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Opening to The Outside World

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Special Economic Zones and Open Coastal Cites      Opening Up West Region       Foreign Economic and technological Cooperation
Utilizing foreign Capital          Foreign Trade


Special Economic Zones and Open Coastal Cites

When it decided to reform the national economic setup in 1978, the Chinese government embarked on a policy of opening to the outside world in a planned way and step by step. Since 1980, China has established special economic zones in Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province, and designated the entire province of Hainan a special economic zone. In 1984, China further opened 14 coastal cities—Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhanjiang and Beihai—to overseas investment. Then, beginning in 1985, the state decided to expand the open coastal areas, extending the open economic zones of the Yangtze River Delta, Pearl River Delta, Xiamen-Zhangzhou-Quanzhou Triangle in south Fujian, Shandong Peninsula, Liaodong Peninsula, Hebei and Guangxi into an open coastal belt.In 1990, the Chinese government decided to open the Pudong New Zone in Shanghai to overseas investment, and opened more cities in the Yangtze River valley. In this way, a chain of open cities extending up the Yangtze River valley, with Shanghai’s Pudong as the “dragon head,” has been formed. Since 1992, the State Council has opened a number of border cities, and in addition, opened all the capital cities of inland provinces and autonomous regions. In addition, 15 free trade zones, 32 state-level economic and technological development zones, and 53 new- and high-tech industrial development zones have been established in large and medium-sized cities. As a result, a multi-level, multi-channel, omni-directional and diversified pattern of opening, integrating coastal areas with riverine, border and inland areas has been formed in China. As these open areas adopt different preferential policies, they play the dual roles of “Windows” in developing the foreign-oriented economy, generating foreign exchanges through exporting products and importing advanced technologies and of “radiators” in accelerating inland economic development.

Primarily geared to exporting processed goods, the five special economic zones are foreign-oriented areas which integrate science and industry with trade, and benefit from preferential policies and special managerial systems. They have summed up their rich experiences in absorbing foreign investment and developing foreign trade for China to open up to the international market. In recent years, the special economic zones have led the country in establishing new systems, upgrading industries and opening wider to the outside world, serving as national models. In 1999, Shenzhen’s new-and high-tech industry became one with best prospects, and the output value of new-and high-teach products reached 81.98 billion yuan, making up 40.5 percent of the city’s total industrial output value and coming out in front in the country.

Since its founding in 1992, the Shanghai Pudong New Zone has made great progress in both absorbing foreign capital and accelerating the economic development of the Yangtze River valley. The state has extended special preferential policies to the Pudong New Zone that are not yet enjoyed by the special economic zones. For instance, in addition to the preferential policies of reducing or eliminating Customs duties and income tax, common to the economic and technological development zones and certain special economic zones, the state also permits the zone to allow foreign business people to open financial institutions, and run tertiary industries. In addition, the state has given Shanghai permission to set up a stock exchange, expand its examination and approval authority over investments and allow foreign-funded banks to engage in RMB business. In 1999, the GDP of the Pudong New Zone came to 80 billion yuan, and the total industrial output value, 145 billion yuan. Up to now, 78 Chinese and foreign-funded financial institutions have been set up in Lujiazui, Pudong, of which 24 foreign-funded banks have been approved to engage in RMB business. The 5,900 foreign-funded enterprises, with a total investment of nearly US$30 billion, and over 5000 domestic enterprises from all over the country, with a total registered capital of about 20 billion yuan, have formed six pillar industries: automobiles and spare parts and components, microelectronics and computers, household electrical appliances, bio-medicines, and optical, mechanical and electrical products. A large number of projects funded by business people from more than 60 countries and regions have taken root and blossomed there. Pudong’s “dragon-head” role of radiating and leading the whole country is becoming more and more prominent.

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Opening Up West Region

At the turn of the new century, while continuing to promote the opening up of the coastal regions, the Chinese government has begun to implement the strategy for the wide-ranging development of the western China. Western China includes Shaanxi, Gansu, Qinghai, Sichuan, Yunnan and Guizhou provinces, the Ningxia Hui, Xinjiang Uygur and Tibet autonomous regions, and Chongqing Municipality. Western China has an area of 5.4 million sq km, making up 56 percent of the country’s total land territory; and a population of 285 million, accounting for 23 percent. Western China is rich in mineral resources, and has advantages in energy (including hydraulic power), tourism and land resources. In the 1980s, Deng Xiaoping put forward the strategic concept for China’s modernization drive, featuring “two situations” (one situation is that the southeastern coastal areas will speed up their opening to the outside world, and the other is that China should concentrate its strength to speed up the development of its central and western tegions. In the past 21 years, since the adoption of the policies of reform and opening to the outside world, the development of the coastal regions, especially the development of traditional industries, has gradually become saturated, so the coastal areas need to look for new markets. The development of western China is now extremely urgent. The implementation of the strategy for the development of western China, opening it wider to the outside world, and encouraging domestic and foreign enterprises to participate in the development of infrastructure facilities and natural resources in the region will benefit China’s economic development in the 21st century. Hence the Chinese government is working out an overall plan for the development of the western region, and has formulated a series of preferential policies and measures for encouraging foreign business people to invest there. The Chinese government welcomes foreign investors to participate in the development of the country’s western part.

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Foreign Economic and technological Cooperation

Since the 1950s, China has provided economic aid to developing countries. Since the adoption of the policy of reform and opening to the outside world, China has quickened its pace of foreign aid, involving agriculture, forestry, water conservancy, light industry, textiles, food, power, machinery, chemicals, transportation, culture, education, public health and public utility projects. Some of them are large and medium-sized, while others are small projects featuring less investment, but quick and high economic returns. By 1999, China had aided more than 130 countries and regions, and completed 1,500 foreign-aid projects.

Contracted projects and labor service cooperation with foreign countries are brand-new undertakings developed since the initiation of reform and opening to the outside world. To date, China has such undertakings in 187 countries and regions. In 1999, the contracted capital agreed to in newly signed contracts for overseas engineering projects or labor services reached 13 billion US dollars-worth; completed turnover amounted to 11.2 billion US dollars-worth; and more than 380,000 laborers had been sent abroad.

China has also made initial progress in making investments abroad. China has more than 160 foreign investment markets, and 5,793 investment enterprises outside Chinese territory. China’s total agreed investments have come to 6.5 billion US dollars-worth. These overseas investment enterprises are engaged in a wide range of businesses, including foreign trade, real estate investment, information consultancy, finance, insurance, catering, tourism, contracting for labor services, culture, education, public health and technology development.

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Utilizing foreign Capital

China absorbs foreign capital through foreign loans, direct foreign investment and other investment by foreign business people (international leasing, compensation trade, processing and assembling). So far, foreign business people from more than 170 countries and regions have made investments in China. Since the founding of the first Sino-foreign joint venture in 1980, China has taken the utilizing of foreign capital as an important aspect of basic state policy, and great efforts have been made to promote it. In the beginning Sino-foreign joint ventures first entered the processing industry, and later they expanded toward the basic industries and export-oriented enterprises, commerce, finance, information, consultation, real estate, and other fields.

Though most Sino-foreign enterprises are located in the coastal cities, some of them have gradually settled down in the inland cities. In recent years, thanks to the constant improvement of China’s investment environment, some international consortiums and transnational companies have come to China, one after another. Of the 500 top transnational companies in the world, more than 300 have invested in China. Foreign investments have become an important capital source for China’s economic construction. In 1999, direct foreign investments in real terms totaled 40.3 billion US dollars; and projects with direct foreign investment numbered 16,918. Between 1979 and 1999, of foreign capital utilized by China, the accumulative total of direct foreign investment came to 305.9 billion US dollars. By 1999, China had approved the founding of 342,000 foreign-funded enterprises, of which over 100,000 have gone into operation. Most of them have made satisfactory profits.Growth of Actually-used Foreign Capital.

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Foreign Trade

Opening to the outside world has greatly promoted the development of China’s foreign trade. China’s import and export volume increased from 1.13 billion US dollars-worth in 1950 to 360.65 billion US dollars-worth in 1999, or an increase of 319 times. The total import and export volume in 1999 increased by 17.5 times, as compared with that in 1978. In terms of foreign trade, China ranked 32nd in the world in 1978, and rose to ninth in 1999

Over the past 21 years, great changes have taken place in China’s import and export trade. First, the structure of import and export commodities has been constantly improved. The export volume of primary products, with food, agricultural and sideline products, and crude oil as the mainstay, has been reduced by a large margin—from 53.5 percent of the total export volume in 1978 to 10.2 percent in 1999; and the proportion of industrial products increased from 46.5 percent in 1978 to 89.8 percent in 1999. Remarkable progress has been achieved in the export of machinery and electrical products, rising from 1.41 billion US dollars-worth in 1980 to 77 billion US dollars-worth in 1999. Second, foreign-invested enterprises, which grew from nothing, have become new factors contributing to the growth of China’s foreign trade. In 1981, the export volume of foreign-invested enterprises made up 0.1 percent of China’s total export volume, and 0.5 percent of the import volume. By 1999, the export volume of foreign-invested enterprises made up 45.5 percent of China’s total, and the import volume, 51.8 percent. Third, China’s international trade market is becoming more diversified. In 1980, nearly 180 countries and regions had trade exchanges with China, a figure which rose to 228 in 1999. In 1999, along with the recovery of the Asian economy, China’s exports to other Asian countries restored growth, and its exports to North America, Europe, Oceanic and Africa constantly grew. Fourth, foreign trade has been expanded through various flexible trading forms. Processing trade and small-scale border trade have increased by a large margin. A situation in which ordinary trade, processing and assembling with supplied or imported materials, and small-scale border trade are competing with each other for development has been formed.

While running the special economic zones, China has undertaken a series of reforms in the foreign trade system, such as expanding local governments’ examination and approval authority over foreign trade and exports, and enlarging foreign trade enterprises* autonomy over export trade and operations. Consequently, the old system featuring monopolized operation by the state, highly centralized management, integration of government administration with enterprise operations and the state assuming responsibility for profits and losses has basically been changed: The state has gradually cut back on mandatory plans for foreign trade enterprises, and a management system which indirectly regulates and controls foreign trade through Customs duties, foreign exchange rates, credits and tax refunds has been put in place step by step.

In 1986 China formally applied for reinstatement as a signatory state in the General Agreement on Tariffs and Trade (GATT), so as to make its foreign trade conform more to international practice. Since the World Trade Organization (WTO) was founded in 1995, China continually applied to participate in it. During this period, China lowered its import tariff rates on several occasions and realized the convertibility of RMB in regular items. Over the past 14 years, China’s enthusiasm for acceding to the WTO has never flagged and it has put its commitments into practice. That is to say, with its status as a developing country as the premise and the Uruguay round of negotiations as the basis, China undertakes its obligations suitable to its economic development level, actively strengthens negotiations with the United States, European Union and other member states. Bilateral and multilateral negotiations for China’s entry into the WTO have reached the final stage. The day for China to join the WTO is not far away. Meanwhile, China actively participates in the activities sponsored by the Asian-Pacific Economic Cooperation Organization, and plays an important role in the organization. The bilateral trade relations between China and the United States, the European Union, Russia and Japan have been constantly strengthened.

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  Information provided by China National Tourism Administration.


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