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China's Special Economic Zones: Experimental Units for Economic Reform

THE People's Republic of China (P.R.C.), which emerged as a socialist State in 1949, brought forward the principle of what is called "self -reliance" due to the deterioration of relations with the Soviet Union in the 1950s. She kept it as her inviolate national policy for a quarter of a century. This "principle of selfreliance" meant to stand her on her feet without any support or loans from foreign countries and to exclude overseas investment, direct or indirect. In 1971, the P.R.C. was accepted as a member of the United Nations in place of Taiwan and came to have a political voice on the international plane. But it was not until 1978 when the Gang of Four was purged that the principle of selfreliance was revised in her external economic policy. Then the present leaders of the P.R.C. put up the new slogan of "four modernisations" which was designed to help China catch up with the most developed Western countries by the end of this century in four fields, namely agriculture, industry, science and technology and national defence. In pursuance of the four modernisations, the Central Government of the P.R.C. realised the vital necessity of attracting an enormous amount of foreign capital and advanced technology. Since then the P.R.C. has promoted increased economic co-operation with capitalist States and, starting with the processing of imported materials, she has become engaged in various patterns of foreign trade and has even gone as far as applying for governmental and non-governmental loans from abroad. Moreover, China's 1979 Joint Venture Law, which permitted overseas enterprises to undertake joint ventures with Chinese nationals, took the epoch-making step of allowing direct foreign investment.' On the other hand, the so-called "readjustment of the economy" has been under way in China since 1979 to accomplish the four modernisations. For example, one major economic policy of special interest to potential investors is