News Analysis: Economic Development Zones Reposition Themselves after China's WTO entry

What will Chinese economic development zones (EDZ), known as the "test fields" for China's opening up and reform, become after the country's entry of the World Trade Organization (WTO)?

Authorities believe that they will reposition themselves to take the lead in joining the global competition and strive again to take the country's economic strength to another higher level.

Although the national treatment principle required by WTO entry will force Chinese government to gradually abolish preferential policies to EDZs, economic experts believe that these former bellwethers can still rely on the comprehensive strength they have accumulated during the past a dozen of years to push along the development of other regions and cast China within next one or two decades into a global manufacturing center.

"With a land area taking up less than five per hundred thousand of the country's total territory, state-approved EDZs have made an industrial output accounting for more than two percent of the country's aggregation," said Ma Xiuhong, Assistant Minister of China's Ministry of Foreign Trade and Economic Cooperation (MOFTEC) .

"The entry of WTO is rather an opportunity for EDZs to seek new development," said Ma.

Between 1984 and 2000, some 43 EDZs have been approved by the country's State Council. Being the first to break off the chains of the planned economy, these development zones, with constantly innovated management system in one hand and the state-approved preferential policies in the other, have flourished into the country's most vibrant economic growth poles.

As the latest statistics from the MOFTEC shows, during the first half of 2001, the foreign fund used by these EDZs has hit 286.5 billion US dollars, witnessing a year-on-year increase of 56. 22 per cent, twice as much as that of the nation's average.

The industrial output value made by them totaled 274.838 billion yuan (about 33.1 billion US dollars), up 29.98 per cent over the same period of last year, 15.88 percent higher than that of the nation's average.

Currently, a number of EDZs have made breakthroughs in new high technology and are upgrading their industrial structure at a faster pace. Last year, the information industry alone has made 1, 000 billion yuan (about 120.5 billion US dollars) in output value and nearly 300 billion yuan in added value (about 36.14 billion US dollars).

EDZs are reforging themselves as the country's bellwethers during the current economic structure adjustment, economic experts pointed out.

"These years, developed countries have started to move their knowledge-intensive manufacturing with high technique content to those developing countries. Economic development zones have become the hottest spots for the industrial transfer, both within China and the world at large," said Zhang Yansheng, a famous economist in China.

A plenty of multinationals have been reported to build their establishments in China's economic development zones.

Mek Tianseng, general manager of the SEW Eurodrive (Tianjin) Co. Ltd. said, "the investment climate here in China are much better than people can imagine." His company put its production base for Asia-Pacific market into Tianjin Economic Development Zone last year.

Being the first to get in touch with market economy and the first to follow international practices, these economic zones boast not only a relatively sound management system but also more mature supporting facilities.

Taking them as the vanguards to join the world economic competition, as analysts believed, would bring back valuable experiences for China as a whole to rise to the challenges given by the country's WTO entry.

"The future mission of EDZs will no longer be the intake of foreign capital or the gain of foreign exchanges. They need to exert their vested advantages in former regional competition and push more Chinese enterprises to follow international rules. Also they need to boost the technical innovation and industrial upgrading of various sectors and help domestic companies to quickly develop into those having the ability to run business globally," said Zhang Yansheng.

According to Zhang Shuguang, a research fellow of the Chinese Society of Social Science, with the comparative advantages shifting from policies to the comprehensive business environment they can fabricate, EDZs will see their future destiny hinged more upon whether they can take lead in following the global rules, building a modern tertius industry and realizing the mutual stimulation between the third and the second industry.

To date, most EDZs have put new high-tech industries like micro- electronics and biological engineering as their priorities in the next five years. More attention has been reportedly given to innovation in both management system and technology.

As a lot more EDZs have started to build up their service industry, Dalian Economic Development Zone in northeast China has attracted 22 financial institutions and provided operation fund worth of a hundred billion yuan.

Sources say that China has planed to set up more state-approved economic development zones this year, in both central and western areas, which will add the total of EDZs to 48.

"The vitality of EDZs can last more than 10 years, and probably no less than 40 to 50 years," said Zhao Yundong, president of Chinese Association of Economic Development Zones.






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