370 { China’s Quest
was a function of this private investment by the advanced capitalist coun-
tries. That was why they were poor, and the advanced capitalist countries
rich. These verities of Marxism-Leninism guided China during the Maoist
era. The substantial foreign investment that existed in China prior to 1949
was quickly eliminated in the process of “cleaning house” in the early 1950s.
No foreign investment was permitted between 1949 and 1979.^38 While China
would occasionally purchase and import foreign industrial equipment, and
indeed whole factories, during the Mao era, the foreign role typically ended
when the factory was “turned on” (hence “turnkey projects”). The result-
ing facilities were always owned by the Chinese state, never by capitalists,
Chinese or foreign.
The Four Tigers followed a far different and a far more successful path.
Hong Kong and Singapore welcomed foreign private capital, and this helped
propel their rapid industrialization, export growth, and increase in stan-
dards of living. Taiwan and South Korea adopted state-guided industrial
policy and restricted the role of foreign capital to a far larger extent than
Singapore or Hong Kong in the initial states of industrialization. But in
the 1960s, Taiwan and South Korea pioneered the use of designated geo-
graphic zones in which foreign direct investment (FDI) was encouraged by
various preferential policies. Production in these “export processing zones”
(EPZ), as they were called, was exclusively for foreign markets, thus keeping
the local market protected from foreign competition as a seedbed for do-
mestic industry. Domestic capital could be invested in the EPZ, but, again,
the output was entirely for export. Technologies and processes introduced
in the EPZs nonetheless tended to disseminate from the EZP into the local
economy outside the zone, as ambitious local entrepreneurs first learned the
secrets of commercial success inside the EPZs and then replicated them for
themselves outside the zone. EPZs in Taiwan and South Korea proved very
successful and served as a model for the Special Economic Zones (SEZ) set
up in Guangdong province in 1979.
Guangdong had for centuries been a center of China’s commercial activ-
ity with Southeast Asia. Chinese ocean-faring junks—well designed for the
monsoon wind cycle of the South China Sea—would set out from Guangzhou
(formerly known as Canton) and Qianzhou in Fujian province and pass
through the South China Sea to the Straits to Malacca, where goods were
typically handed off to Indian, Arab, or Persian merchants for the next seg-
ment of the journey west. The arrival of Europeans in the sixteenth century,
with their revolutionary breakthroughs in ship design (no longer confined to
monsoon seas) and more direct transoceanic trade routes to Europe and the
Americas, greatly expanded this East Asian maritime economy.^39 Guangzhou
was a key hub of this robust international maritime trade. Migrants followed
trade routes, and Guangdong, along with Fujian, supplied a large num-
ber of migrants to Southeast Asia. There these immigrants often became