Opening coastal China to foreign investment and trade brought capital, technology and markets, and turned China into a great exporter.
In 1980 China created four Special Economic Zones (SEZs), including Shenzhen next to Hong Kong. They offered foreign investors low taxes, cheap land and labour, and fewer controls.
The policy widened step by step. In 1984 fourteen coastal cities were opened. Hainan became an SEZ in 1988, and Shanghai's Pudong district was opened in 1990.
Foreign investment rose from almost nothing to about 40 billion dollars a year by the mid-1990s. Foreign firms brought capital, technology, management skills and access to world markets.
Exports grew from about 10 billion dollars in 1978 to about 250 billion dollars in 2000. Shenzhen grew from a small border town into a city of about 7 million people.
The policy also widened gaps. Coastal provinces grew far faster than the interior.
- SEZs
- 1980: Shenzhen, Zhuhai, Shantou, Xiamen.
- Coastal cities
- 1984: fourteen opened.
- Exports
- About 10 billion dollars (1978) to 250 billion dollars (2000).
Worked example: Tracing the open door
How did the open door change China?
- Experiment: four SEZs in 1980.
- Expansion: coastal cities in 1984, Pudong in 1990.
- Results: investment, technology and exports.
- Cost: a widening gap between coast and interior.
Watch out for this
The open door opened all of China at once.
It began with four zones in 1980 and widened step by step, mainly along the coast.
Check your understanding
Why was Shenzhen chosen as an early SEZ?
- It was next to Hong Kong, a source of investment and a gateway to world markets.
- It was China's largest city in 1980.
- It had China's largest oil reserves.