CONFIDENTIAL
22.
Approval has now been given for the development of SEZs at Shenzhen, Zhuhai and Shantou in Guangdong and at Xiamen in Fujian. At the end of August 1980 the National People's Congress- approved 'Regulations on Special Economic Zones in Guangdong Province' (those for Fujian are expected in the future) gave certain groundrules concerning the terms and conditions for enterprises operating in the zones. Although the regulations are set out in very general terms, some items are quite specific, as in the case of company tax, which is set at 15%. Investors in the zone retain a considerable degree of freedom in the manage- ment of their enterprises.. According to the regulations
'investors can operate their enterprises independently in the special zones and employ foreign personnel for technical and administrative work'. Imports of machinery and other equipment necessary for production will be duty- free. Enterprises established within two years of the promulgation of the regulations, those whose foreign investment exceeds US$5 million, and those involving more advanced technology are eligible for preferential treatment although the terms are not specified. A special body, the 'Guangdong Provincial Administration of Special Economic Zones' is established by the regu- lations to manage all of the three zones in Guangdong. It is at present headed by Wu Nansheng, a provincial Party Secretary.
23.
A 'special industrial zone' at Shekou falls within the Shenzhen Special Economic Zone but, since a State Council decision in March 1979, responsibility for the management of the zone has until now rested in the hands of China Merchants Steam Navigation (CMSN) Company Limited of Hong Kong. It is understood that the Chinese Ministry of Communications holds a 60% share in CMSN. Under CMSN management, Shekou's development seemed to get off to a good start in July 1979 and thereafter with first-phase development projects including the levelling of 1 million sq. ft. of land, the construction of a 600 metre berth to accommodate 3,000 dwt freighters, the provision of water and electricity supplies and the setting up of communication and transport facilities. But Shekou is likely to suffer from the shallowness of the water in Deep Bay. The greatest depth at the newly built wharf is only 5 metres.
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24.
The plans for the SEZs are ambitious and much work has clearly yet to be done. In most areas, an adquate infrastructure is having to be built from scratch. Thus, although the zones have attracted few large-scale or capital intensive joint enterprises (with the notable exception of construction projects for hotels and tourist
CONFIDENTIAL
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