February 24, 1984

I gathered some impressions from my recent tour of three special economic zones in Guangdong and Fujian provinces and of the Baoshan Iron and Steel Complex in Shanghai. Today, I have invited you here to discuss the best ways of running the special economic zones and the question of opening more cities to the outside world.

In establishing special economic zones and implementing an open policy, we must make it clear that our guideline is just that -- to open and not to close.

I was impressed by the prosperity of the Shenzhen Special Economic Zone during my stay there. The pace of construction there is rapid. It doesn't take long to erect a tall building; the workers complete a storey in a couple of days. The construction workers there are from inland cities. Their high efficiency is due to the contracted responsibility system, under which they are paid according to their performance, and to a fair system of rewards and penalties. Construction is particularly fast in the Shekou industrial district, because the authorities there are permitted to make their own spending decisions up to a limit of US$5 million. Their slogan is "Time is money, efficiency is life."

A special economic zone is a medium for introducing technology, management and knowledge. It is also a window for our foreign policy. Through the special economic zones we can import foreign technology, obtain knowledge and learn management, which is also a kind of knowledge. As the base for our open policy, these zones will not only benefit our economy and train people but enhance our nation's influence in the world. Public order in Shenzhen is reportedly better than before, and people who slipped off to Hong Kong have begun to return. One reason is that there are more job opportunities and people's incomes and living standards are rising, all of which proves that, in the final analysis, ethical progress is based on material progress.

The Xiamen Special Economic Zone is too small. It should be expanded to cover all of Xiamen Island. If this is done, we shall be able to absorb a large amount of investment from overseas Chinese, from Hong Kong and Taiwan and from many foreigners and to stimulate surrounding areas, thus promoting the economic development of all Fujian Province. The Xiamen Special Economic Zone will not be called a free port, although some free- port policies could be implemented there. There are precedents for this. With the free flow of funds, foreign businessmen will invest there. I am sure that this endeavour will not fail and that, on the contrary, it will be very profitable.

In addition to existing special economic zones, we might consider opening more port cities, such as Dalian and Qingdao. We wouldn't call them special economic zones, but policies similar to those in the zones could be pursued there. We should also develop Hainan Island. Rapid economic development there would represent a substantial accomplishment.

Where shall we begin in developing China's economy? A Japanese friend has made two suggestions: first, that we begin with transport and communications, which are the starting points of economic development; second, that we encourage high wages and high consumption. Being in a different situation from other countries, we are not in a position to adopt the second suggestion as our policy nationwide. However, as we develop the coastal areas successfully, we shall be able to increase people's incomes, which accordingly will lead to higher consumption. This is in conformity with the laws of development. We shall allow some areas to become rich first; egalitarianism will not work. This is a cardinal policy, and I hope all of you will give it some thought.

(Excerpt from a talk with a few leading members of the Central Committee of the Communist Party of China after Deng Xiaoping had returned to Beijing from an inspection tour of Guangdong and Fujian provinces, Shanghai and other areas. During his tour he wrote inscriptions in visitors' books for the places he visited. The one he wrote in Shenzhen was, "The development and experience of the Shenzhen Special Economic Zone prove that our policy of establishing such zones is correct." In Zhuhai, he wrote, "The Zhuhai Special Economic Zone is a success." In Xiamen he wrote, "Manage the special economic zones in such a way as to achieve better and faster results." And for the Baoshan Iron and Steel Complex in Shanghai he wrote, "Master new technologies and techniques, be good at learning and better at innovating.")