There are multiple interpretations of Coase’s work, but one key takeaway is that establishing market systems requires the gradual development of legal structures, business norms, and behavioral practices. These elements are essential in reducing transaction costs, defining property rights, and fostering market institutions.
From this perspective, we can gain new insights into Shenzhen’s economic reform experience—and its potential lessons for Hong Kong today.
Shenzhen’s reform strategy can, paradoxically, be understood as having no predefined strategy at all. The concept of “reform and opening-up” was broad and abstract. How should reforms be implemented? In what way should the market be opened? There was no master plan—only a process of trial and adaptation.
Yet, the Special Economic Zone (SEZ) concept was a brilliant innovation. Its most significant advantage lay in its deliberate vagueness, which gave the market room for imagination and expectation. Even if certain policies were impossible elsewhere in China, they were not impossible in Shenzhen. Many decisions could be made based on real-world circumstances and practical judgment rather than rigid ideology.
This flexibility was critical in fostering a market-driven system. It allowed Shenzhen’s legal framework, business norms, and institutional structures to adapt dynamically under market pressure—or even evolve in response to market forces.
This principle remains relevant today, and in the future, we will explore its broader implications.
