Chapter 3 The Direction of Chinese economic development and the political environment

This chapter aims to provide a background of how China has been carrying out its economic policies and describe the situation in which ETDZs were established since the founding of the People’s Republic of China by reviewing both the economic and political development of China. Essentially，the whole story is divided into two parts，with the year 1978 dividing them. Since 1978，China has turned a corner；“the era of revolution and violent struggle was followed by an era of reform and consolidation”（Fairbank，1988）. Before and after 1978，China presents two totally different development directions. China’s economic situation since 1949/1950 provides the background for the huge changes in China，as well as providing the background for establishing FEZs and promoting the Chinese economy. The most significant phenomenon of the reform may be that “market mechanisms have begun to play an important role in the operation of the economic system”（Chen et al，1988）. Taking an overview of the 60 years’ development，the evolution of Chinese types of FEZs must be seen against the background of the political and economic changes that have occurred in China. To emphasise the characteristics of Chinese FEZs，a typology，the evolution of FEZs with a policy review，will be presented. Therefore it is necessary to provide a literature review of China’s economic policy since 1949/50 and the establishment and development of FEZs under different economic policies.