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The Optimal Design of the Qianhai Special Economic Zone

152 Pages Posted: 31 Jan 2017 Last revised: 18 Feb 2017

Bryane Michael

University of Hong Kong Faculty of Law; University of Oxford

Naubahar Sharif

Hong Kong University of Science & Technology (HKUST) - Division of Social Science; Hong Kong University of Science & Technology (HKUST) - School of Science

Seung Ho Park

China Europe International Business School

Date Written: January 29, 2017

Abstract

Qianhai – an innovation park in Shenzhen – has the possibility of boosting innovation in Hong Kong, Shenzhen and in the wider region. This paper analyses the costs and benefits of existing plans for Qianhai and discusses the profit-maximising design of the Qianhai. We review existing evidence about which policies have promoted profitable innovation in the Qianhai region (Hong Kong and Shenzhen) in the past. We also show how a raft of legal changes concomitant with Hong Kong-Shenzhen development of Qianhai can increase innovation-led profits in the two jurisdictions. Some of these changes touch upon the mandate and organisation of the Qianhai Authority itself, and relatively poor-performing innovation agencies and schemes especially in Hong Kong. We find that such a zone would increase innovation-led profits in the logistics, IT, and other Qianhai-targeted sectors by a factor of four in the short-run and a factor of ten in the longer run. As a contribution to the wider field of innovation policy, we derive a model of the optimal innovation agency. That model shows the equilibrium and optimal levels of profits, R&D spending and cash/investment for innovative companies in a particular jurisdiction.

Keywords: Qianhai, cross-border economic zones, innovation, special economic zones

JEL Classification: P48, R12, R58

Suggested Citation

Michael, Bryane and Sharif, Naubahar and Park, Seung Ho, The Optimal Design of the Qianhai Special Economic Zone (January 29, 2017). Available at SSRN: https://ssrn.com/abstract=2907608

Bryane Michael (Contact Author)

University of Hong Kong Faculty of Law ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://web.hku.hk/~bmichael/

University of Oxford ( email )

South Parks Road
Oxford, Oxfordshire OX1 3QY
United Kingdom

HOME PAGE: http://users.ox.ac.uk/~scat1663/

Naubahar Sharif

Hong Kong University of Science & Technology (HKUST) - Division of Social Science ( email )

Division of Social Science
Clear Water Bay
Clear Water Bay, Kowloon
Hong Kong

Hong Kong University of Science & Technology (HKUST) - School of Science ( email )

Room 6515, 6/F, Lifts 25/26
Clear Water Bay
Kowloon
Hong Kong

Seung Ho Park

China Europe International Business School ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China
86-21-28905134 (Phone)

HOME PAGE: http://www.ceibs.edu/faculty/cv/1089.shtml

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