Factors Affecting UK Origin Company, AMINEX Business Expansion in China

This research examines the factors affecting the UK origin business in China, taking the case of AMINEX. The study identifies the major factors affecting UK based companies in China and recommends appropriate policies for AMINEX to establish its business in China.

Factors affecting UK origin company, AMINEX business expansion in China
Contents
Introduction.......................................................................................................................................1
Literature Review..............................................................................................................................2
Methodology.....................................................................................................................................2
Data analysis and Findings................................................................................................................3
Conclusion and Recommendation.....................................................................................................8
Abstract
This research is aimed to examine the factors affecting the UK origin business in China. For
the analysis purpose the case of AMINEX has been taken into consideration. Secondary data
has been collected for the time period 2005- 2016. The profit of the company has been taken
as the dependent variable whereas the inflow of FDI, currency exchange rate and the net
exports as the independent variables. Both the descriptive and the inferential analysis has
been conducted using the SPSS. Results from the analysis shows that only net exports shows
significant impact on the dependent variable.
Introduction
China is one of the largest economy in as per the purchasing power, which has made it one of
the main attraction for some of the big firms around the world. China not only provide the
good business environment and cheap labor to the industries, but it is also one of the largest
market in the world. It has the largest population in the world which is the huge market for
any products/services in the world. In the last two decades many big firms have shifter their
manufacturing business to China. However there are many factors which affect the business
expansion in China. Some of the companies are able to generate huge profit by shifting and
expanding their business to China, whereas on the other hand some of the business are not
able to do well ever after entering the largest market in the world. So this research’s main
objective is to examine the factors affecting the business expansion of companies based in
UK in China. For the current research the case of AMINEX has been taken into
consideration. The research will help to analyse and identify the major affecting the UK
based companies in China which can be used by the business world to frame their policies
before entering China, so that the loss can be minimized. Furthermore the research can also
be used by government to analyse and evaluate the performance of the UK based companies
in China and to frame the effective policies so that China remains attractive for other UK
based companies also.
In the current research the case of AMINEX has been taken into consideration. AMINEX
PLC is one of the largest UK based companies which is majorly involved in the producing
upstream oil and gas. The firm is listed on London Stock Exchange and also on the Irish
Stock Exchange (AEX). The company has already expanded its business in Tanzania and
now looking to expand in China. However before entering China, it is important to know the

business environment, macro-economic environment of China and also the trends in the
related industry. There are many previous studies focused on factoring affecting the business
expansion of foreign firms in China. However, there are limited studies which focus on the
business expansion of the UK based firms and especially in the petroleum and the gas
industry. So the current research has been conducted to fill the gap in existing literature.
Aims and objective of the research:
The main aim of the current search are as follows:
 To identify the factors affecting the UK origin companies in China
 To examine the impact of each factors on the business expansion of AMINEX in
China
 To recommend appropriate policies ( based on results) so that the AMINEX can
establish its business in China
Research Questions:
The current research will try to examine the research questions given below:
Q1: What are the factors affecting the business expansion of UK based companies in China?
Q2: Which factors have the significant impact on the business expansion of AMINEX in
China?
Literature Review
China has become one of the major attraction for multinational corporations after the 1979
reforms. It has opted for the open economy policy which was very restricted prior to the
reform. Also the Chinese government has set the target of quadrupling the GDP by 2020. So
the Chinese government has focused on improving its ease of doing business ranking and it
has improved significantly. There are many factors which have led to increase in foreign
business in China(Finamore Barbara 2016).
One of the major factors is the inflow of FDI in China. There has been significant increase in
the inflow of FDI in China and it has received the higher amount of FDI ahead of United
States. The inflow of FDI also brings the foreign technology and knowledge also which
increase the efficiency and also improve the productivity of the labour. Over the years both
the technology and the productivity of the labour has improved and also the cost of labour has
also declined. So, in this research also FDI has been taken as one of the factors(Grandhi
2016; Lee & Oh 2015; Wei 2010; Lan et al. 2012).
Another factors affecting the foreign origin business is the net exports. China economy is
export led economy which has been one of the main reason the slowdown in the economy
when the exports declined. However higher exports has become one of the key factors for
foreign companies to expand business in China. The foreign firms can take the advantage of
the low cost and exports its products worldwide. So the second factors taken into
consideration in the current research is higher exports from China and many previous
research scholars has also mentioned this as one of the major factors(Khandare 2016; Fauzi &
Chee 2013).

Furthermore the currency exchange rate of is another factor which has been taken by many
previous research also. The exchange rate plays an important role in the international
business as the exchange rate determines how much the import and export costs (Zhu 2012;
Granneman & Dijk 2015; Xing & Pradhananga 2013).
.
Methodology
The current research is aimed to examine the factors affecting the UK origin business in
China, taking the case of AMINEX which is one of the largest firm in UK in the petroleum
and gas industry. For the analysis purpose secondary data has been collected. In the current
research the profit of the AMINEX has been taken as the dependent variable whereas on the
other hand the inflow of foreign direct investment, currency exchange rate and net exports
has been taken as the independent variables. The data for the profit of the company has been
extracted from the annual report of the company from 2005 to 2016. Similarly the data for the
currency exchange rate, net exports has been extracted from the data base of IMF and The
World Bank. Lastly the data for the inflow of FDI has been taken from the data base of
UNITAD.
Data analysis procedure
Since the prime objective is to analyse the effect of each factors on the business expansion in
China, both the descriptive and the inferential analysis has been taken into consideration. For
the descriptive analysis the different measures of the central tendencies such as mean,
median, standard deviation, skewness and kurtosis has been calculated. Furthermore the
regression and the correlation analysis has been performed as a part of the inferential
analysis. The correlation analysis helps to examine the relationship between two variables
whereas the regression analysis helps to find the effect of the explanatory factors on the
dependent variable.
Data analysis and Findings
In this section the findings from analysis of the data has been presented. In the initial part the
findings from the descriptive analysis is discussed. In the next part findings from the
normality test is shown. Furthermore in the next section the results from the inferential
analysis has been shows which includes the correlation and the regression analysis.
Descriptive statistics
Findings for the descriptive statistics have been shown in the table below. For the descriptive
statistics various measures of the central tendencies such as the mean and median has been
shown, along with standard deviation, skewness and kurtosis, maximum and the minimum
value.
Statistics

FDI Net Exports profit of the
company
exchange
rate
N Valid 12 12 12 12
Missing 0 0 0 0
Mean 96524.9167 1390949.333
3
2228611.000
0
8.1775
Median 101656.0000 1325574.500
0
2348237.000
0
8.0650
Mode 53505.00a 438228.00a 1076386.00a 5.23a
Std. Deviation 27067.48741 638419.8335
2
690000.8496
5
1.89178
Variance 732648874.8
11
40757988383
7.697
47610117251
3.636
3.579
Skewness -.326 .051 -.533 .104
Std. Error of
Skewness
.637 .637 .637 .637
Kurtosis -1.555 -1.244 -.508 -1.078
Std. Error of
Kurtosis
1.232 1.232 1.232 1.232
Minimum 53505.00 438228.00 1076386.00 5.23
Maximum 128500.00 2342293.00 3246000.00 11.23
a. Multiple modes exist. The smallest value is shown
As shown in the result above, the first variable is the FDI and it shows that on an average
96524 million FDI comes into the Chinese economy each year. However the median value of
the FDI is different from the mean value. Many statisticians and the economist argues that
median is the better measure of the central tendency as compared to the mean value. This is
because the mean value is affected by the extreme values which is not the case in median.
Furthermore the standard deviation shows that there is huge variation in the inflow of FDI.
Similarly the minimum and the maximum inflow of FDI is 53505 million and 128500 million
respectively.
The second independent variable included in the current study is the net exports from the
country. China is one of the largest exporters in the world. Since it a manufacturing hub it has
also become the exports hub and a significant percentage of the Chinese GDP is based on
exports. Results from the analysis shows that the average exports from China is $ 1390949
million per year with the standard deviation of 638419.83 which is very high. On the basis of
these values it can be said that there is high variation in the data for net exports. The
minimum and the maximum value of the net exports are also 438228 and 2342293
respectively, which also indicates higher variation in the data set.
The third independent variable is the currency exchange rate which is also one of the major
factors for the international business. The exchange determine whether the imports/exports
are cheaper or expensive. If the currency of the one country appreciates against the other
currency then the more amount of goods can be bought with less currency. However in case

of the currency depreciation more money has to be given for the same amount of goods. So,
currency exchange plays an very important role in international business. Results from the
current research shows that the average currency rate between china and the UK is 8.177. In
other words one pound sterling is equal to the 8.177 Chinese yuan. Similarly the minimum
and the maximum value of the exchange rate is 5.23 and 11.23 respectively. This shows that
there has been huge variation in the exchange rate between China and UK. This is because
the Chinese currency has gain much value in last two decades as its economy grew.
Lastly the descriptive statistics of the dependent variable is also shown in the table above.
The dependent variable for the current case is the profit of the AMINEX Company. Results
shows that the average profit of the company between 2005 and 2016 is 2228611 with
standard deviation of $69000. This shows that there is high variation in the profit of the
company. A low value of the standard deviation indicates that there is low variation in the
data set or most of the values lies around the mean value. On the other hand the high value of
the standard deviation indicates that there is high variation in the data set and most of the data
points lies far from the mean value of the series. One interesting analysis for the profit data is
that the profit of the company’s profit has declined in the last few years. There may be
various reasons behind the decline in the profit of the firms such as higher competition,
increasing cost and increasing inefficiencies in the process.
Test of Normality
Time series data has been for the current research so normality of the test is important. To
test the normality both the Kolmogrorov –Smirnov and the Shapiro-Wilk teste has been
performed and the findings are shown in the table below.
Tests of Normality
Kolmogorov-Smirnova Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
FDI .168 12 .200* .900 12 .160
Net Exports .120 12 .200* .956 12 .725
profit of the
company
.161 12 .200* .937 12 .461
exchange rate .100 12 .200* .972 12 .928
*. This is a lower bound of the true significance.
a. Lilliefors Significance Correction
As shown in the table above, the significance value for FDI is 0.2, which indicates that we
cannot reject the null hypothesis. In this case the null hypothesis is that the variable follows
the normal distribution. So, one can conclude that the FDI follows the normal distribution.
Similarly for all other variables also the significance value is higher than 0.05. This indicates
that none of the values are significant at 95 % confidence interval. Since we fail to reject the
null hypothesis, it can be concluded that all the variables included in the research follows the
normal distribution. Therefore further analysis can be conducted.
Correlation analysis

Analysis of the Correlation is used to examine the two variables’ relationship. The value of
the correlation is from -1 to +1. Among the two values -1 refers that two variables are
negatively and perfectly correlated, whereas on the other hand the correlation coefficient of
+1 refers that variables are perfectly and positively related. However it should be noted that
the correlation does not necessarily imply the causation. Results for the correlation analysis
for this research is presented in following table.
Correlations
profit of the
company
FDI Net
Exports
exchange
rate
profit of the
company
Pearson
Correlation
1 -.876** -.947** .235
Sig. (2-tailed) .000 .000 .463
N 12 12 12 12
FDI
Pearson
Correlation
-.876** 1 .969** -.549
Sig. (2-tailed) .000 .000 .064
N 12 12 12 12
Net Exports
Pearson
Correlation
-.947** .969** 1 -.372
Sig. (2-tailed) .000 .000 .234
N 12 12 12 12
exchange rate
Pearson
Correlation
.235 -.549 -.372 1
Sig. (2-tailed) .463 .064 .234
N 12 12 12 12
**. Correlation is significant at the 0.01 level (2-tailed).
Results shows that the dependent variable is negatively correlated with the inflow of FDI.
Similarly the correlation between the dependent variable and net exports is also negative and
statistically significant. Lastly the correlation between exchange rate and the dependent
variable is positive, however the correlation is not statistically significant at 5 %. Furthermore
the correlation among other independent variables is also statistically significant, so further
analysis can be conducted by taking into consideration these variables.
Regression analysis
The regression is used to measure how the explanatory variables affect the dependent
variable. This is measured through the value of regression coefficients. If the coefficient is
greater than 0 it can be concluded that the explanatory variable positively affect the
dependent variable. On the other hand if the regression coefficient is negative, it implies that
that the explanatory variable negatively affect the dependent variable. The statistical
significance of the variable is analysed using p values.

Model Summaryb
Model R R Square Adjusted R
Square
Std. Error of
the Estimate
Durbin-
Watson
1 .962a .925 .897 221123.3673
9
1.922
a. Predictors: (Constant), exchange rate, Net Exports, FDI
b. Dependent Variable: profit of the company
Finding of the model summary shows that the value of R squared is 0.925 which indicates
that the explanatory variables in the equation are able to explain 92 % of the variation in the
dependent variable. The R squared of 0.92 is considered to be very good in terms of goodness
fit of the model.
ANOVAa
Model Sum of
Squares
df Mean Square F Sig.
1
Regression
s
48459485488
13.059
3 16153161829
37.686
33.036 .000b
Residual 39116434883
6.940
8 48895543604
.618
Total 52371128976
49.999
11
a. Dependent Variable: profit of the company
b. Predictors: (Constant), exchange rate, Net Exports, FDI
The results from the ANOVA measure the cumulative effect of the independent variables on
the dependent variable. In this case the F value of 33.036 is statistically significant at 5 % so
it can be concluded that the cumulative effect of the explanatory factors on the dependent
variable is statistically significant.
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig. Collinearity Statistics
B Std. Error Beta Tolerance VIF
1
(Constant) 2737402.205 1274334.441 2.148 .064
FDI 19.991 17.303 .784 1.155 .281 .020 49.350
Net Exports -1.830 .660 -1.693 -2.771 .024 .025 39.988
exchange rate 13100.752 66292.454 .036 .198 .848 .283 3.538
a. Dependent Variable: profit of the company

. As the results shows that FDI and the exchange rate has positive impact on the profit of the
company, whereas the net exports shows negative impact. Also the regression coefficient of
net exports is statistically significant at 5 % whereas other two variables do not show
significant results. One can interpret the coefficient of net exports as, with one percent
increase in the net exports the profit of the company decreases by 1.83 units holding all other
factors constant. Furthermore the results from the collinearity indicates that there is no
problem of multicollinearity in the regression equation.
Hypothesis testing.
H1:
Null: There is no significant effect of Foreign Direct Investment on profit of the company.
Alternative: There is significant impact of Foreign Direct Investment on the profit of the
company.
Since the results from the regression coefficient shows that the coefficient of FDI is not
statistically significant the null hypothesis cannot be rejected.
H2:
Null: There is no significant impact of net exports on profit of the company.
Alternative: There is significant impact of net exports on the profit of the company.
Results from the regression coefficients shows that the coefficient of net exports of the net
exports is statistically significant, so the null hypothesis can be rejected.
H3:
Null: There is no significant impact of currency exchange rate on profit of the company.
Alternative: There is significant impact of currency exchange rate on the profit of the
company.
The regression results shows that the coefficient of the currency exchange rate is not
statistically significant, the null hypothesis cannot be rejected.
Conclusion and Recommendation
The main aim of the current research is to investigate the factors affecting the UK origin
business in China. To analyse the same, the AMINEX Company was taken into
consideration. For the analysis purpose data was collected for the time period 2005 – 2016.

The profit of the selected company was taken as the dependent variables whereas the
independent variables in the study includes the inflow of FDI, net exports and the currency
exchange rate. The review of the existing literature also identify these factors as the most
important factors. Data analysis was conducted using various descriptive and inferential
techniques. Results from the analysis shows that there has been declining trend in the profit
of the company in the recent years. Also there is high variation in the inflow of FDI.
Furthermore the results from regression analysis shows that the FDI and currency exchange
rate shows positive impact on the dependent variable, whereas net exports has negative
impact on the profit of the company. Only the net exports shows significant impact. On the
basis of the results from the analysis it can be concluded that the exports from China is the
main factor and the AMINEX should focus frame their strategies for net exports. This is
because it has shown negative impact on profit of company.
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