Do export processing zones attract FDI and its benefits: the experience from China

In the experience of China, export-processing zones (or, to use Chinese terminology, Special Economic Zones or SEZs) did succeed, during the decade of the 1980s, to bring into China a significant volume of foreign direct investment (FDI). With this investment did come certain benefits. However, both greater volumes of investment and greater benefits followed when the special privileges accorded to foreign investors in SEZs were nullified by the Chinese government in 1991 via the opening all of China to foreign investment on essentially the same terms as were granted in the SEZs. This has led some observers to conclude that the SEZs were a failure in the sense that perhaps the benefits that almost unquestionably have been brought to China by foreign investment could have been accelerated had the 1991 liberalization occurred earlier and the period curtailed during which this investment was largely restricted to SEZs.