Shenzhen SEZ Output Reaches 300bn Yuan

by Mary Swire, Tax-News.com, Hong Kong

24 January 2002

Last week, Shenzhen officials announced that the Special Economic Zone's gross industrial output reached a record 306.7 billion yuan (HK$289.3 billion) last year. The SEZ was set up by the late leader Deng Xiaoping in August 1980.

The SEZ was aimed at introducing overseas investment, advanced technology, management and information to the mainland. It was also used by the Central Government to experiment with economic reform and as a testing ground for opening up the region. To lure overseas investors, including those from Hong Kong, Macau and Taiwan, Beijing granted a series of preferential policies to Shenzhen. Later on, SEZ status was also given to Zhuhai, which borders Macau, Shantou in eastern Guangdong, Xiamen in the southeastern Fujian province, and the island of Hainan.

In the five SEZs overseas investors benefit from tax breaks, a reduction in administrative hurdles and duty-free imports of equipment needed to set up factories. After tax holidays, overseas businesses now pay 15% corporate income tax - elsewhere firms pay 33%. The experiment with naked capitalism brought with it a fevered response: Shenzhen's population grew from 30,000 to more than four million while per capita income is now one of the highest in cities on the mainland. Between 1980 and 2000, Shenzhen soaked up US$20 billion (HK$156 billion) of foreign investment. It is the only city other than Shanghai with a stock exchange, and GDP per head is around US$4,335 - six times the national average.

It took 15 years for the Shenzhen SEZ to produce an annual industrial output of more than 100 billion yuan from 1979's 71 million yuan, five years to reach 200 billion yuan in 1999 and three years to achieve the current 300 billion yuan.

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