Learning from Shenzhen

China’s Post-Mao Experiment from Special Zone to Model City

Mary Ann O'Donnell, Winnie Wong, Jonathan Bach, Mary Ann O'Donnell, Winnie Wong, Jonathan Bach

• Publisher: University of Chicago Press
• Year: 2017
• Print ISBN: 9780226401126, 9780226401096
• eBook ISBN: 9780226401263
• Topic: History
• Subtopic: Economic History
• Index: History

This multidisciplinary volume, the first of its kind, presents an account of China's contemporary transformation via one of its most important yet overlooked cities: Shenzhen, located just north of Hong Kong. In recent decades, Shenzhen has transformed from an experimental site for economic reform into a dominant city at the crossroads of the global economy. The first of China's special economic zones, Shenzhen is today a UNESCO City of Design and the hub of China's emerging technology industries.

Bringing China studies into dialogue with urban studies, the contributors explore how the post-Mao Chinese appropriation of capitalist logic led to a dramatic remodeling of the Chinese city and collective life in China today. These essays show how urban villages and informal institutions enabled social transformation through cases of public health, labor, architecture, gender, politics, education, and more. Offering scholars and general readers alike an unprecedented look at one of the world's most dynamic metropolises, this collective history uses the urban case study to explore critical problems and possibilities relevant for modern-day China and beyond.

PART I

Experiments (1979–92)

1

Shenzhen: From Exception to Rule

JONATHAN BACH

Introduction

Writing of the spectacular architecture that fills the skylines of Shenzhen and other Asian cities, Aihwa Ong borrows the term hyperbuilding from the architect Rem Koolhaas to describe how the new Asian city creates stunning urban infrastructures that simultaneously serve national and global aspirations.1 The pursuit of the national and the global, she emphasizes, cannot be divorced from each other—the (re)construction of the nation involves a positioning of the nation on the global stage. The origins of today’s Asian cities of hypermodernity lie in an unprecedented reconfiguration of national and global economic space in the second half of the twentieth century, from which Shenzhen emerged as one of the leaders of a fast urbanism that came to define the image of the new Asian city.

For China, emerging from the political chaos and economic paralysis of the Cultural Revolution of 1966–76, the creation of Special Economic Zones (SEZs) linked the national and the global in an ongoing speculative project that indelibly transformed China’s identity, economy, and urban landscape. Shenzhen was the largest and most successful of these early endeavors, and this chapter shows how Shenzhen emerged from the interplay between national and global dynamics and entered into the global circulation of models of economic and urban development. Shenzhen arose specifically against the backdrop of two genealogies of the SEZ—the zone as a site of economic planning that enhances the global circulation of goods and the accumulation of capital, and the zone as a version of the imagination of the modern rational city with an inherent civilizing mission. By internalizing and expanding on these origins, Shenzhen became a prototype for China and beyond as a model (or antimodel) for a unique blending of economic and urban innovation and development.

Harnessing the Logic of the Zone

AN EXPORT ZONE BY ANY OTHER NAME?

Shenzhen originated from the attempts of the post-Mao leadership in the late 1970s to undo the economic paralysis of China’s economy during the Cultural Revolution of 1966–76. A major challenge lay in acquiring badly needed foreign capital and technology from the class enemy without appearing to betray socialist principles. An economically attractive, though ideologically problematic, model appeared in Taiwan and South Korea, both firmly within the “imperialist” camp, who themselves sought ways to gain capital and technology with significant success. In 1966, while the Cultural Revolution was getting under way in the People’s Republic, Taiwan established an export processing zone at Kaohsiung that grew at an astounding rate—just under 50 percent for the first four years and around 26.5 percent on average in the period up to 1979.2 As the Cultural Revolution was winding down, South Korea established its first zone in Masan in 1974, which was widely successful in precisely the areas that China was concerned with: foreign exchange earnings, the introduction of new technologies, and the training of workers and managers in these new technologies. This had a ripple effect on other parts of the South Korean economy through employment, services, and materials.

Taiwan and South Korea, in turn, had looked toward the colonial entrepôts of Singapore and Hong Kong as inspiration for new ways to attract foreign direct investment (FDI), and therein lay a significant ideological problem. Singapore had only recently acquired formal independence in 1963, and Hong Kong remained a British colony (until 1997). South Korea and Taiwan were firmly within the American economic and military orbit. Were economic zones just another form of concession to Western powers—a modern version of the hated colonial treaty ports forced on China after it lost the Opium War in 1842—or was there a way to use the logic of the zone to China’s advantage without compromising its principles?

These kinds of considerations faced Deng Xiaoping, Vice-Minister Gu Mu, and other leaders as they gathered throughout 1979 to discuss the best way to relink China to the outside world. Both Deng and Gu were supporters of creating special zones, and they ultimately carried the day. The idea of a “special district,” first introduced in March 1979, coincided with Deng’s desire to use the districts to not only attract foreign money but also gain room for broader reform attempts that would surely be too controversial if attempted in established cities. Seeking to justify the idea of an experimental space, Deng is said to have exclaimed, “Yannan was also a zone!,” referring to the Communist Party’s mountain headquarters during the war. After a debate about what name would be least ideologically delicate, the decision was made to announce four SEZs that year—Shenzhen, Zhuhai, Shantou, and Xiamen. Of these, Shenzhen, located on the border of Hong Kong, became the largest and most well known outside of China.

The term SEZ struck a rhetorical balance between reassurance and boldness. These were not capitalist export processing zones (EPZs) as in Taiwan and South Korea but special economic zones that would, as Deng once put it, not be capitalist enclaves but “develop the productive forces under socialism.”3 They were not located in established cities but strategically placed to attract investment from overseas Chinese in Hong Kong and Taiwan, where their peripheral locations also conveniently gave the government a sense that they could be erased if they failed. They would not be limited to factories but would become model cities with diversified industries, including tourism and real estate development. In a somewhat updated version of learning from the industrial city of Daqing, the hope was that someday the rest of China would learn from the SEZs.

THE RISE OF THE EXPORT STATE

In creating these zones, China was taking part in the midphase of a phenomenon that had become an integral part of the global economy by the twenty-first century. Forms of economic enclaves have long been part of the history of trade: from the extensive trading network of Hanseatic cities from the thirteenth to the seventeenth century in Europe, to the Japanese island of Dejima where Dutch traders were confined from the seventeenth to the nineteenth century, to the Ming- and Qing-era port of Guangzhou (Canton) where European trade was concentrated and then confined from the 1700s until the British invaded to end the system, to the aforementioned colonial treaty ports from Hong Kong to Gibraltar. The contemporary concept of the economic zone, defined as a spatial designation where one country alters its laws to give preferential treatment to foreign investors and manufacturers, gained its current contours primarily in the postwar period. The zone as a contemporary phenomenon was spurred into being by mobile capital seeking the relatively cheaper wages of immobile labor. This process became greased by new developments in transportation (faster, more capacious) and an increased desire by developing countries to attract more investment to transform their economies.

Up until the mid-1960s, there had been scattered attempts by a small number of countries to attract investment by tempting investors with a different set of rules to allow them to take advantage of cheaper labor, lower or no taxes, and exemption from various regulations. Puerto Rico, for example, was promoted in 1948 as a de facto SEZ avant la lettre with tax and duty exemptions for US companies who produced there. In the mid-1960s, Mexico also worked out special incentives for companies to produce in a strip along their northern border in maquiladora factories, mainly to allow US companies access to cheap Mexican labor after the end of a “guest worker” program called Bracero that had enabled migrant labor in the United States. But it was Shannon, Ireland, that in 1958 hit upon the formula that now exists in approximately 3,500 variations around the world. Transatlantic flights to Europe used to stop in Shannon to refuel. Once long-haul flights no longer made this necessary, Shannon sought to keep air traffic by creating a geographic special zone that brought global transportation links, various investment incentives, and industries together in one legally exempted and proscribed space.4

By the time China created its SEZs, the idea of exports as a growth model for developing countries had taken hold. Developing countries were increasingly eager to adopt zones because they had grown disillusioned with the widespread strategy for economic growth of the early postwar era known as “import substitution,” where countries aimed to grow and protect their own industries for domestic production and made imports prohibitively expensive, among other measures. Often faced with an excess of labor and lack of foreign exchange revenue, starting in the 1960s countries like India, Mauritius, the Philippines, and Kenya began to create EPZs that incorporated elements of Shannon’s model, where foreign companies could employ local workers, goods could enter and leave with minimal regulation, and foreign exchange could be earned. These zones, however, had a relatively limited economic impact. It was only when Taiwan and South Korea began to reconceptualize the zone as a means of national development that the idea of export processing as a path to growth caught fire. The “Asian Dragons,” or “Asian Tigers” (Singapore, Hong Kong, South Korea, and Taiwan), owed their meteoric rise to export-led growth, and this was not lost on China. The developing world was shifting to an export-oriented phase of industrialization that would later prove to be central to China’s own strategies for economic growth.

The flip side of national growth driven by exports was the massive flight of manufacturing from the developed countries—primarily the United States and, to a lesser extent, Western Europe—to low-wage factories in Asia. From its peak of 19.5 million manufacturing jobs in 1979, for example, the United States lost 5.7 million jobs by 2007 (the year before the global economic downturn).5 Not all jobs went overseas, since automation and a rise in productivity also reduced workplaces, but the majority did, and most of them went to East Asia. In a comparable period (1980 to 2005), East Asia gained a whopping 42 million manufacturing jobs (from 27 to 69 million), an indication of not only the overall growth in manufacturing but also the incredible competitiveness of the region when manufacturing jobs declined everywhere else except Eastern Europe and India.6

The rise of “exportism,” as Ngai Ling Sum has called this phenomenon, as a new form of development, along with the shift in manufacturing away from the industrialized countries, is part of an epochal rescaling of national economic space in which zones came to play a key role.7 As Western governments sought to ease regulations from the late 1970s onward, corporations began to relocate manufacturing in large numbers to the most competitive locations. This trend was emboldened by Western government policies of deregulation and privatization that became dominant in the 1980s, starting with Britain’s Prime Minister Margaret Thatcher and US President Ronald Reagan.

Yet the political context alone would have been insufficient for such a global rescaling of space had it not been for major changes in technology, especially long-distance transport and computerization. The container ship, which had only been invented in 1956 and standardized in 1961, allowed freight costs to drop from nearly 25 percent of product cost in the 1950s to a tiny fraction of that today.8 The earliest of these ships could carry five hundred to eight hundred containers—today the largest carry eighteen thousand.9 Together with a corresponding rise in the availability of air freight, these technological innovations allowed for the rise of “flexible” production methods such as “just-in-time” production that tailored production to consumer demand.

China’s experiment with SEZs thus came as the global economy was shifting to internationalized production for ideological, structural, and technological reasons, where companies increasingly distributed their processes across the globe in a complex choreography of design, labor, production, transport, and assembly. When Shenzhen came into existence in 1979, then, it became part of an already rapidly expanding global system of economic zones.

FROM EXCEPTION TO EXPANSION: THE ZONE AS INTERNAL MODEL

Each host country selectively applies their domestic law to their economic zones in order to generate investment, primarily by enhancing the production and circulation of commodities. In doing so, they are taking part in the logic of sovereign exception, where states effectively section off a part of their country and give it an intermediate status between home and abroad. Political and economic space becomes separated within the boundaries of the nation-state, and companies and workers alike receive different status within the zone than in the rest of the country.

As Ronen Palan has shown in his important work on offshore spaces and tax havens, the ability of states to parcel their territory and market it for profit is inherent in the very structure of the modern international system even as it can seem to contradict the sacred status of the sovereign nation as an organic whole.10 The sovereign state system achieved near universal status after decolonization in the wake of the Second World War. It is premised on a doctrine of noninterference in other states’ internal affairs. This gives, in principle, a state the freedom to determine whether laws apply equally or differentially within its borders. For much of the history of modern capitalism, especially industrialization in Western Europe and North America, the global economic system functioned effectively within s...

Table of contents

• Cover
• Title Page
• Copyright Page
• Contents
• FOREWORD
• INTRODUCTION: Experiments, Exceptions, and Extensions
• PART 1  Experiments (1979–92)
• PART 2  Exceptions (1992–2004)
• PART 3  Extensions (2004–Present)
• A Shenzhen Glossary
• Contributors
• Acknowledgments
• Index