a strongly motivated migrant community tends to generate an innovative and entrepreneurial culture. For example, in Shenzhen, migrants account for 83 percent of the total population. Among its permanent citizens, 21 percent are under 16, and 62 percent are between the ages of 17 and 44 (Asian Development Bank 2007). Such a young and innovative culture makes Shenzhen one of the most dynamic SEZs in China.

**_Clear objectives, benchmarks, and competitions._** In China, SEZs were normally set up in batches— initially four—and then the number increased rapidly. Despite the large number of these zones, most of them have clear goals and targets in GDP growth, exports, employment, revenues, FDI generation, and the like. These expectations put a great deal of pressure and responsibility on the shoulders of the zone management. Meanwhile, the hundreds of SEZs are highly competitive among themselves. Each SEZ strives to distinguish itself in service, quality of infrastructure, and appearance to attract new enterprises and reach the targeted development goals. Such competition helps make them more efficient and competitive (Zeng, 2010).

**_Location advantages._** Most SEZs in China are located in the coastal region or near major cities with a history or tradition of foreign trading or business and thus are better linked to the international market. They also have good access to major infrastructure, such as ports, airports, and railways. The location advantage is especially obvious for the SEZs in the Pearl River Delta region (close to Hong Kong SAR, China) and the Min Delta region (close to Taiwan, China). Hong Kong SAR, China has provided capital, logistical support, access to world markets, management knowhow, technology, and management skills. The Pearl River Delta region has provided labor, land, and natural resources. It is this interaction that has allowed the Greater Pearl River Delta region to emerge relatively quickly as one of the world’s major manufacturing bases (Enright, Scott, and Chung 2005).

# **II.3   Some Pitfalls to Avoid**

While overall SEZ lessons from China are positive and encouraging, there are also a few adverse lessons which other countries should try to avoid in their pursuit of SEZ programs. Such lessons include:

- **_Mushroom approach at local level and high-level overlaps at the later stage_** _._ Seeing the success of SEZs at the coastal region, in the 1990s and early 2000s, many local governments and cities began to imitate this approach and set up various industrial zones/parks to attract investments or to support the local township and village enterprises (TVEs) without any appropriate assessment and planning. This led to a large waste of resources and environmental damage and many of them have failed. At the central and provincial levels, the zone programs were more organized with better planning and management, but at the later stage, after huge success in the coast region, there was also a high level of overlap and competition since late 1990s. Many industrial zones are competing in the same or similar sectors, lacking conspicuous product or sector differentiations. This phenomenon leads to declining efficiency of the zone programs.

Based on an analysis (Wang 2013) of 321 prefecture-level cities, the effect of a SEZ treatment seems to have decreased marginally for later zones - the average per capita FDI for the 1978–1990 sample group was 60% higher than that for the control group. For the 1986–1995 sample group the SEZ program increased per capita FDI by 33% relative to the matched control municipalities. For the 1991–2008 sample group this increase rate dropped to 20%. Moreover, the SEZ program seemed to have crowded in domestic investments for the first two sub-groups, but not for the 1991–2008 subgroup. In addition, for the 1978–1990 sample group, the average worker's wage increased by 7.7% and the CPI decreased by 2.2% with a SEZ treatment, while for the 1991–2008 sample group, the 9