Why the SEZ Model Is Outdated

The establishment of Shanghai's free trade zone (FTZ) is sparking another wave of rushing for similar zones in other major cities. It would be a mistake to grant more such areas. There is no room, if the stated purposes are strictly enforced.

The FTZ is a form of special economic zone (SEZ). It gives one geographic location more rights than the rest. It made good sense when China had a labor surplus and insufficient production capacity. As the country is experiencing a severe labor shortage and overcapacity in most industries, SEZs do not serve a useful purpose in general.