Not-so-special economic zones

Sam writes*

Ever wondered where that iPhone of yours came from? Who put it together? And how are so many can be made each year? For years we have used a neat trick in order to keep up with this type of demand, most particularly in electronic devices.

Special Economic Zones (SEZs) are that neat trick. They offer “tax efficiency” and loose regulations to attract industry that will export to the world. China loves them — establishing over 60 SEZs since the 80s — and that’s how you get the iPhones you know and love.

So that answers the “where” question, but what about the “who” and the “how”? As it turns out, Apple workers in Chinese SEZs have some of the worst working conditions imaginable. Minimum wages are barely higher than the living wage [pdf], working shifts can exceed 16 hours (oh and there’s no overtime pay), and conditions require workers to meet quotas as they attach tiny wires and chips all day. The stress has led to alcohol abuse, divorce rates are 3 times the national average, and suicides so regular that factories have have councilors on site.

How are companies allowed to do this? Article 22 of the National Chinese Labor Act states that workers have the right to fair pay and healthy working conditions but not in SEZs (remember those loose regulations). Since trade unions are not permitted in China, workers are not likely to see improvements in their conditions.

Photo Courtesy of Steve Jurvetson, CC-BY-2.0 [pdf]
Apple’s relationship with China was worth over $43 billion in 2019, with 217 million iPhones produced (and some sold) in the country. SEZs allow rich companies to profit from cheap labor in exchange some technology transfer. SEZs are popular everywhere, but especially in rapidly developing countries such as China and India that have abundant labor. In places without a labor glut, like in the United Arab Emirates, labor is imported [pdf] to work in their “Free Economic Zones”.

Bottom line: Global competitiveness means firms need fast, efficient, accessible places to produce their products. Countries with SEZs benefit from growing industries, FDI, and new technologies, but is this the best route to development? Worried that workers are losing? Don’t. Your nice new iPhone created jobs, even if they are poorly paid.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

2 thoughts on “Not-so-special economic zones”

  1. Hi Sam!

    I think you wrote a great blog and I would be very interested in reading your essay and further research. In your blog, you talk about Chinese special economic zones which are areas where fiscal, legal and other benefits are provided to investors who would otherwise abstain from investing. I think you are taking a very appropriate approach by discussing how these areas contribute to economic growth but might not be the best route to achieving development.

    You might have heard this already but I just wanted to inform you about another type of Special Economic Zone’s China has been investing in: Overseas Economic and Commercial Cooperation Zones (OECCZ). OECCZ’s are an enclave designed by a Chinese company appointed by China to create a haven in another country’s territory to accommodate Chinese companies, which are subject to Chinese law, and thus boost Chinese economic development. Bräutigam & Xiaoyang wrote an interesting article about the impact of these Chinese economic zones in Africa. You could use these as further examples of the harm or contribution of special economic zones to economic growth and development.

    I hope this is helpful in some way and good luck with writing your essay!

    Bräutigam, D., & Xiaoyang, T. (2011). African Shenzhen: China’s special economic zones in Africa. The Journal of Modern African Studies, 49(1), 27–54.

    1. Hello Menno,
      Yes I also find these overseas SEZ interesting, not only from a GED perspective but from a world politics one too.
      I will take them into consideration!

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