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How Internal Politics Influenced the Opening-Up Policy in China: Lessons from a Case Study of the Xiamen Special Economi

How Internal Politics Influenced the Opening-Up Policy in China: Lessons from a Case Study of the Xiamen Special Economic Zone. SHIMONO, Hisako (The University of Kitakyushu). Sections. 1. Introduction 2. Expansion of the SEZ 3. Taiwanese Begin to Visit Xiamen

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How Internal Politics Influenced the Opening-Up Policy in China: Lessons from a Case Study of the Xiamen Special Economi

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  1. How Internal Politics Influencedthe Opening-Up Policy in China:Lessons from a Case Study ofthe Xiamen Special Economic Zone SHIMONO, Hisako (The University of Kitakyushu)

  2. Sections 1. Introduction 2. Expansion of the SEZ 3. Taiwanese Begin to Visit Xiamen 4. Direct Cargo Ship Lines to Taiwan 5. Statistics and Concluding Comments

  3. 1-1. Introduction: China’s Economic Reform and the Opening-Up Policy ⇐ Delegation of Power to Local Authorities 　⇒High Economic Growth SEZ Shenzhen in Guangdong ⇒Yes Xiamen in Fujian ⇒No

  4. Shenzhen Large Scale General SEZ More Delegation of Economic Power Hong Kong Capital Xiamen Small Scale “Export Processing Zone” Less Delegation Following Shenzhen’s Experiences Taiwan Ethnic Chinese in SE Asia 1-2. Shenzhen and Xiamen

  5. 1-3. Questions • What prevented the Xiamen SEZ from achieving economic prosperity? • How did local cadres react to the economic and political environment surrounding the SEZ? • What kind of political adjustments were taken?

  6. Where is Xiamen? Fujian Province Fuzhou in north, Xiamen in South

  7. Fujian Province Fuzhou in the north, Xiamen in the south

  8. 1-4. Initial Conditions of Fujian/ Xiamen Geography: Mountainous Land, Little Plains, A Long Saw-Toothed Coastline Economy: Poverty, Less Investment, Poor Infrastructure Light Industries Politics: Frontline to Taiwan Strong Connection to Overseas Chinese/ Taiwanese

  9. 1-5. Turning Point Change in the CCP’s Taiwan policy (Jan.1979) From “liberalization of Taiwan” to “peaceful unification of the motherland” and “three direct links” Establish an SEZ in Fujian (Xiamen) for making an appropriate environment for unification Local cadres in Xiamen/Fujian: not so eager to promote the economic reform and the opening-up policy …because of political remains of the Cultural Revolution in Fujian

  10. 1-6.The Xiamen SEZ Hardship in reality: Poor transportation system Strong needs for construction capital ⇒Borrow foreign assistance and develop 1.1sq km Local Cadres: Optimistic → Disappointed Fujian Province: Intervene in Xiamen SEZ Equal-size investment in Fuzhou Central Authority: Limited delegation of economic power

  11. 1-7. Tripartite Relationship The Central Authority × × × Fujian Province Located in the Xiamen City Xiamen City Authority Administrative Committee of the SEZ Xiamen SEZ

  12. 2-1. Opportunity to Expand the SEZ 1984 Deng Xiaoping inspected the Xiamen SEZ Party secretary of Fujian (Xiang Nan) and Xiamen cadres appeal directly to Deng Different expectations between the two Results: expansion of the Xiamen SEZ (131 sq km) partial “free port policies”(in the future) ＊A free access to capital was not accepted opening of Fuzhou

  13. 2-2. Increased Financial Burdens • Lack of capital to build infrastructure in the expanded areas in Xiamen SEZ • More delegation and policy assistance by the central authority, but little financial support • Free port ⇒ less customs revenue in the future ⇒ Xiamen needs more FDI and more opening in the financial sector to raise funds

  14. 2-3. Deepening Conflicts A conflict between the province and Xiamen became deeper over policy intervention and jurisdictions Internal criticism in Xiamen arose: incapability of local cadres, missing opportunities

  15. 3-1. Taiwanese Visits Begin Investment environment became less attractive in Taiwan. pressure to the Taiwanese authority to relief the “three no’s” policy In November 1987, the Taiwanese authority allowed Taiwanese people to visit the mainland to see their relatives

  16. 3-2. Xiamen as a Gate to the Mainland In former days: coastal areas of Fujian for smuggling and de facto direct exchanges with Taiwanese fishermen Since 1987: Xiamen as a main gate for Taiwanese to visit the mainland and do business in China. Xiamen cadres started to take actions to attract investors ex. Taiwanese investment zones, administrative lines and custom warehouses for the SEZ, building infrastructure, Yitai Yintai policy

  17. 3-3. To Attract Taiwan Capital The central authority: to win over Taiwanese investors to the communist side Delegation of economic power to Xiamen Making provisions to protect Taiwan investment Fujian: Attempts to lure Taiwanese capital into the province Create two domestic centers

  18. 3-4. Xiamen Missed Opportunity to Take Off • Without “three direct links,” high production/ distribution costs. • Shortage of facilities and infrastructure • Many small- and medium-sized Taiwanese-funded enterprises • Fail to attract Formosa Plastics Group • Insufficient support from the central/provincial authorities ⇒ ineffective utilization of Taiwanese capital

  19. 4-1.Rising Expectations for Direct Cross-Strait Links Improvement of the cross-strait political situation in the early 1990s ⇒ expectations for “three direct links” rose Private companies expressed interests in Xiamen as a gate for Taiwanese to the mainland Local governments promoted construction of infrastructure/ making laws ＊Xiamen faced to a fierce competition to draw FDI

  20. 4-2. A Crisis over the Strait • 1995-1996 the cross-strait tensions escalated Again, Fujian as a frontline against Taiwan The CCP government: - menace the Taiwanese authority with military power - improve the investment environment for Taiwanese compatriots Local governments: ask for a peaceful environment for the regional economic development

  21. 4-3. After the Crisis Xiamen mayor was seriously concerned about difficulties to lure FDI in the near future… because of the competition for FDI and the WTO factor Last resort for Xiamen’s economy: Taiwan capital, realization of the “three direct links” The Central authority’s political (not military) pressure to the Taiwanese authority

  22. 4-4. Establishment of Cross-Strait Direct Cargo Shipping Lines The restoration of Hong Kong to the PRC (July1997) 　⇒　pressure to the Taiwanese side …through informal consultative meetings… Finally, direct cargo shipping lines between Xiamen and Kaohsiung began in April 1997 ⇒ It aroused expectations of stimulating the local economies *regional economies were too small in scale, cautious attitude of the Taiwan authority, the cross-strait political tensions increased again

  23. 5-1. From Statistics:FDI Inflow into Xiamen Source：Judy Howell (2000), "The Political Economy of Xiamen Special Economic Zone," in Y.M.Yeung and David K.Y.Chu eds., Fujian: A Coastal Province in Transition and Transformation, The Chinese University Press.

  24. 5-2. From Statistics:FDI Inflow into Xiamen (USD100mil.) Contracted amount Actually utilized amount Source：Judy Howell (2000).

  25. 5-3.From Statistics:Taiwan-Funded Investment in Xiamen Source：Xiamen shi difangzhi bianji weiyuanhui bian (2004), Xiamen shi zhi: diwuce (The Annals of Xiamen City: No.5), Fangzhi chubanshe, Fujian Jingji Nianjian Bianji Weiyuanhui, Almanac of Fujian’s Economy, Fujian Jingji Nianjian Chubanshe( The Year of 1988 and1989.

  26. 5-4.From Statistics:Taiwan-Funded Investment in Xiamen(US$10 thousand) Actually utilized amount Contracted amount Source：Xiamen shi difangzhi bianji weiyuanhui bian (2004), Xiamen shi zhi: diwuce (The Annals of Xiamen City: No.5), Fangzhi chubanshe, Fujian Jingji Nianjian Bianji Weiyuanhui, Almanac of Fujian’s Economy, Fujian Jingji Nianjian Chubanshe( The Year of 1988 and1989.

  27. 5-5.From Statistics:Number of Taiwanese Investment on the Mainland (Contract basis) Source: Lin Zhanghua (1995

  28. 5-6.From Statistics:Taiwanese Investment on the Mainland (Contract basis : US$ 100 mil.) Source: Lin Zhanghua (1995), “Lun Taiwan de Daowai Touzi: Jianlun Zhongguo Dalu Xiyin Taizi Wenti,” (Arguments Regarding Taiwan’s Out-of Island Investment: Including Arguments on the Issue that the Mainland Attracts Taiwanese Capital), Xiamen Daxue Xuebao, Zhesheban (The Bulletin of the Xiamen University: Philosophy and Social Sciences), No.2.

  29. 5-7. Concluding Comments • Initial conditions of Xiamen made the construction of the SEZ difficult • The Taiwan factor as the largest obstacle • Different views and interests among the central authority, the province, and Xiamen • Passive attitude of the Xiamen cadres • This case study suggests: Internal politics operated in the process of economic development Internal fragmentation of China

  30. Thank you very much for your kind attention! - END -

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