International Trade, Finance & Investment

International Trade, Finance &
Investment

Contents
EXECUTIVE SUMMARY.............................................................................................................1
QUESTION 1..................................................................................................................................1
BRIEF BACKGROUND OF FINANCIAL MARKETS............................................................1
DOMESTIC ECONOMY AND CAPITAL ALLOCATION.....................................................2
INTERNATIONAL ECONOMY AND CAPITAL ALLOCATION.........................................3
TRADE, FINNACIAL AND INVESTMENT THEORIES........................................................4
CONTRIBUTION IN THE INTERNATIONAL TRADE..........................................................5
QUESTION 2..................................................................................................................................6
INTRODUCTION TO BRICS....................................................................................................6
EVALUATING GROWTH OF CHINA.....................................................................................6
CHALLENGES FACED DUE TO INDUSTRLIALISATION..................................................7
CHALLENGES FACED DUE TO WTO...................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

EXECUTIVE SUMMARY
International trade, finance and investment is a field of study in which concepts related to
financial markets are reviewed in order to make an informed decision so that relevant profits can
be gained by investing in international trade (Bhandari and Javakhadze, 2017). The main aim of
this report is to develop an understanding about capital allocation in domestic and international
economy. The below report has covered background information about financial markets along
with ways by which finance can be allocated in these markets. In the second part of this report, a
BRICS organisation is selected which is China. The reason behind selecting this organisation
was the developing finance industry of this region. Various challenges and problems are
identified which this nation is facing due to industrialisation development. Issues arising from
organisations such as WTO against China are also evaluated in this report so that potentiality of
this nation can be ascertained.
QUESTION 1
BRIEF BACKGROUND OF FINANCIAL MARKETS
Financial market is a market place where financial instruments are traded between parties.
This market involves trading of various securities such as stocks, bonds, commodities etc. All
these instruments are traded and managed by parties which includes key players of market which
are intermediaries (brokers), individual investors and regulators. Financial markets are broadly
classified into two classes which are debt and equity.
Equity financial market – It is a stock market in which securities such as shares are
bought and sold. Examples of these markets are London Stock Exchange (LSE), New York
Stock Exchange (NYSE) etc. Equity shares are traded between the parties in this market in which
companies holding the securities does not intervene. Equity market involves high risk as the
price value of the securities can be changed due to various reasons (Bolton, Santos and
Scheinkman, 2016).
Debt financial market – This is a bond market in which parties make investments by
providing loans at which they earn interest. This market is considered as less risky interface as
price of their investments does not change, bondholders are the first ones to be paid if the
company is liquidated and even fixed interest is also gained against the loan given. Along with
the risk, return on investment in this market is also low.
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