Rents, party cadres and the proliferation of Special Economic Zones in China

China's more than ten thousand economic zones, while similar in some respects to those found elsewhere, exhibit various unique features. In most developing economies, zones are the responsibility of the central administration and are designed to promote exports or foreign investment. In contrast, the Chinese zones are built and run by local governments and need not involve foreign investment or exports. We argue that the Chinese zone policy is best understood as part of a drive for economic reform, and that its unique features serve to defuse potential resistance from local cadres, whose interests are not served by reform.