The role of Special Economic Zones in China’s development – Prospects for Africa

by Munetsi Madakufamba – SANF 15 no 57
Having followed the European models of development for many decades, the post-colonial state in Africa is yet to enjoy the promised benefits of development, and yet to effectively empower its citizens out of poverty.

However, China’s arrival on the global economic stage, with reforms that have enabled it to emerge as the largest economy in the world and extricate the larger part of its population from poverty in a record time of less than 30 years, has heightened the call for a rethink of Africa’s development model.

This has shown that it is possible for Africa to industrialize through an alternative model unique to the continent, a model that is not necessarily the same as that championed by western proponents.

China and Africa are very different polities. China is a unitary state with more than a billion people, while Africa is a continent of 55 fragmented sovereign states.

Yet despite these differences, China and Africa share many commonalities of a historical, geographical and demographic nature, and more.

Africa’s combined population of 1.1 billion is almost the same size as that of China at 1.35 billion.

China, India and Africa are the three most populous regions of the world. These regions share a similar colonial history, having suffered from resource exploitation by imperial powers.

They suffered extreme poverty at the turn of the century, with China having turned its fortunes around and India moving in that direction, while the majority of states in Africa are still suffering from rising inequalities.

The success of China’s industrial development can be attributed to gradual and strategic economic liberalization, an effective policy of foreign direct investment, incentives to both private and public sector enterprises, strategy of internationalization for state-owned enterprises, research and development, and dynamic state institutions for policy guidance.

Success is driven by China’s strategic balance of protectionism and economic liberalism; China’s investment policy and the regional development policy; and export-oriented growth and foreign economic policy.

Two strong features of the Chinese rapid economic development are the investment-driven and export-oriented growth, based on the Chinese government’s ability to formulate an effective industrial development policy while maintaining a favourable climate for foreign investment.

In order to attract Foreign Director Investment (FDI) without threatening the growth of domestic industries, China adopted measures that include:

  • Regional industrial policies and export promotion strategies;
  • Development-oriented and sustainable FDI regimes that promote capital inflow, joint ventures between local firms and foreign investment; and,
  • Adoption of coherent strategies for Special Economic Zones.

Since the 1980s, Special Economic Zones were introduced in China through careful experimentation, notably starting in Guangdong Province where the remarkable story of Shenzhen was turned from what was once a fishing village into an ultra-modern industrial city.

This model has since been replicated over the last 35 years in other parts of China, turning the country from a previously agro-based economy into one that now derives about 90 percent of its income from industrial and service sectors.

China is already supporting Special Economic Zones in African countries such as Egypt, Ethiopia, Mauritius, Nigeria and Zambia. There are some lessons that can be drawn and adapted from China’s development experience.

A growing industrial sector is key to sustained overall economic development of a country due to the multiplier effect insofar as it promotes value addition and employment generation.

Special Economic Zones can be applied at many levels from city level, provincial to national country level. Perhaps the one level that should be considered in China-Africa relations is extending this to the sub-regional level.

The Special Economic Zones already established in African countries should therefore incorporate a regional outlook, with impact on regional development.

The opportunity is further presented by the fact that for the first time in 2012, China and Africa through the Forum on China Africa Cooperation (FOCAC) noted the importance of relations between China and sub-regional organizations and agreed to cooperation to promote economic integration.

Special Economic Zones offer a good opportunity to push African industrialization.

The global manufacturing centre has historically shifted from England in the last 200 years, to Germany in the last 100 years, to the United States since the 1940s, to Japan since the 1960s and 1970s, and now more recently to China.

All developing countries that have successfully made the transition from low income to middle and high income status such as China and the East Asian Tigers as well as Latin American countries have done so relying on a strong manufacturing sector as the driver of an export-oriented growth economy.

This has been achieved with a strong role for government, especially in the provision of infrastructure whose magnetic power has been most evident in China in attracting new industries and other forms of development.

Most African countries are still to break from current consumption and commodity exports development path to a more sustainable development model based on industrial competitiveness.

China’s SEZ experience therefore offers a viable option if carefully designed with African characteristics.

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