In 1979, China opened four Special Economic Zones (SEZs) within the territory of the People's Republic of China as part of its program of far-reaching reform of the socialist economy. The SEZs were allowed a great deal of leeway in experimenting with new economic policies. For example, Western management methods, including the right to fire unsatisfactory workers (something unknown under the Soviet-style centrally planned economy), were introduced into SEZ factories. Laws and regulations on foreign investment were greatly eased in the SEZs in order to attract capital from abroad. Export-oriented industries were established with the goal of earning large amounts of foreign exchange in order to help China pay for the imported technology needed to hasten modernization. To many people, the SEZs looked like pockets of capitalism inside the socialist economy of the PR.C.; indeed, they are often referred to as "mini-Hong Kongs."
The largest of the Special Economic Zones is Shen-zhen, which is located just across the border from the Hong Kong New Territories. The transformation of Shenzhen over the last 2 decades from a sleepy little rural town to a large, modern urban center and one of China's major industrial cities has been phenomenal. The city now boasts broad avenues and China's tallest skyscrapers, and the standard of living is the highest in the country.
But with growth and prosperity have come numerous problems. The pace of construction has gotten out of hand, outstripping the ability of the city to provide adequate services to the growing population. Speculation and corruption have been rampant, and crime is a more serious problem in Shenzhen than it is elsewhere in China. Strict controls on immigration have been implemented to stem the flood of people who are attracted to Shenzhen in the hopes of making their fortune.
Nevertheless, the success of Shenzhen and other Special Economic Zones has led the leadership to expand the concept of SEZs throughout the country. The special privileges, such as lower taxes, that foreign businesses and joint ventures could originally enjoy only in these zones were expanded first along the coast and then to the interior, so that it too could benefit from foreign investment. Eventually, all of these special privileges will be eradicated.