China's Special Economic Zones (SEZs), once designed as limited policy experiments, are once again drawing attention as the global economy slows. During a recent visit to southern China, Singapore's former UN ambassador Kishore Mahbubani joined Chinese expert Tao Yitao to reflect on how the zones emerged and what lessons they offer today.
Mahbubani visited Shenzhen and Zhuhai, two of China's earliest SEZs, before holding a discussion in Shenzhen with Tao, a senior professor at Shenzhen University and a leading expert on special economic zones.
Why were China's SEZs created?
Opening the discussion, Mahbubani asked why China initially selected only a small number of locations, including Shenzhen and Zhuhai, to establish SEZs, and what factors influenced those early decisions.
Tao stressed that the zones were never intended merely as engines of growth or export-processing hubs. Rather, she said, their primary purpose was to facilitate a transition from a planned economy to what later became known as a socialist market economy.
"At the time, it was unclear what such an economy would look like or whether it would succeed at all," Tao said. "Special Economic Zones, therefore, became testing grounds — places where experimentation could take place before broader reforms were rolled out."
Tao noted that China adopted a gradual approach to reform. Unlike some countries that pursued rapid institutional overhauls — often described as "shock therapy" — China initially concentrated reform experiments in coastal regions, where international connections were stronger and the constraints of the planned economy were relatively weaker. This, she said, allowed reforms to proceed in a controlled manner, limiting systemic risks.
How does China's development thinking change?
Mahbubani also drew attention to the profound shift in social attitudes during the early years of China's reform and opening-up.
He described the period as one of significant psychological change, noting that private enterprise was virtually non-existent before reforms began, but later became a key driver of China's economy.
Tao said reform in China began with a transformation in ideas. "The starting point was a change in mindset," she said, adding that people gradually came to accept that socialism could incorporate markets, and that capitalism could involve planning.
Using Shenzhen as an example, Tao recalled the slogan "Time is money, efficiency is life," which she said captured the urgency of the early reform period. The phrase, she argued, marked a break with past economic thinking and signaled a new emphasis on efficiency and market mechanisms.
Why do China's SEZs succeed?
Turning to the drivers behind the success of China's SEZs, Mahbubani argued that their development was shaped both by the opportunities created by globalization and by China's institutional arrangements.
Drawing a comparison with Singapore, he said both countries shared the view that development could not rely on free markets alone. "Government and the market must work together for countries to succeed," he said.
Tao added that China's whole-of-nation approach constituted a distinctive advantage. According to her, this system enabled the country to concentrate scarce resources during the most challenging phases of reform and opening-up, improving the efficiency of social transformation while maintaining a clear policy direction.
Mahbubani pointed to China's progress in technological development and poverty reduction as examples of how that system has operated in practice.
He said efforts to hinder China's technological progress "will fail," citing space technology as one area in which China has made notable advances. He also described China as the world's most successful country in lifting people out of poverty, adding that its development experience offers important reference points for others.
The discussion then turned to Shenzhen — often described as China's "Silicon Valley" — as a case study in the evolution of SEZs.
Tao attributed the city's rise to three main factors: its proximity to Hong Kong, which helped it integrate rapidly into the global economy; its character as a migrant city, fostering a culture of risk-taking and entrepreneurship; and its strategic decision to focus on technological innovation and high-value-added industries in the absence of significant natural resources.
Official data show that Shenzhen's GDP has risen from 270 million yuan (about 38.42 million US dollars) in 1980 to nearly 3.7 trillion yuan (about 523.58 billion US dollars) in 2024, making it one of China's most economically dynamic cities. Mahbubani described Shenzhen as "the fastest-growing city in world history."
Where do China's SEZs go from here?
Tao said a growing focus for China's SEZs now is how to further align domestic institutions with international rules. She pointed to Qianhai, a cooperation zone between Shenzhen and Hong Kong, as an example of ongoing experimentation, which she described as a "special zone within a special economic zone".
According to Tao, Qianhai has promoted institutional coordination between the two sides in areas including finance, international arbitration, and intellectual property protection, contributing to China's efforts to integrate more deeply into global regulatory frameworks.
Mahbubani recalled visiting the Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub, saying he was struck by the investment ecosystem that had been created there for start-ups from both cities. "What Qianhai is doing offers lessons that other countries can learn from," he said.
Looking ahead, both scholars agreed that amid rising global uncertainty and the re-emergence of trade barriers in parts of the world, China's SEZs will need to continue advancing in areas such as high technology, strengthening innovation capacity, and enhancing international competitiveness.
Mahbubani said that the 45-year evolution of China's SEZs offers a reference point for other countries seeking their own development paths.
"For me, this has been a particularly meaningful journey," he said, adding that understanding what Shenzhen and China's SEZs have achieved matters not only for China but also for the wider world.
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Project Lead: Zhao Yang
Editorial Coordination: Xie Miaofeng, Ouyang Yan
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