Economic environment of a country is important towards the determination of the suitability of investment programs. The analysis of the suitability of an economic environment towards an investment program involves the identification of important variables of economic environment. This research study investigates the suitability of the economic environment of China towards the launch of Champaign in the country. The research paper investigates various important factors that affect the economic environment of China and their impacts on the launch of Champaign in the country. The research study further provides the analysis of the economic variables, various strategies and recommendation that can ensure successful launch of the product in China

Economic Variables

There are various economic variables that can affect the economic growth and level of trade in a country. The nature of economic growth can either impact negatively or positively towards investment in a country (Henisz, 2000). China has a number of economic variables that determines its attractiveness to investment programs. This research study has identified the various important economic variables in China. The research therefore investigates the identified economic variables in China and their impact on the launch of Champaign in the Chinese market. The following is a list of the economic variables that this research paper investigates as well as their influence on the launch of Champaign in the Chinese market.

National income
Interest rates
Unemployment
Foreign direct investment
International trade balance
Exchange rates
Balance of payment
Population

Impact of the Economic Variable on the Product

The launch of Champaign in the Chinese market can be affected negatively or positively by the economic variables of the country. The impacts of the economic variables on the launch of Champaign in China depend on the nature and the trends of the various economic variables in the country. The following are some of the economic variables and their impact on the launch of Champaign in China.

National Income

National income in a country is important in determining the purchasing power of consumers. When there is high national income in a country, the purchasing power of consumers will increase since they will be having adequate disposable income to spend on the available goods and services (Scharpf, 2000). This will results to an increase in the aggregate demand in the country. This implies that the demand for Champagne in China will be affected by the national income in the country. High levels of national income will increase the demand for Champaign in China hence increases its sales and profitability. On the other hand, when the level of national income in the country decreases the demand for Champagne will decrease hence there will be a reduction on sales and profitability of the company.

Tax Policy

Many of the governments around the world have been using tax legislation and policies as a means of regulating business environment. Tax policy can have positive or negative effects depending on its nature. Countries with unfavourable tax policies can hinder the development of businesses in a market. High tax rates can raise the cost of production hence reduce the profitability of the firms. When the government of China raises tax rates for wines and alcoholic beverages such as Champagne, the cost of production will increase hence the profitability of the Champagne business will reduce. It can also make the Champaign business to incur losses in the market in case the tax rates are so high. Introduction of a favourable tax rate such as reducing the rates of tax charged in a country can contribute to the profitability of the Champagne businesses. The presence of low tax rates in a country can promote the growth of businesses hence the growth of Champagne business in china can be realized if the country has favourable tax rates.

Tax policy can also have effects on the price of goods and services in a market. High tax rates normally results to high prices. This is because manufacturers will pass the extra costs to consumers. This implies that the consumers will purchase the Champagne at high prices when tax rates are increased. On the other hand low taxation can result to reduction of prices of goods by manufacturers. The price of Champagne in Chinese market will therefore increase when the government imposes high taxes on the product or decrease when the tax charged by the government is reduced.

Unemployment

Unemployment as economic term refers to the act of having no source of income by an individual. This implies that the unemployed individuals have no source of income. When there is high unemployment rate in a country, there is a reduction of national income. A country with low national income will have low purchasing power and this will reduce the aggregate demand in the country (Hoskisson et al, 2000). The sales of Champagne in China can be affected negatively when the rate of unemployment in China is high. This is because people will not be having money that they can spend to purchase Champagne which in most cases is considered as a luxury product.

The demand of Champagne can also be increased when there are low unemployment rates. Countries with low unemployment rates are characterized with high levels of income. High income levels in China can results to the increase in aggregate demand in the country. The demand of Champagne in China will therefore rise and this will increase the sales and profitability of the Champagne business in China.

Inflation

Inflation is the general rise of price of products in a country. High Inflation in most cases is associated with negative effects for majority of businesses. High inflation leads to an increase in prices of goods and services in a country. When the inflation rate in China rises, the price of products in the country will increase. During inflation, majority of people will not spend their money on luxury products such as Champaign. The cost of production of Champagne can increase due to high inflation rates. This is because the cost of all factors of production such as raw materials, labour and land will increase as the rate of inflation increases. This will reduce the profitability of the Champaign business in China.

Population

The size and nature of population is an important economic parameter that can help determine the economic growth of a country. It is also important to note that although countries with high population has some benefits, the rapid growth in population also have some limitations. One of the benefits of huge population in a country is the provision of market for goods and services. Countries with high population growth rates provide adequate market for goods and services. This implies that there will be increased sales of goods and services in countries with high population growth. There will be adequate market for Champagne product in China due to the high population growth rate characterized in the country. China is the leading country with the highest number of individuals. This makes it have adequate market for various products around the world (Chen & Feng, 2000). Launching Champagne product in the Chinese market will therefore help take advantage of the huge market occasioned by high and rapidly growing population in the country. The production capacity of the company will also increase so as to match the demand that is occasioned with the rapidly growing population. Another effect of the high population on Champagne business in China is that it will help provide cheap labour. There will be adequate labour for the Champaign production facilities. Excess labour supply can result to low labour cost. This can make the company to reduce its production cost hence increase the profitability of the Champagne business in China.

Interest Rates

The rates of interest in a country can increase the cost of doing business as it increases the cost of capital (Buckley et al, 2007). If there is high interest rate in the country, the capital required to launch Champaign Company in the country will be high. This can make the company incur high initial cost. High interest rates can also raise the cost of products in the country hence reduce the purchasing power of consumers. This can results to low demands of Champaign in the market.

Collection of Data

In order to effectively launch Champaign in Chinese market, it is essential that appropriate market research should be conducted. Conducting market research will ensure that different economic variables in the country which can impact negatively or positively on the products are identified. The identification of the economic variables and their impacts on the product can help the marketers and management of the company to develop appropriate strategies that will ensure that the product launch is successful. There are various methods that can be used to collect data of economic variables of country. This research study used a number of data collection methods to ensure that appropriate economic variables are identified and analysed. The research used two main data collection methods that involve primary data collection methods and secondary data collection methods.

The Primary Data Collection Methods

The primary data collection methods that were used to collect economic variables in China included interviews, survey questionnaires and observations. The primary sources of data were mainly used to collect data from direct sources of information such as from the study participants and economic experts. Various economic experts in China were interviewed with an aim of identifying various economic trends in China. This helped the research study to come up with various economic variables that can affect the launch of Champaign in China.

Consumers in the country were also interviewed to establish the level of income and unemployment rate so as to be able to determine their purchasing power and trends in the country. They were also interviewed on various economic aspects such as the pricing of various goods, taste and preferences and the availability of the products. This information was useful in developing appropriate strategy that can help towards successfully launch of Champaign in the market.

The use of survey questionnaires formed an important component of the study. The research study in most cases used survey questionnaires to gather various economic and market conditions from various professionals around the country. The preference for the use of the study questionnaires was based on its cost. Survey questionnaires are less costly as compared to other data collection methods. The questionnaires were distributed to various economic and market experts to help in the identification and analysis of different economic environment in the country.

Another method that was used towards the collection of the primary sources of data involved observation. The researchers observed various trends of different economic variables in the country such as the price levels, inflation, exchange rates, interest rates and balance of trade. This helped the study to identify the trend of various economic variables and hence come up with appropriate strategies and recommendation that can ensure that the launch of Champaign in China is not negatively affected by the economic variables.

Secondary Sources of Data

Secondary sources of data were also used in the research study. Secondary sources of data were collected from various publications such as books, journals and some online sources (Johnson & Turner, 2003). Various publications of the Chinese economic environment were analyzed in the study. The publications were obtained from relevant government authorities and various sources such as business publications. The National Bureau of statistics of China provided most of the information that was used to analyze the economic environment of China. Various variables such as the inflation rates, balance of payments, the national income and interest rates among other economic variables were collected from the publications obtained from the National Bureau of Statistics of China. The People’s Bank of China was also another important source for research information. Information regarding the trends of various economic factors such as interest rates, foreign exchange rates and inflation rates were collected from the publications obtained from the People’s Bank of China.

Discussion of Results and Findings

The research study identified various variables that are important towards the determination of economic activities in the country. The findings also came up with the effects of the various economic variables identified towards the launch of Champaign in China. The important economic variables that were identified in the research study included interest rates, inflation rates, national income, per capita income, foreign exchange rates, tax policies, balance of payments, population growth rate and unemployment rates.

Interest Rates in China and Impacts on the Product Launch

The rate of interest rates in China is reported by the People’s Bank of China. The benchmark interest rate in China stands at 6 percent according to the People’s Bank of China. According to the statistics obtained from the People’s Bank of China, the average rate of interest between 1996 and 2013 was 6.42 percent (PBC, 2014). The statistics also indicated that the highest interest rate was recorded in China at 10.98 percent in 1996 while the lowest recorded interest rate in the country was at 5.31 percent in 2002. The trend of interest rates in China indicates that China has low, stable and favourable interest rates. This stability in the rate of interest rates in China makes it suitable for economic activities and investments. This is because various investment decisions can be determined due to that stability of the interest rates.

The stability in the interest rates in China provides an enabling economic environment for various investments (Qingwang & Junxue, 2005). The launch of Champaign in China will therefore benefit from the stability of the rates of interest in China as it will help reduce chances of economic uncertainties that are occasioned with fluctuations in interest rates. The fluctuations in interest rates can make it difficult for management of organizations to conduct their investment planning accurately. High interest rates can lead to losses of organization hence making investment initiative unprofitable. The launch of Champaign in China will therefore benefit from low and stable interest rates by increasing the profitability of the business venture due to low cost of capital.

Inflation in China and Impacts on the Product Launch

Statistics from the National Bureau of Statistics of China indicated that the inflation rates in China have been low during the previous years. In November 2013, the inflation rate in China was recorded at 3 percent. The average rate of inflation in China stands at 5.8 percent according to the statistics received from the National Bureau of Statistics of China. The highest inflation rate recorded in China was 28.4 percent in February of 1998 while the lowest inflation rate was recorded at -2.20 in April of 1999 (NBSC, 2014). The trend of inflation rate in China as indicated by the available statistics shows that there have been low and stable inflation rates in the Chinese economy. This has contributed to the economic growth and stability of the country.

The launch of Champaign in Chinese market will therefore be appropriate given the low level and stability in the rates on inflation. This implies that the cost of inputs required for the production of Champaign will be low. This will enable the company to increase its profitability in the Chinese economy. Low inflation rates can also lead to low labour cost in the economy. The available of low labour in the Chinese economy will ensure that production cost is reduced hence the company will increase its profitability.

The Foreign Exchange Rate in China and Impacts on the Product Launch

Foreign exchange rate of a country can determine that stability and strength of a currency in comparison with currencies from other countries. A stable and strong foreign exchange rate can help spur economic development of a given country. China has as strong domestic currency as compared to other economies around the world. The strength of the domestic currency of China enables different companies to import products at cheaper rates. This implies that the inputs that are required for production of Champaign in China will be cheap hence enable the company to increase its profit margin as the cost of production will be relatively low. The company will also be able to export Champaign to other countries at a high price making them to increase their profit margin. China monetary policies have enabled it to hold its Yuan at a steady rate for a number of years since 1994 (Jun et al, 2004). This enabled it to have surplus capital flows due to a surplus trade balance. The increase in capital flows in the country contributes to a rise in the general income. This help raise the consumer’s disposable income hence creates high demand for products. This means that the demand for Champaign in China will be high given the high disposable income of consumers in the country. The country’s average foreign exchange rates in terms of the United States dollars have been constant and stable at an average rate of 6 Yuan per United States dollars.

National Income in China and Impacts on the Product Launch

The national income of a country can be determined in terms of gross domestic product (GDP). The current national income of China is approximated at 12.44 trillion US dollars purchasing power parity in 2012.the country has been experiencing a constant and steady growth in national income over the years. This has led to the economic development of the country as it is able to raise the required capital for various development programs. The rapid growth in national income of China has enabled it to develop important infrastructures such as road and transport networks, telecommunication facilities and various industries. The availability of these facilities is important for establishment of companies in the country.

According to the records obtained from National Bureau of Statics of China, the averages GDP growth rate in the country is estimated at 2.0 percent. The country realized a high growth rate of 2.5 percent during the month of June 2012. The lowest recorded growth rate of China was at 1.5 percent in March of 2012. This pattern of the gross domestic growth rate in China indicates that its national income is constantly increasing hence the demand for goods and services in the country will not be affected. The strength of the Chinese gross domestic products ensures that the national income in the country is high. This makes consumers to have high purchasing power hence the aggregate demand in the country will increase. Increase in the aggregate demand will result to high demand of the Champaign in China. This will ensure that the demand for Champaign in the Chinese market is high hence make the business profitable.

Tax policy in China and Impacts on the Product Launch

Tax policies play an important role in the economic environment of countries (Low, 1992). Many of the world economies depend on tax as the main source of revenue earnings. The tax system in China has been reformed since 1994 and currently China has a streamlined tax system that is aimed at facilitating the socialist market economy. The implementation of the tax system that is geared towards achieving socialist economy has enabled the country to earn fiscal revenues, attract direct foreign investments and promotes health and rapid development of the Chinese economy. Chinese Ministry of Finance is responsible for the development and implementation of various tax policies in the country.

The china tax structure is divided into two main categories that include tax on individual’s income and the corporate tax. The tax charged on the individuals income is a progressive tax and ranges between the rates of 3 percent to 45 percent depending on the level of income of individual. The corporate tax for both domestic and foreign companies is at a rate of 25 percent. Small companies however are required to pay a corporate tax at a rate of 20 percent in certain instances (Li, 1997). The high tech companies are provided with special tax rates in China that is below the corporate tax rates. High tech company’s corporate tax a rate in China is at 15 percent. This is because Chinese considers high tech companies as important in ensuring rapid growth and development of the country through the provision of the necessary infrastructural facilities that can help promote economic development. The launch of Champaign in China will benefit from the tax system being practiced in China. This is because the taxation policies of China are not discriminatory and favours the growth of industries in the country. The rate of tax in China is also low as compared with other countries hence the company will spend less amount of money on taxation. This will ensure that the company is profitable.

Balance of payment and Impacts on the Product Launch

China has been having a surplus balance of payment over a long period of time. The surplus balance of payments in the third quarter was estimated at 39.7 billion US dollars according to the data from State Administration of Foreign Exchange (SAFE, 2014). According to the data, goods trade recorded a surplus of 87.1 billion US dollars. It is also important to note that in the same period deficit surplus were recorded on service trade 42.5 billion US dollars and current transfers at a value of 42.5 billion US dollars. Surplus trade balance was also recorded on financial and capital accounts at amount totalling to approximately 57.3 billion US dollars (Xiaolu & Gang, 2004). The surplus balance of trade in the country ensures that the economic environment of China is stable and healthy. This implies that the establishment of Champaign Company in the country will benefit from the effect of the balance of payments by ensuring that there is adequate capital and income flows in the country. This will help in the growth of the Champaign business venture in the country.

Unemployment Rate in China and Impacts on the Product Launch

The level of unemployment rate in China stands at 6.5 percent. This is one of the lowest levels of employment recorded in countries around the globe. The low levels of unemployment rates in China implies that majority of the Chinese population are employed and have a steady source of income. This makes the purchasing power of consumers to be high hence makes them able to afford various products. The demand of Champaign in China will be high given the high levels of income and purchasing power of consumers in the country. This will also ensure that sales of Champaign in the country is high and results to the productivity of the business venture.

Population Growth Rate and Impacts on the Product Launch

China is the country with the highest population around the globe. The current population of China is over 1.3 billion (Trading Economics, 2014). The huge population in China provides adequate market for various products that are manufactured in the country. The presence of huge population in the country increases the demand for products. The demand of Champaign in China will likely to be high owing to the huge population in the country. This implies that there will be adequate market for the Champaign product in China hence the sales volumes and revenues will be high. This will make the company to be productive and profitable in the Chinese markets. Again huge population in the country will ensure that there is sufficient labour required for the manufacturing of the Champaign in China.

Recommendations and Conclusion

The study of the economic variables in China and their impact towards the launch of Champaign in the country provides some useful information that can be used to develop appropriate strategies that will ensure that the launch of the product is successful. The study found that the economic variables play an important role in ensuring that the demand of products and purchasing power of consumers are high. Economic variables also ensure that the country is stable hence make it possible for the management of organizations to make accurate and reliable decision that can ensure the growth and development of their companies. From the study it is clear that the economic variables in China are stable and favourable for various investments initiatives. Majority of the economic variables in the country such as interest rates, inflation rates, foreign exchange rates, population, balance of payment, tax policies, national income and unemployment rates are favourable hence attractive for investments initiatives.

Recommendation

From the analysis of the economic variables it is recommended that the launch of Champaign in the Chinese market is appropriate. This is because the favourable economic factors in the country will ensure that the demand of the products is high and the company will be able to generate more sales and become profitable in the market. The plan to launch Champaign in China should therefore be implemented so as to enable the investors to benefit from the stable and favourable economic environment in China as well as the high aggregate demand in the country.

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