018) ‘Heterogeneous Impacts of China’s Economic and Development Zone Program’. Working Paper, Peking University. Jenkins, Rob, Lorraine Kennedy, and Partha Mukhopadhyay (eds) (2014) Power, Policy, and Protest: The Politics of India’s Special Economic Zones. New Delhi: Oxford University Press. Kumar, Mrinal and Ekta Gupta (2010) ‘Land Acquisition: Fear Factors for Companies’, Business Standard, 16 January. Available at https://www.business-standard.com/arti­ cle/companies/land-acquisition-fear-factor-for-companies-110011600078_1.html. Kundra, Ashok (2000) The Performance of India’s Export Zones: A Comparison with the Chinese Approach. New Delhi: Sage Publications. Levien, Michael (2011) ‘Special Economic Zones and Accumulation by Dispossession in India’, Journal of Agrarian Change 11(4): 454–83. Li, Lixing and Shen Guangjun (2015) ‘Development Zones, Comparative Advantage, and Regional Industrial Transformation’, China Economic Quarterly 14(3): 885–910. Mukherjee, Arpita, Parthapratim Pal, Saubhik Deb, Subhobrota Ray, and Tanu M. Goyal (2017) Special Economic Zones in India: Status, Issues and Potential. India: Springer. NDRC (2007) The List of China’s Development Zones (2006). Available at http:// www.ndrc.gov.cn/zcfb/zcfbgg/200704/t20070406_126961.html. NDRC (2018) The List of China’s Development Zones (2018). Available at http:// www.ndrc.gov.cn/gzdt/201803/t20180302_878800.html. People’s Daily (2018) ‘HIDZs Contributed 11% of National GDP and 35% of R&D Expendi­ ture Nationwide’, 27 December. Shenzhen NDRC (2016) The Development Guidance of the 13th Five-year-plan for Strate­ gic Emerging Industries in Shenzhen. Available at http://www.sz.gov.cn/szfgw/xxgk/ ghjh/zxgh/201701/t20170106_5865726.htm. Wang, Jin (2013) ‘The Economic Impact of Special Economic Zones: Evidence from Chi­ nese Municipalities’, Journal of Development Economics 101(1): 133–47. Page 21 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Xinhua (2018) ‘China’s Industrial Value-added Increased by 53 Times during the 40 Years of Reform and Open-up’, 5 September. Available at http://www.xinhuanet.com/politics/ 2018-09/05/c_1123380431.htm Yeung, Yue-man, Joanna Lee, and Gordon Kee (2009) ‘China’s Special Economic Zones at 30’, Eurasian Geography and Economics 50(2): 222–40. Zheng, Siqi, Weizeng Sun, Jianfeng Wu, and Matthew Kahn (2016) ‘The Birth of Edge Cities in China: Measuring the Spillover Effects of Industrial Parks’, Journal of Urban Eco­ nomics 100: 80–103. Zheng, Yu (2014) Governance and Foreign Investment in China, India, and Taiwan: Credi­ bility, Flexibility, and International Business. Ann Arbor, MI: University of Michigan Press. Zheng, Yu (2016) ‘Institutions, Labor Mobility, and Foreign Direct Investment in China and India’, Studies in Comparative International Development 51(2): 147–68. Notes: (1) The original list of strategic emerging industries included: next-generation informa­ tion technology, high-end equipment manufacturing, new materials, biotechnology, newenergy vehicles, new energy, and energy-saving and environmental protection technolo­ gies. The list was revised in 2013 and then again in 2016. Yu Zheng Yu Zheng is a professor at the School of International Relations and Public Affairs, Fudan University. His research interests include international development, aid and investment, industrialization, and business‒government relations. He is the author of Governance and Foreign Investment in China, India, and Taiwan: Credibility, Flexibil­ ity, and International Business (University of Michigan Press). His publications have also appeared in journals such as Comparative Politics, International Studies Quar­ terly, Public Opinion Quarterly, Socio-Economic Review, and Studies in Comparative International Development. Aradhna Aggarwal Aradhna Aggarwal, professor at Copenhagen Business School, Denmark has pub­ lished widely on international trade and business, SEZs, and technology transfers and in novations, and is a senior editor of the International Journal of Emerging Mar­ kets. She is the key resource person for an annual training programme for SEZ offi­ cials from South-east Asia and China co-organized by ADB and Asia-Pacific Finance and Development Institute, China. She has participated in research projects on SEZs with ADB, World Bank, UN ESCAP, UNCTAD, and UNDP, and actively participates in international expert panel discussions, public forums, and research and training workshops on SEZs. Page 22 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020 Special Economic Zones in China and India: A Comparative Analysis Page 23 of 23 PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice). Subscriber: OUP-Reference Gratis Access; date: 10 November 2020