“Three supplies and one compensation” was a form of trade among enterprises at the beginning of reform and opening up, namely “processing with supplied materials, processing according to supplied samples, assembling with supplied parts, and compensation trade.” Foreign clients provided equipment, raw materials, and samples while Chinese enterprises provided land, workshops and labor and organized production, processing and assembly in accordance with the requirements of foreign clients. All products were exported and Chinese enterprises charged only processing fees.
The "three supplies and one compensation" trade of Bao’an County (the predecessor of Shenzhen) started in 1978.
In July 1978, the State Council issued the Trial Measures to Carry out Foreign Processing and Assembly Business, allowing enterprises to set up factories first and then undertake processing and assembly businesses from foreign clients. According to the instructions of the State Council, in October 1978, the Guangdong Provincial Foreign Trade Bureau issued a notice, agreeing that the foreign trade departments of Bao’an, Zhuhai, Dongguan and other counties and cities, relying on their geographical advantages and production bases, together with the local planning and industrial departments, directly handle the processing and assembly businesses of Hong Kong and Macao. After the Third Plenary Session of the 11th CPC Central Committee, the Central Government offered Guangdong Province “special policies and flexible measures,” letting Bao’an County give full play to its advantages and actively develop the “three supplies and one compensation” trade, which greatly promoted the subsequent leapfrog growth of Shenzhen’s economy.
One of the documents of the Shenzhen Foreign Processing and Assembly Business Experiences Exchange Conference — “Summary of Foreign Processing and Assembly” (January to September 1979).
In September 1979, the State Council issued a document to further standardize the processing trade, and the legitimacy of the “three supplies and one compensation” mode was further confirmed at the national level. Since then, the pace of introducing enterprises engaging in the “three supplies and one compensation” trade was greatly accelerated.
Archives show that from 1993 to 1994, the development of the “three supplies and one compensation” trade in Shenzhen reached its peak. In 1994, the number of related enterprises in Shenzhen accounted for one-third of that of the province, and the cumulative actual utilization of foreign capital accounted for 48% of that of the province. The total exports, number of employees and settlement of processing fees each accounted for about 40% of the province’s total. In the early stage of the economic development of the Shenzhen Special Economic Zone, the “three supplies and one compensation” mode brought Shenzhen its “first pot of gold” and became an important pillar of Shenzhen’s export-oriented economy.
Today’s topic: How did you make the first pot of gold? Feel free to leave your comments and three lucky people will receive gifts.
Source: Shenzhen Archives, iShenzhen
Transedited by: Shenzhen Government Online, Shenzhen Daily, GDToday