Investment Promotion for Development Zones in China: Underlying Rationale and Policy Options

Development zones (DZs) have emerged as a significant policy initiative for promoting regional coordination and facilitating resources allocation. They serve as an organizational framework for fostering industrial agglomeration and driving high-quality development. DZs attract and accommodate resour...

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Bibliographic Details
Published in:China economist (Beijing, China) China), 2023-09, Vol.18 (5), p.98-123
Main Authors: Qiangyuan, Chen, Haoyun, Zhao, Yang, Ye
Format: Article
Language:English
Subjects:
Area planning & development
Companies
Competition
Competitive advantage
Coordination
Development policy
Economic development
Economic growth
Externality
Innovations
Intergovernmental relations
Investments
Regions
Strategic planning
Success
Taxation
Text analysis
Theory
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Summary:Development zones (DZs) have emerged as a significant policy initiative for promoting regional coordination and facilitating resources allocation. They serve as an organizational framework for fostering industrial agglomeration and driving high-quality development. DZs attract and accommodate resource factors, firns, and projects, thereby functioning as a central catalyst for economic growth. This study utilizes data collected at the "DZ, City and Country country" levels through manual compilation, textual analysis, and innovation measurement. It aims to empirically examine the theoretical rationale and practical preferences for promoting business and investment in China s DZs. This study considers several factors such as industiy attribute, firm attribute, agglomeration theory, and industrial chain layout. Based on our research findings, DZs exhibit distinct preferences. First, industry attribute: DZs align with both national and regional strategic planning and adhere to the industrial endowments of the respective areas. Second, firm attribute: DZs prioritize attracting firms that are productive and innovative, and have an international presence, rather than those that primarily contribute to taxes and job creation. Third, DZs are guided by the agglomeration theory, which suggests that they prefer firms that generate strong agglomeration externalities. Lastly, DZs also consider the industrial chain layout, aiming to attract firms that not only align with their existing industrial strengths but also extend to the upstream and downstream supply chain links. These conclusions are substantiated by the performance of robustness test. The success of DZs in China can be attributed to the five key principles: Adherence to national and regional strategic planning, prioritizing the actual industrial foundation, incorporating the theory of agglomeration externalities, strengthening corporate competitiveness, and expanding industrial chains.
ISSN:1673-8837
DOI:10.19602/j.chinaeconomist.2023.09.06