TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 13

(4) Enterprises can adopt the floating wage or piece rate systems;

zones;

(5) A more market-orientated price system operates in the

(6) The local governments of the SEZS have more decision-making power than their inland counterparts. For example, they can approve heavy industrial construction projects of up to 15 million yuan and light industrial construction projects of up to 30 million yuan, providing they do not necessitate the state making readjustments in its production and construction plans.

THE 14 OPEN COASTAL CITIES

18.

In April 1984 it was formally decided to open 14 coastal cities and the Island of Hainan to foreign investment. The reasoning behind this policy was basically that which lay behind the establishment of the SEZS in 1980 and it was hoped to facilitate the extension of the experiences of the Zones to other areas of China. The policy was initially declared a success: the number of contracts using foreign funds signed by these cities in 1984 and the amount involved, equalled those of the previous 5 years. It was also claimed that the number of technologically-advanced projects had notably increased. However the progress of the policy was slowed down in 1985 when, in the course of a review of the SEZ policy, it was decided to focus attention on only the 4 most advanced of the 14 cities. These cities are Dalian, Tianjin, Shanghai and Canton. These 4 (and especially Canton and Shanghai) attracted the bulk of foreign investment in the 14 open cities in 1985. Total agreed investment in 1985 was US $1,717 million (an 86.8 per cent increase over 1984) and actual investment US $293 million. of this the 10 other cities accounted for only US $263 million of agreed foreign investment and US $50 million of actual foreign investment.

19.

The special policies to be applied in the 14 coastal cities are as follows:

(1) They have greater power to examine and approve projects financed by foreign capital, thus avoiding recourse to the central authorities and simplifying bureaucratic procedures. Foreign capital is mainly used to upgrade old enterprises and to build new factories. For those enterprises which operate outside of the State Plan, Tianjin and Shanghai may approve projects each costing no more than US $30 million; Dalian and Canton have the power to approve projects of less than US $10 million; and the other cities may approve projects involving less than US $5 million each. With regard to non-productive projects, city authorities have the power to examine and approve projects which use foreign capital, locally raised funds and imported equipment and which do not fall under state planning, regardless of the amount of investment involved.

(2) Customs duties, taxes on imported products and value-added taxes are exempted up to 1990 on the import of key equipment and other materials necessary for technical updating of existing

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/enterprises