Concept Definition
With the advent of economic globalization and the era of knowledge economy,fully participating in cooperation and competition of global businesses has been one of the fundamental approaches for many countries. Nowadays, establishing Development Zones has become a major tendency of world economy development, as well as the economic growth powerhouse of high-tech industry intensive districts and open economy clusters in every region.
Classified by functions, international Development Zones usually includes Free ports, Free-trade Zones, Industrial Parks of Science and Technology and Export Processing Zones etc. In China, Development Zones widely consists of all kinds of economic fields, mainly economic and technological development zones (hereinafter referred to as NETDZs), High-Tech Industrial Development Zones, Border Economic Cooperative Zones and Free-trade Zones etc. Among them, the former two are the major forms of China Development Zones, considering their industrial scale, economic strength and social contribution.
Current Situation
The establishment of Development Zones is a successful practice in the path of China&rsquos opening-up undertakings. From 1984 when the first zone was founded under the supervision of the state council till now, the number has amounted to 54, of which, 32 in eastern coastal regions, 9 in middle regions and 13 in western regions.
China Development Zones have gradually developed from scratch with 25 years of industrious endeavor and active exploration. According to statistics, in 2008, despite the influence of financial crisis, the major economic indices of China&rsquos Development Zones achieved steady growth. The 54 Development Zones GDP has reached 1531.3 billion Yuan, with industrial added value of 1097.2 billion Yuan accounts for 71.65% of GDP ÿ the Development Zones have also scored a total industrial output (current price) of 4593.5 billion Yuan, tax revenues of 248.1 billion Yuan, export value of 205.1 billion US dollars, import value 180.4 billion US dollars and actually-utilized foreign investment of 195 billion US dollars Up by 20.61ÿ 019.26ÿ 019.54ÿ 021.81ÿ 015.17ÿ 018.08ÿ and 12.8ÿ respectively as compared with the same period in 2007.
It is widely acknowledged that Development Zones have been serving as windows and bases at the forefront of China&rsquos reform and opening, acting as the powerful engines in contributing enormously to economy growth and hot places for foreign investment. Generally speaking, the main characteristics of Development Zones can be concluded as follows:
Main Characteristics
Promoting the process of China urbanization
Thanks to its geographical advantage and preferential policies, Development Zones accelerate the process of industrial element convergence and thus speed up the process of regional urbanization in demographic, economic, social and spatial aspects. This phenomenon is most noticeable in emerging economies like China. For example, the transformation of city space in the recent 20 years mostly falls into two aspects: the outer expansion of urban built-up areas keeps along with reorganization of urban inner space simultaneously. During this process, many Development Zones act as the main carrier for adjustment of urban spatial structure. In case of Suzhou, with a view to preserve the ancient city in an all-round way, the local government planned and constructed Suzhou Industrial Park and Suzhou New Area to the east and west of ancient city while the city itself prioritizes modern service industry, therefore realized the replacement of urban land use function.
During the process of urbanization, most development zones concentrate on combining regional planning with the development of mother city and become important sections of overall planning and construction within mother city. Some development zones even become independent of its mother city, building itself into completely new satellite towns. For instance, the Guangzhou Development District has been extended from a single industrial park with 9.6 square kilometers into a comprehensive sub-hub and modern new town in eastern Guangzhou.
Mode of land exploitation and foreign investment
Combining the foreign experiences and concrete national conditions, China Development Zones explored many effective modes of land exploitation and foreign investment. For Development Zones, land usage primarily concerns construction of investment environment. They are committed to optimize investment environment by achieving high efficiency, and excellent infrastructure environment with &ldquoSeven connections and one leveling&rdquo including electricity, water, power, gas, heat supply, sewage and communication.
 &ldquoHard&rdquo and soft investment environment are complementary and the lacking of either is impermissible. China development Zones regard service as the foremost imperative.                
Most of them adopt the management mode of &ldquosmall government with sound function&rdquo and give utmost priority to the investor&rsquos interests. For example, Guangzhou Development Zone has a unique administrative system, innovating mode by integrating five function areas, which has formed a simple and efficient management structure with multi preferential policies, and played an essential role in supporting and sustaining all investors and ventures established. Since Guangzhou Development zone can provide streamlined investment service in the whole process starting from the project consultation, negotiation, application, approval and registration to construction and production of the project, all investors can run business in line with the international common practice.
Industrial Cluster- polarization and diffusion effect
Development Zones gradually become the most important driving force and geographical location for industrial cluster in China. The clusters representing Development Zones locally have already been the irreplaceable &ldquogrowth pole&rdquo for local economy, bringing both polarization and diffusion effect into full play. Furthermore, through industrial cluster, some Development Zones step by step set up pillar industries and industrial chains with striking features.
The industrial structure level of most Development Zones is higher than surrounding districts, putting capital-intensive and high-tech industries in dominant place. For instance, there are 6 large laptop manufacturers from Taiwan settled in Kunshan export-processing Zone. They quickly formed a strong laptop industrial chain, which further attracted investment from one of the biggest computer main board manufacturers.
Finally, nearly every province and its subordinate cities in Yangtze River Delta and Pearl River Delta have built numerous Development Zones differing in scale and level. From wider aspect, Development Zones in each area have cooperated together and created a comprehensive regional industrial cluster, which strengthened the regional competitiveness and promoted industry convergence.
Evident discrepancies of progress among Development Zones
Disparities in geographic location, establishment time, local-specific economic condition and investment environment lead to prominent difference among 54 state-level Development Zones. Overall speaking, the Development Zones in eastern coastal area enjoy much higher economic strength comparing to those in middle and western areas. Among the Development Zones which were approved in earlier time, Guangzhou, Tianjin, and Dalian continue to maintain their leading roles with total economic volume reaching 30% of that of China Development Zones. Among the Development Zones which were approved after 1992, Kunshan, Suzhou and Shenyang develop at the highest speed. In western area, Xi&rsquoan, Chongqing and Chengdu have a better outlook by contrast to other regional ones.
Challenges faced by China Development Zones
Although China Development Zones have gained enormous accomplishment, there are still many problems existing. Firstly, many Development Zones lack reasonable land usage planning, though there is increasing shortage in land resource. For example, some projects approved by local governments haven&rsquot made full use of land to put into operation, which leads to the vacancy and waste of land resource Secondly, the preferential policies of Development Zones have been weakened since China entered the WTO, which means the foreign-funded enterprises will enjoy the same tax rate (25%) inside or outside the Development Zones Thirdly, with the implementation of New Labour Law, many labour-intensive enterprises face the increase of relevant operational cost and have to move out of Development Zones.
Corresponding Counter measures
In the following part, Guangzhou Development District (hereinafter referred to GDD) will be used as a typical case to illustrate corresponding strategies in dealing with above challenges.
After 25 years of successful operation, GDD has not only become an important base for modern high-tech industry and international trading but also an economic growing grid in Guangzhou, of which major economic indices rank among the top of all the Development zones of China.
Currently, in order to improve its overall international competitiveness, GDD intends to upgrade its manufacture, drive innovation and expand services. Firstly, GDD has devoted itself to a harmonious development among hi-tech manufacturing industry and the modern service industry Secondly, GDD focuses on systems of knowledge accumulation and technological underpinnings, rather than just an industrial area mainly relying on production Thirdly, GDD committed itself to transforming the industrial structure from process chain to value chain clustering and building an industrial system with modern manufacturing as its backbone, the modern service industry as its main support and agriculture as the supplement.
To accomplish the goals, many projects have been completed or under construction. For instance, Guangzhou International Bio-island has been established in compliance with the overall objectives of building a world bio-technology innovation and a world-class R&D and industrialization center. Therefore, it can facilitate the supporting system for the bio-technology industry and attract outstanding professionals in research institutes and universities, enterprises and investors both domestic and international.
Moreover, the biggest project between China and Singapore-Knowledge City is anticipated to put into operation in GDD next year, aiming to serve as a model and catalyst for industry to improve the ecological sustainability of Guangzhou and the whole province. It adopts a development strategy of rallying knowledge -intensive high-end industries, attracting hi-end professionals and offering high-end services. Meanwhile, it will seek to construct a world-level industrial park concentrating on the knowledge economy as well as an environmentally and ecologically friendly town suitable for living and working.
Another remarkable practice of GDD comes from advocating headquarters economy, which mainly targeting at renowned corporations from home and abroad (such as Fortune 500) and encouraging them to set their headquarters in the GDD. This approach realizes the intensive use of land resource and helps GDD become a center with integrated functions of administration, marketing and sales, procurement and R&D. Up to now, GDD has a gathering of 104 projects from Fortune 500 corporations.
Last but not least, in 2008, GDD gained the glory of &ldquoGuangzhou Demonstrative Area for the Base City of China&rsquos Service Outsourcing. The year&rsquos total value of the service outsourcing of the GDD reached 1.1 billion yuan. Among them, information technology outsourcing (ITO) and business procedure outsourcing (BPO) accounted for 45% and 55%. Boast as a National Service Outsourcing Model District, the GDD will continue to promote the clustering of service outsourcing companies and the development of service outsourcing.
The 25-year development process has witnessed the significant experimental and radiation effect of China Development Zones in economic development. However, the challenged they face can not be ignored. In one hand, the fierce contest of many foreign countries for international capital puts pressure on the introduction of foreign investment in China Development Zones On the other hand, the transfer and restructure of global industries demand improved competitiveness in China Development Zones. At this critical juncture, China Development Zones will undertake an important transition: paying more attention to industrial structural adjustment and transformation of economic growth pattern focusing more on technological introduction and independent innovation committed to develop world-class competitive industrial clusters to drive Chinese industry to the high-end of international value chain Above development strategies should be sustainable and not at the cost of environmental destruction.
Writer: Tang Qun Ying, Senior Adviser & General Manager of Guangzhou Double-win Investment Consulting Corporation Limited Email: