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Chinese Economy - Case Study Example

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Chinese Economy

China has embraced SEZs because of their varied economic activities (Wei, 47). They embrace a number of economic activities including manufacturing, tourism, real estate development, agriculture and commerce.
EPZs and SEZs are different in that EPZ are industrial estates whilst SEZ are industrial townships with fully developed infrastructure. Other differences include; there is no minimum export performance stipulation for SEZ units unlike EPZ and retention of a hundred percent export earnings by SEZs which are restricted to seventy percent in EPZs. Custom and central expurgate processes are simplified in SEZs, and EPZs are usually found in countries with a market economy whereas SEZs are located in transition economies.
There are a number of similarities between them which may include among others; conditions under which EPZs and SEZs operate are almost the same, tax exemption is given to investors, they cover large tracts of land, both contribute to the overall economy of the country and offer employment to thousands of residents.
Lianxiang Company (Lenovo) was founded in 1984 in Beijing. Then, there were over 100,000 personal computers in China. Lianxiang Company's most crucial initial success was to recognize the importance of coming up a Chinese character computer system permitting 1.3 billion Chinese to enter the computing age. Using the brand name Legend, Lianxiang enabled the conversion of English software into Chinese characters. It later changed its name to Lenovo.
Lenovo owes much of its achievement to its ability of establishing a legal domicile and increasing its capital in Hong Kong. Lenovo got its initial finances from the Chinese Academy of Sciences but from then it on secured all of its investments from Hong Kong. In 1988, it received US $116,000 from the Hong Kong-based Corporation, China Technology to invest in a joint venture and later went public on the Hong Kong Stock Exchange. To that extent, Lenovo became a Foreign Invested Enterprise (FIE). As an FIE, Lenovo was capable of operating in greater regulatory space and with more autonomy. Chinese laws then provided a more liberal operating space for foreign-registered companies. It should be noted that Lenovo is ran and managed by Chinese but co-owned by foreign investors (Shan and Elfring 74).
Lenovo's story illustrate an astounding period in China's modern history as an era of authoritarian, economic and political policies which gave way to a friendlier economic systems. Lenovo is often publicized as a product of China's unusual business environment. In 2004, Lenovo acquired IBM, proving a positive of China's fertile entrepreneurial environment and rising competitiveness. World-sourcing is the secret behind the success of Lenovo. Lenovo believes not in outsourcing but world-sourcing. Another reason for Lenovo's success is that their products persistently aim to provide the best services to their consumers.
3. Explain the concept of comparative advantage between two countries.
Comparative advantage occurs when a nation has a margin of superiority in the ...Show more


Export Processing Zones (EPZ) are generally considered to be like the "free ports". A Special Economic Zone (SEZ) can be described as a geographical region that has its own economic laws that are more liberal than a country's typical economic laws. Many SEZs have characteristics of bonded zones, export processing zone or free trade zones and provide special incentives, including tax exemption or reduction to investors.
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