International Trade: Finance and Investment

This study material provides an in-depth analysis of international trade, finance, and investment. It covers the background of financial markets, capital allocation within domestic and international markets, and the challenges faced by countries in industrialization and trade policies. The content is relevant for students studying finance and investment in international trade.

International Trade
Finance and Investment

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Background of financial market:.................................................................................................1
Capital allocation within domestic economy:..............................................................................2
Capital allocation within international market:...........................................................................4
TASK 2............................................................................................................................................5
Evaluation of the economy........................................................................................................5
Critically evaluating the challenges faced by the country in respect to Industrialization
and trade policies.......................................................................................................................5
Conclusion.......................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
International finance and trade investment refer to the financing activity which is included
between the financial transaction between the countries in the world for a specific period. It
means expanding of the industry and business in other country by increase the area of the income
for the generation and investment purpose for country. In this report there is the analysis of the
international trading and financing of the United Kingdom with the international market. in this
report there is the background of the financial markets and which is the main platform for the
security transaction because it increases the liquidity and efficiency of the company in increase
of the gross domestic product (Alvarado, Iniguez and Ponce., 2017). There are various financial
markets is described for that for the better utilization of the resources in the efficient manner. In
this there is the capital allocation of the domestic country in international trade and allocation of
the domestic in the international market. there are some challenges also faced by the country
which is related to industrialization and trade policies which is evaluated.
TASK 1
Background of financial market:
Financial market refers to marketplace that pertains trading of security. It is vital for
providing smooth functioning of capitalist economy by ensuring resource allocation and liquidity
creation for business. This market makes procedure easier for sellers and buyers for the purpose
of trading in relation to financial holdings. This market helps in security creation as it enables
return on excessive security, such as, investors (Anwar and Sun., 2018). Along with it, financial
market enables fund availability to people which pertains desire of excessive fund, such people
are borrowers. Various financial instruments are purchased and sold in this financial platform.
Types of financial market are forex market, derivative market, money market, over the counter
market as well as bond market. Over the counter market can be explained as market which do not
have physical location and which is decentralised. Electronic trading is conducted in this market
and participants are involved in direct trading in context to securities, in other words,
requirement of broker is not there. In context to bond security, in this type of financial security
investors loan money for specific time period and even interest rate is pre-established. Bond is an
agreement between borrowers as well as and in this detail of loan is recorded for the purpose of
payment. Trading in money market is incorporated with products of high liquidity value which
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matures in short term period. Return on interest in this market is low although its safety level is
high. Value of money market is derived from primary security value. Forex security ensures
purchase, selling and speculation of currency by its participants.
UK financial market: economy of country pertains financial holding of 25% in context to
private equity around world. Additionally, UK covers 52% of European equity market. At this
period, London stock exchange is considered as largest stock market in context to Europe, it
employs almost 5000 people in United Kingdom (Araújo and et.al.,2017). Contribution of
country in relevance to gross domestic product is 0.8% in 2007. From past 300 years financial
market of United Kingdom. This financial market generates income of 1.4 trillion at year end. It
is popular for sale of assets, which states derivatives as well as foreign exchange. Business man
and entrepreneurs most probably prefers this financial market because it enables expansion of
business and high profit earning. UK’s financial market performs different types of functions, for
example, open system creation for attraction of large fund for business and this can be achieved
by bond market and stock market. Utilization of this market is conducted through large number
of individuals and price that is set is transparent. Users are provided with adequate liquidity in
this market. On consideration of authenticity of financial market, it can be noted that it is
productive approach for generating profit as limited foreign money is hold by it. This efficient
tool provides finance to big organizations and is helpful in achievement of business goals. In the
year 1977, Apple persuade loan of amount 250000 from the investors, after 5 years, company
borrowed loan of 100 million amount by sharing shares of small size from financial market.
Capital allocation within domestic economy:
Domestic economy: It can be defined as production activities and trade activities that is
consisted in country’s economy. Economy of United Kingdom is entitled as fifth largest among
globe while measured in context to nominal gross domestic product. Its economy is market
oriented and is highly developed. In context to PPP or purchasing power parity economy of UK
is ninth highest across globe. In addition to it, this economy is twenty first largest in relevance to
gross domestic product in per capita which is comprised of almost 3.3% of globe’s gross
domestic product (Cumming and Zahra., 2016). In 2019, UK was entitled to be as 5th largest
around world in context to exports and imports. It is further comprised as third largest in
relevance to inward foreign direct investment and fifth largest in context to outward foreign
direct investment. UK is estimated as top globalised in context to economy. Country pertains
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service sector domination as it impacts major contribution of almost 80% of GDP of United
Kingdom. Financial services industry is vital for country; hence, London proves as second
largest financial sector around world. Industry of aerospace of estimated to be second largest
industry. Nation’s pharmaceutical industry is tenth largest in globe as it plays a crucial role in
economy of world. In consideration of 500 largest company of world, 26 are headquartered in
United Kingdom. Production of gas and oil of north-sea region boosts nation’s economy and
reserves. It is estimated as 2.8 billion in 2016. Currency of country is stated as pond sterling and
trade organizations incorporated with nation are WTO, OECD as well as AIIB. Population of
nation is 67,025,542 in the year 2020. GDP rank of United Kingdom is fifth in context to
nominal and ninth in relation to purchase price parity in 2020. Rate of base borrowing for
country is 0.25% and in context to human development index, nation is pertained to be very
high. Unemployment rate of nation is 3.9% and its average gross salary is estimated to be 585.
Rank of United Kingdom in relation to ease of doing business is stated as 8th. Export of nation is
valued at 837 billion and its import is valued at 876.6 billion dollars (Harpaz, 2016).
Capital allocation within UK’s domestic economy: Allocation of capital is states as
financial resources distribution in such a way that its efficiency enhances and its profitability also
improves. Capital allocation can be implemented in nation in various forms which are explained
below:
 Development of infrastructure: Infrastructure development can be estimated as activities
regarding construction which leads to enhancement of basic foundation services of nation
with pertains motive of economic improvement and quality enhancement. UK’s capital
allocation is focused mainly on infrastructural activities for the purpose of improving
efficiency as well as competitiveness of country (Hussain, Shahmoradi and Turk., 2016).
Further, supply chain of nation also enhances and opportunities are created for
development.
 Investment in micro or small business: It states those businesses which pertains
operations at low or small level. It employs a smaller number of individuals and its
investment is also less. United Kingdom invests in these organizations are its improves
opportunity for employment creation and income generation capacity of country also
increases as disposable income of citizens improve. This type of enterprises possesses
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significant impact on tax generation of nation which involves employment tax, property tax
as well as income tax.
Capital allocation within international market:
International market can be explained as market that is operated across borders of
country. Capital allocation indicates distribution of financial resources of an enterprise, in
addition to investments of country in a way that its productivity, profitability as well as
efficiency improvises (Liu and Woo., 2018). This ultimately leads to maximization of profit.
Hence, United Kingdom allocates its capital in international market of Germany, tactics and
techniques for the same is discussed below:
 Repaying debt: Debts can be defined as burden or obligation attached with nation’s
government in context to amount borrowed by country. It involves bond holders,
borrowings from bank, finance providers regarding trade, and may more. In relevance to
international market of Germany it can be estimated that, country is mainly concerned
regarding repayment of loan, hence, entire obligations are repaid as soon as possible for
the purpose of improving credibility of nation and enhancement of its value (Onaran and
Obst., 2016).
 Acquisitions: It refers to an effective approach for the purpose of improvement and
expansion of profit that country generates. This strategy entitles allocation of capital for
acquisition of efficient companies of Germany. It leads to enhancement of recognition
and improvement of fund generation capacity of nation.
 Payment of dividend: Dividend can be indicated as amount which company pays to
holders of its shares as a reward or return for investing in company. Hence,
implementation of dividend payment strategy plays a critical role as it enables company
of nation to improve its value in market (Nemet and et.al., 2017). If low dividend is paid
to shareholders in comparison to their expectations than company’s value will decrease in
market. Hence, country focuses mainly on capital allocation with the intention of
repayment of dividends in adequate manner. It will ultimately lead to improvement of its
value in relevance to international market. This strategy has huge influence regarding
decision making of investment as it imposes high result on upcoming profitability and
productivity of nation.
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TASK 2
Evaluation of the economy
In the economy of the Germany it is highly develop social market economy across the
country. In this it has the largest economy in the Europe and fourth largest in the nominal GDP
across the world in the 2017 and it is the fifth largest purchasing parity in the GDP. In the
country it has been accounted for the 28% in the euro area economy in the international
monetary fund. It is the founding member in the European Union and in Eurozone. In 2016 it
reached the largest surplus in the world in worth 310 billion, making the biggest exporter in the
world, and it is the one of the largest exporters in globally with 1448.47 billion worth of goods.
In the Germany there is the percentage in the agriculture is 0.9% and in machinery it is 41%.
There is the name of the 10 exports products in the Germany are transport, pharmaceuticals and
transport equipment, basic metals, food products and rubber. It is the largest economy in the
manufacturing sector which is affected by the finance down. In this there is the bridge is made
between the university insight and industry insight. In the international monetary fund they give
some advice in maintain the long run (Qian and Sandoval-Hernandez., 2016).
It is the first country in the state of the nuclear power, gas, solar energy and biomass. It is
the first major industrialized nation to commit the renewable energy transition and biomass. It is
the major industrialized for converting the renewable energy into Energiewende. In this 99% of
all German companies is belong to the small and medium size enterprises in which 2000 largest
publicly listed companies are register in aspects of revenue and profits. It is the world top
location in the trade fairs. In this two third is the trade fair take place which is exploited in the
state of the Lower Saxomy.
Critically evaluating the challenges faced by the country in respect to Industrialization and trade
policies
Industrialization- It is the method used in transform the agriculture product into
manufacturing product. it helps in the increase the economic growth of the economy in the
country, in other terms it is also used in the delivery of the product and use of the resources in
the proper way which help in solving the human problems (Yu, 2016). It helps in increasing the
income level and standard of livings in the society. It was occurred in the 19 century in the
European cities then it is happened in the north America and then it is spread in all over the
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world. In this there are various reasons for the need of the industrialization because there is the
need of increasing the productivity level of the farmers and increased the manpower which is
also utilized in easy manner. In this economy there is requirement of increase in per capita
income, there is rise in the formulation also which result increase in the development of the
economy across the world. By the use of the resources in the optimal manner there is the increase
in the agriculture sector. In the Germany there is the favourable incentives is there apart from
them there is transportation cost also there with the reduce of the cost of production by
improving the profit with the low cost of the prices. In the Germany by the improvement there is
the great impact on the profit margin and services. In the development of the industry there is the
use of the modernisation which help i increasing the output and production level in the
organization. Industrialization helps in reducing the poverty in the private jobs and in the nation
which help in provide the jobs at the small and large level for the people. It also help in increase
the standard living of the person and also have skilled labours, for performing the task easily. By
considerations all these points there are some challenges are occurred, some of them are
discussed.
Challenge 1: Unequal income distribution- in the distribution of the income, there is
the gap is created which result in differentiate between the rich and poor peoples in respect of
labour and capital. They also help in accomplishment of the economic activities and financial
activities which result in increase in the disparity income and wealth. They have the advantage in
the Germany by using that if there is no division is occurred in their working condition because
there is the differentiate between rich and poor which leads to decline in the living condition of
the individuals which are living in the country from lots of years. Through this there is no growth
occur in their class and it leads to poverty. This also occur due to increase in the income
distribution of the person between the poor and rich person.
Challenge 2 :Emigration: It means there is the negative impact is faced by the country,
workers have to migrate from the different place and result is they lose their job in their
workplace, it effect the health issues because it affect them at the difficult factories, in this factor
the long working hour affect the productivity of the employees at the job place which is face by
the Germany, for this they do migration from one place to another for working in the positive
conditions and result is the less efficiency (Zeng and et.al.,2017).
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Trade policies- It means regulation which is related to the nation which is incorporated
with the foreign countries. In this policies there is the rules and regulation is attached that
help the Germany which help in pertains the relation of the trades among the counties. Such
policies are very specifically used by each country which is used by the public officials.
There are various constituents of the use of the trade policies are tariffs, trade barriers and
safety.
 Challenge 1 : Welfare of economy: Globalization is come used as the critical challenge
in against of the rights in the economy because it leads to the conflicts among the power
of the economics have the seizing influence on the Germany.
 Challenge 2 : Intellectual property theft- As in the trade policies there is the
distribution of the goods and services across the borders, it also improve the risks which
is associated with the intellectual rights for the competitors. It is used by the various
forms such as Proprietary information for the market branding. It is the complex activity
which is used for the political risk with the Germany in the policy changes among the
different countries which have negative impact on the operations of the various nations.
Conclusion
From the above report it has been concluded that in the international finance and trade
investment means incorporation of the various activities for the financial statements for
conduction in the globally. In the financial market there is the market place for the platform in
for the consists for the activities in which there is the use of the operations for the economy of
the country. It also includes the derivative, bond, stock and forex markets. In this approach it is
very helpful for the allocation of the domestic economy in the international trade. There is also
the capital allocation of the domestic economy in the international market for the smooth
operations of the economy in the country. By the use of this there is the development in the
infrastructure development and for the small as well as large companies which is considered.
With this intentions there is the mergers and acquisitions, share repurchases and dividend
payment for the debt payment can be applied.
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REFERENCES
Books and journals
Alvarado, R., Iniguez, M. and Ponce, P., 2017. Foreign direct investment and economic growth
in Latin America. Economic Analysis and Policy. 56. pp. 176-187.
Anwar, S. and Sun, S., 2018. Foreign direct investment and export quality upgrading in China's
manufacturing sector. International Review of Economics & Finance. 54. pp. 289-298.
Araújo, K., and et.al.,2017. Global biofuels at the crossroads: an overview of technical, policy,
and investment complexities in the sustainability of biofuel development. Agriculture.
7(4). p.32.
Cumming, D. J. and Zahra, S. A., 2016. International business and entrepreneurship implications
of Brexit. British Journal of Management. 27(4). pp. 687-692.
Harpaz, M. D., 2016. China’s coherence in international economic governance. Journal of
Chinese Political Science. 21(2). pp. 123-147.
Hussain, M., Shahmoradi, A. and Turk, R., 2016. An overview of Islamic finance. Journal of
International Commerce, Economics and Policy. 7(01). p. 1650003.
Liu, T. and Woo, W. T., 2018. Understanding the US-China trade war. China Economic Journal.
11(3). pp. 319-340.
Nemet, G. F., and et.al., 2017. Addressing policy credibility problems for low-carbon
investment. Global Environmental Change. 42. pp. 47-57.
Onaran, O. and Obst, T., 2016. Wage-led growth in the EU15 member-states: the effects of
income distribution on growth, investment, trade balance and inflation. Cambridge
Journal of Economics. 40(6). pp. 1517-1551.
Qian, X. and Sandoval-Hernandez, J., 2016. Corruption distance and foreign direct investment.
Emerging Markets Finance and Trade. 52(2). pp. 400-419.
Yu, P. K., 2016. The investment-related aspects of intellectual property rights. Am. UL Rev. 66.
p. 829.
Zeng, S. and et,al., 2017. A review of renewable energy investment in the BRICS countries:
History, models, problems and solutions. Renewable and Sustainable Energy Reviews.
74. pp. 860-872.
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