Section 1：The definition of Free Economic Zones（FEZs）

In the literature，there are many definitions of FEZs；there are at least 66 different terms to describe what is generally known as FEZs（Meng，2005a）. Areas with special economic privileges-such as the right to raise or lower taxes-have been established in various forms since the 16th century. According to some scholars，such as Grubel（1982），Fan（1993）and Chen（1995），“Free Economic Zones” are likely to be used as a general designation to cover all different types of FEZs，because FEZ is a general concept that generalises their dominant characteristics. Through analysing the general characteristics and common economic and political objectives of FEZs，Meng（2005a）devised a brief definition of FEZs：

“FEZ is a geographically defined zone where certain economic activities are especially allowed，and where free trade and other preferential policies and privileges different from the host country are granted.”

The general characteristics of FEZs are that they are instruments to realise economic and political goals by enjoying economic and administrative “freedom”. FEZs are restricted geographically and administratively（Grubel，1982）. Several general characteristics were identified by Grubel（1984）as follows：

“FEZs are used as an instrument to realise micro-economic objectives，such as creating employment and foreign exchange，and macro-economic and political objectives，such as implementing regional economic development strategies and structural reforms.”

“Freedom” means that the financial incentives and special economic and administrative privileges are applied to a “zone”，yet are not enjoyed by the domestic economy as a whole，and the national tax system，other foreign trade restrictions and some economic and administrative policies would not be active within this zone.^[2] This freedom includes the free flow of commodities，capital，services and personnel between the zones and world economy，as well as various administrative privileges. In other words，the zone enjoys the preferential policies offered by the government. Furthermore，these preferential policies can only be utilised within the strictly defined geographical area（zone）.

The zone will not only be used to carry out free trade，but also to protect the domestic economy in the rest of the country from the negative influences of the world economy.

Based on the characteristics of FEZs above，an FEZ can then be defined as a strictly defined area that can be used to realize certain economic and political objectives by fully utilising specific preferential policies. Furthermore，FEZs for social communist countries（e. g. China）are the special areas that in some way follow capitalist market economic rules to achieve certain special economic objectives，such as attracting Foreign Direct Investment（FDI）. In China，FEZs are also regarded as an important tool for Chinese economic reforms. Park（1997）states，“SEZs^[3] in China are capitalist areas under the restrictions of a socialist state.” China regarded “the idea of FEZs as an important instrument in the market-based transformation of an administrative-distribution economy”（Manezhev 1995）. Therefore，FEZs are also geographical regions that have a more liberal economic system than a typical socialist economic system.