The establishment of Special Economic Zones (SEZs) in China has been a focus of study for many developing countries. It was initiated with a notion of experiment that foreign capital is an important instrument to put the country on a growth path of economic development and modernization while simultaneously integrating the inner regions with the main economic activity and development of the country. The Chinese experience of SEZs turned out to be a success in some sense as it could fulfill the goal of the people and the Government. It is sometimes argued that SEZs have become a multiplier of economic activity which has supported the economy. It has become an instrument in empowering human resources and promoting inclusive growth. The paper makes an attempt to understand the concept behind this initiative; what political reforms were taken to set up SEZ; how it contributed to the growth of the Chinese economy; how FDI attracted by SEZ played a critical role in promoting exports, providing employment and overall creating an inclusive growth. The paper further tries to analyze if the SEZ model can be a vehicle for inclusive growth and what are the key challenges remaining for the firms and the government to address in making it sustainable model of growth. How key environmental and natural resources such as water, oil, electricity, land etc. are important for SEZs survival and log term growth. The paper provides policy recommendations for future establishment of SEZs in China and the lessons that other developing economies can learn from this Chinese venture.