reserves. (A large portion of imports are however destined for inland provinces taking advantage of the privileged position enjoyed by Shenzhen);
(2) Industry had not developed quickly enough: commerce, trade, tourism and property development were the sources of most of its prosperity. In 1984 the net output value of industrial product- ion made up only 21 per cent of Shenzhen's total output value;
(3) Advanced technology had not been introduced on a large-scale. Many factories were engaged in simple processing and assembly work. Materials for this had to be bought with hard currency and the finished products were rarely competitive internationally and had to be sold on the domestic market.
15. Officials in Shenzhen made a spirited defence of their performance to date. They denied that Shenzhen had been living on "blood transfusions" from the central budget but claimed that the vast bulk of the funds it had used in capital construction had come from foreign investors, banks and Shenzhen's own budgetary surplus. They also argued that there had been an improvement in Shenzhen's performance in the first half of 1985. They cited a 92 per cent increase in industrial production over the same period in 1984 and also a slight surplus on foreign exchange earnings over expenditure. However it was difficult to deny that Shenzhen had failed to attract foreign investment in technologically advanced enterprises with good export and foreign exchange earning potential. In answer to this it is argued that it is unrealistic to expect that such development could take place so quickly in areas which as recently as 1980 were still small, undeveloped border towns. Initial development was inevitably in the creation of an appropriate infrastructure for foreign investment and industrial development. Accordingly the development plan of Shenzhen has been set out in the following way:
Stage 1 1980-85 The main task was to absorb foreign funds and develop the infrastructure, import modern technology and advanced management experience;
Stage 2 1986-1990 Direction to shift to becoming more export-orientated. Industry is to increase in importance over trade and a small number of high technology industries are to be selectively developed and traditional industries transformed with modern technology and equipment;
Stage 3 1991-2000 The technical transformation of traditional industries to be completed. The proportion of technology and knowledge-intensive industries to be increased at the expense of labour-intensive ones.
According to this scheme, the SEZS are now entering the second stage of development and defenders and critics alike will be looking for a successful change of direction. The development of the SEZS has been slowed by the tightening of control over foreign trade and capital investment in 1986 and some of the initial optimism appears to be evaporating. Their 'specialness' has been somewhat diminished
5
/by