Can Africa learn from the SEZ Model of China?

1. Can Africa learn from the SEZ Model of China? Prof. Dr. Li Xiaoyun, Senior Advisor of IPRCC, Dean of College of Humanities and Development Studies, China Agricultural University

2. 1. Why Did China Do the SEZ? • China’s economy had been trapped in planned regime and economy had been stagnated before the end of the 1970s. There was a need to try a new way either different from planned economy or free market economy. There was a political risk to adopt capitalist market system at the time. • There was a need to shift planned economy, but the shift had to be in a small and partial scale directly under the central control in order to reduce political risk; • To introduce market economy needed special experiences that China lacked at the time, thus small scale and special experimentation would be useful to practice market operation within controlled context in order to avoid risk of failure that would happen if the reform was commenced immediately in a large scale. • To start from cost areas where can access global capital market and technology to ensure success

3. 2. What Did the SEZ Bring to China • Learning based piecemeal reform model: from political, social and economic point view, China is different from any industrialized nation in the world. To promote market based reform requires different approach. The SEZ provides a learning model that has guided China into incremental industrialization process that avoided market disorder and social instability; • Role of state and market : given China’s existing strong state to explore how state can facilitate market economy to ensure market system can best integrated into Chinese system; • Explored the way how to attract different kinds of foreign investments; “ window of opening to the world”; • Explore technology transfer model; • Lead structure transformation; • Building capacity to manage global production chain

4. 3. Can Africa Learn from China’s SEZ • Two challenges most Africa countries face, stagnated economic growth and poverty reduction. even for some resources rich countries, poverty is still serious problem • Most Africa countries are in shortage of capital, lack of capacity and technology to break through growth and poverty trap, therefore China’s experience naturally attracted most of African countries and SEZ has been considered one of the experiences that Africa can drawn from China; • China’s ESZ suggests that (1) for countries like China and most African countries, to introduce market economy needs gradual learning process from small scale and small area to gain the experiences and capacity as well as political and public support based on reflective policy review. The failure of structure adjustment in Africa is a typical example; (2) when to introduce market economy , state should be more strong to facilitate the process rather let “state out”; (3) learning capacity for policy development and implementation is essential to ensure success . In those regards, Africa can draw the experiences from China SEZ practices.

5. 4. however, for African context, Africa can not just copy China’s model. 4.1 China’s SEZ was set up to test how to manage market economy, mainly politically because market system was not politically encouraged in China in the 1970s. There was need to have it in ‘special area” to test ‘special policies” which are common now; while African countries widely adopted market economy after structure adjustment program; it less important to set up “special area” in Africa. 4.2 under current political situation in most African countries, it is also difficult to test ‘special policies” unless the law of “special economic zone “ can be developed to allow the SEZ to use different policies; 4.3 Current African countries’ political system is different from the Chinese system when China started SEZ; 4.4 China’s rapid economic growth and poverty reduction largely based on its agriculture –led growth process, and SEZ contributed significantly for the transformation and structural upgrading, but not the essential elemment.