International Trade, Finance and Investment

This document explores the concepts of international trade, finance, and investment. It discusses the background of financial markets, the allocation of capital in the domestic economy, and the challenges faced by Germany in trade policies and industrialization.

International Trade
Finance and Investment

Executive Summary
International trade and finance is considered as a trading activity between the borders of different
nations. Further, it is stated that financing as well as trading activities are organised in
international market. They help the organisation to generate funds from persons of various
countries. It transforms economic position of a nation as it increases the GDP of an economy.

Table of Contents

Executive Summary.........................................................................................................................2
TASK 1............................................................................................................................................7
Background of financial market:............................................................................................7
Allocation of Capital in domestic economy:..........................................................................8
Capital allocation within international market:....................................................................10
TASK 2..........................................................................................................................................11
Critically analyze challenges faced by Germany in respect to trade policies and
Industrialization....................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERNCES:................................................................................................................................14
Books and Journals:..............................................................................................................14

INTRODUCTION
In order to trade in the market there is a need of finance to be invested in that trade and
that is known as trade finance. International trade finance includes financial transactions between
different countries (Ahn 2020). International trade investment refers to the investment in trade in
order to extend the business globally. International trade and investment helps the organisation to
expand their business globally. This report contains evaluation of United Kingdom's trade,
finance and investment within the international market. It contains history of financial market
which is very important for the security transaction. There are several financial market that are
used for better utilisation if resources in the efficient manner. In order to allocate capital of
domestic market in international market faces a lot of challenges. They are related to trade
policies and industrialisation of different countries needs to be analysed.
TASK 1
Background of financial market:
Financial Market adverts to activities of the market that refer commercialism of safety.
This is much critical for cater effective and smooth running of market economy by assuring
allocation of resources and fluidity activity or creation for the organisation (Jessel and DiCaprio
2018). This kind of market makes a process so simple for the trader and purchaser in regard of
commercialism with purpose of fiscal clasp and grasping. Financial market also support in safety
initiation because as it permit return on inordinate safety like investors, capitalist and so on.
Moreover, financial market also permits and delegate money accessibility to the individuals that
refer tendency of overweening money, these kinds of individuals are creditors. There are several
financial equipments which are acquired and sold in the security market. They are several types
of financial market such as money market, derivative market, over the counter market, bond
market and Forex market. Over the counter market are those markets which are decentralised and
not having any substantial establishment. They operate their business from electronic trading.
Participants of these trading are directly involves in trading of securities whereas there is no need
of brokers to be involved in it. Bond securities are the type of security in which investors invest
their money for a particular time period with a pre determined interest rate (Brewster 2017).
Bond refers to a contract between borrower and investor with the details of terms and conditions

for payment. Money market deals with the instrument which matures in the short period of time
generally within 1 year. Interest on money market instruments are generally very low and
involve high amount to be invested in it (Demir and Javorcik 2020). But safety level of these
securities is high as it is generally issued by government. Forex securities deals in purchase and
sell of Currency and involve speculation by its participants. Currency strength is used to express
the value of currency of a country. Got a currency get its strength when the exchange rate of a
currency is more than other currencies it is also known as appreciation off currency.
UK financial market: In world's private market security, UK holds for 25% of share of the
market. It holds 52% in venture capital of European market (Brewster 2017). London stock
exchange has a history of 300 years of robust performance and considered as largest stock
exchange of Europe. It provides employment to approximately 5000 people of United Kingdom.
It contributes to GDP of country in 2007 in approximate 0.8%. In the end of the year they have
an income of 1.4 trillion as they are popular for sale of various derivatives and foreign exchange.
Entrepreneurs and businessmen prefer this foreign exchange as it helps business to grow and
expand with high earnings of profit (NGUYEN 2020). Financial market of UK carry through
various types of functions such as attracts large funds for business and this is attained by stack
market and bond market. This market is proving to be beneficial for the business as they are
trusted by investors. This is because they provide for adequate liquidity of funds. It is considered
as authenticated source of finance for large organisations in order to achieve their organisational
goals. In 1977 the Apple Company take a amount from investors as a loan of 250000 and after
completing 5 years that company borrow funds of 100 millions just by sharing small size shares.
When interest rates get high, It means that there is less money left with the consumers to spend is
taking loan will became was clear to them. When consumers have less money to spend then it
will result in drop off stock prices in the capital market. in case of Decreased interest rates, the
businessman's and consumers will have increase in spending power which result in rise off stock
prices in capital market.
Allocation of Capital in domestic economy:
According to the GDP of various countries the economy of United Kingdom is
considered as fifth largest economy of the world. The economy of UK is highly developed and
market oriented. In terms of purchasing power parity, economy of UK is ninth largest across the

world. The capital allocation in UK is primary between federal and local government and
corporations. In instance, the federal government issues notes and bonds for long term in order to
fund the debt of nation and capital projects. These capital projects include improvement in
infrastructure of a country by making schools, prisons or other construction processes. Whereas
corporations issues in both the market either bond or stock markets in order to finance their
growth with the help of issue of debt and equity in the market.
Financial intermediary operates as a middle man between the investors as well as
borrowers (Auboin and DiCaprio2017). They work to obtain funds from the savers who are
interested to invest in capital market and provide it as loan or other borrowing to the borrower.
The process followed above is known as financial intermediation.
Further the capital is to be allocated in different markets such as capital market, money
market and bond market.
Capital market – Capital markets are the markets which regulate the sale and purchase
of securities which are issued long term generally for more than a year (Brewster 2017). The
maturity of these securities is more than one year and provide for various types of securities like
debts, equity and many more types of shares. They are sold in domestic market to be purchased
by investors so that savings of people can be utilised for the purpose of production. These market
provide companies a capital to expand their business operations. According to a study that in UK
bank loans are considered as credit market instruments which provides borrowers a loan amount
they need to borrow and it will be paid to the lender on the date of maturity with interest amount
which works as a profit for lender for which they provide their amount to the borrowers. Capital
markets are the connection between savers and the entrepreneurs who want to borrow phones for
their company. The capital marketplace essential role in mobilizing funds from savings to the
productive investment. capital market is the key or the development of industry as well as
Commerce and will result in economic growth of the country. it fulfills financial needs off
various industries in the economy by providing them appropriate funds in proper time.
Money Market: One more method of capital allocation is money market. This market is
for those people who are not interested to invest their funds for a long period of time. The
maturity of money market instruments are for generally one year or less than it(Goldfarb and
Trefler 2018). They are the safest type of securities in the market with high liquidity. These are

generally issued for a specific purpose. Sometimes they are issued on discounted prices and the
payment is made at par prices and the difference between both the prices is considered as return
or interest on these securities. Generally the issue of money market securities are made by
organisations which are authorised by government to issue those securities. The money market of
UK comprises of building societies, banks and specialist security dealer who use to buy and sell
the securities.
Bond Market - There are several types of bonds that are issued for long period of time
having maturity of more than a year. They can be of different maturities and control by
regulations of bond market. Bonds oblige the institution to pay a nominal sum at a granted date,
mostly with periodical interest payments. For instance Bank of England issues government
bonds in which individuals give their money as credit to government b y taking an decided
charge of interest, they are largely considered as safest asset classes. When individuals purchase
a government bond they are giving money to the government which utilize the sum raised to
finance task or infrastructure in return, the government will fix an interest rate which will be
paid at intervals specified by the bond coupon these payments proceed till the bonds maturity
date(Avsar 2020).
Capital allocation within international market:
International markets are those market which are operated across the boundaries of a
country. They arrange capital from foreign market by issuing various bonds and instruments such
as foreign direct investment, Hedge fund or SWAP, Foreign bonds, Foreign exchange and many
more. They all are discussed below in brief:
Foreign Direct Investment – FDI it stands for foreign direct investment and reference to those
investments which are made by either forms or individuals in the business is all another country.
The resident of various countries can diversify their portfolio by investing in risky assets of
international market. Foreign direct investments are considered as a corporation of a nation
invest to build a facility in another country (Mhlongo 2019). The direct investment made to
another country in order to establish building, equipments or machinery are is not in set with
making a portfolio investment and includes all the activities of acquiring outside the home
country of investing firm. They help in rapid growth of economy. According to several studies,
FDI is an essential element which helps in development of private sector and helps to reduce

poverty. Market efficiency is that degree at which the market prices choose every relevant and
available information in the market. it will be considered as efficient when all the data is already
present in the prices. Non efficiency in the market is that situation in which prices of assets are
not reflect its true value.
Hedge Fund or SWAP – SWAP were designed to surround capital controls obligated by
government in order to ensure more efficient borrowings in security market(Ganne 2018).
International money market comprises of national currencies that are invested for short of time
and provide interest on them accordingly. The basic transaction in international money market
are borrow or lent by large financial institutions, government etc. large financial institution
includes banks, HSBC, Barclays capital, etc. Handling of Hedge or Swap includes trades of
currencies against US dollars.
Foreign Bond – Foreign bond market where bonds are offered by international borrowers.
Foreign bonds usually utilise the general currency. In the market of foreign bonds they are
offered by foreign corporations. The issuer of these binds is generally private corporations or
government. And the participants of this market are either debt issuesf that are borrowers or
Sellers that are institutions of funds. Both the participants are known as Institutional investors,
governments, traders and individuals.
Foreign Exchange – Foreign bonds are sold in the denomination of that country's currency in
foreign market. And these process of trading 9is included in foreign exchange. The exchange of
currency of different country. The exchange rate is considered as price of a specific currency
expressed in context of another one.
Central Banks - Central banks are there father of all banks and review the monetary system for
the nation along with this do you also have large range of other responsibilities all free viewing
monetary policies like low inflation, full employment and currency stability. central banks are
responsible to regulate all banks and give them financial services so the goal to stabilize currency
of nation. There are basic 5 functions which are performed by central bank That are bank of
issue, custodian, lender, controller of credit, Banker to governmentand clearing house. it also
provides protection to the interest of depositor.

TASK 2
Economy of Germany is highly developed social market across the globe having largest
economy in the Europe (Schefer 2020). There are ten export product in the economy of in
Germany that are pharmaceuticals, basic metals rubber transport equipment and food products.
It became huge economy in manufacturing sector which gets affected from down in finance. In
order to maintain to maintain it for long run they provide several suggestions in international
monetary fund. It is first to introduce gas, solar power, nuclear power as well as biomass.
Germany is the first country which introduced main industrialisation to convert the renewable
energy into biomass. In the year 2016, it became biggest addition in the international market
having value 310 billion, devising largest business person across globe, and became one of the
biggest exporter in the world with 1448.47 billions of merchandise. In Germany there is a
proportion in agribusiness which is 0.9% and in case of machinery it is 41%. Among these
figures 99% of all German institutions are exist to the medium and small size organization of
which 2000 ample are public registered corporations register in feature of income and earnings.
Critically analyze challenges faced by Germany in respect to trade policies and Industrialization
Industrialization- Industrialisation refers to a process of transforming agricultural products into
manufactured products. It is helpful in increasing growth of economy in a country. They provide
country a developed infrastructure as well as satisfy demands of people of a country. It also helps
to increase employee’s engagement in a country as it creates new employment for that specific
area. It increases the level of income as well as living standards of a society (Steckel and Jakob
2018). The emerging need of industrialisation was first notices ion 19th century in European
cities due to increased production level of farmers which needs to be utilized in during the
process of industrialisation. It not only uses the extra production from agriculture sector but also
increase employment for unemployed persons. It results in growth of economy and expansion of
a country. Industrialization is a major process which is required every country to grow in the
international market and compete with international producers. It brings foreign currency in the
country which increase its per capita income (Shaver 2020). It helps in reducing poverty in a
country by creating private jobs for small as well as large level depends on the qualification of an
individual. During this process they face several challenges which are discussed below:
Challenge 1: Unequal income distribution- Industrialisation causes unequal
distribution of income in the society as the manufacturer became rich due to high demand of

their products and farmers gets poor. The attraction of customers will more towards the
manufactured products which causes disparities in the society. This became a major challenge
for the government to solve as rich became richer and poor became poorer. In order to remove
this gap government takes various measures such as they introduce several policies for farmers
so that they can also grow and expand their businesses (Ahn and McQuoid 2017). They have
benefit in Germany by utilising no division in their working conditions as there is the difference
between affluent and helpless individuals which results in decline in the standard of living of
people which are surviving in the country from so many years. This became a major problem for
the economy of a country.
Challenge 2: Emigration – Emigration is a negative effect of industrialisation. In order to attain
a job in established industry workers needs to mitigate from one place to another which can
results in various problems in an economy. When workers mitigate from one place to another it
can result in regional disparity and also can cause various issue to health of the workers. Long
hours of working affect the productivity of employees and they feel bad for leaving their native
place for the purpose of work. Regional disparity is a condition of development of one area while
decrease in development of another area. If workers mitigate from their places to the developed
places, it will create a loss of labour capacity of that area which can cost the development of that
area.
Trade policies - Trade policy are the legislations and contract that take care of imports and
exports to foreign countries. It includes policies that assist Germany regarding the connection of
the mercantilism between countries. These rules and regulations are particularly used by public
officials of every country (Gabusi 2017). Every country has different policies in order to regulate
foreign trade which need to know by every individual Brexit put negative impact on the
economy as it cancel the trade relation between two countries. So many businesses are affected
by the agreement of Brexit. There are several component of utilization of policies in trade which
are tariffs, trade barriers and safety.
 Challenge 1: Benefit to Economy: It is essential to to protect the right of an economy.
Globalisation refers to the process of giving entry to the foreign organisations in the
country to sell their products to the people of country. It create competition for the
corporations established in Germany. Sometimes it led to fail the organisation in

sustaining in the economy. Which is not good for GDP of a country and it is not goof for
economy. Hence globalisation became an major challenge to be faced by economy for its
welfare.
 Challenge 2: Intellectual property theft- Policies in Trade provides for delivery of
goods and services between the borders of an organisation. It makes to reach a product in
every corner of the world which also increases the risk of theft of intellectual rights
associated with the products (Steckel and Jakob 2018)(Mhlongo 2019)(Brewster 2017).
They are utilized in several forms such as Proprietorship data for the branding in market.
It is complicated action which is utilized for the political hazard with Germany in plan of
action modification in the midst of the various countries which have destructive effect on
dealing of several countries.
CONCLUSION
All the above discussion concludes that international trade Finance and Investment is a
process of obtaining finance and investment from people of different countries across the globe.
It is essential in order to expand business globally. In order to borrow money from different
countries the government and other corporations uses various instruments and securities which
are offered in the capital market. These securities can be classified in two types that are to be
issued according to the area of security such as in domestic market and in international market.
In domestic market they are issued for domestic people and in international market they are
issued for institutional investors in the economy. It also provide a description about
industrialisation which has a positive effect on the economy of a country. Due to the introduction
of industrialisation in a economy there are several challenges which are faced by an economy
such as unequal distribution of income and emigration.

REFERNCES:
Books and Journals:
Ahn, J., 2020. A theory of domestic and international trade finance. Emerald Publishing
Limited.
Jessel, B. and DiCaprio, A., 2018. Can blockchain make trade finance more inclusive?. Journal
of Financial Transformation, 47, pp.35-50.
Demir, B. and Javorcik, B., 2020. Trade finance matters: evidence from the COVID-19
crisis. Oxford Review of Economic Policy, 36(Supplement_1), pp.S397-S408.
NGUYEN, H.H., 2020. Impact of foreign direct investment and international trade on economic
growth: Empirical study in vietnam. The Journal of Asian Finance, Economics, and
Business, 7(3), pp.323-331.
Auboin, M. and DiCaprio, A., 2017. Why do trade finance gaps persist: Does it matter for trade
and development?.
Goldfarb, A. and Trefler, D., 2018. AI and international trade (No. w24254). National Bureau of
Economic Research.
Avsar, V., 2020. Travel Visas and Trade Finance. Economics Bulletin, 40(1), pp.567-573.
Ganne, E., 2018. Can Blockchain revolutionize international trade?. Geneva: World Trade
Organization.
Schefer, K.N., 2020. International investment law: text, cases and materials. Edward Elgar
Publishing.
Shaver, R., 2020. International Political Economy.
Ahn, J. and McQuoid, A.F., 2017. Capacity constrained exporters: Identifying increasing
marginal cost. Economic Inquiry, 55(3), pp.1175-1191.
Gabusi, G., 2017. “Crossing the river by feeling the gold”: The Asian Infrastructure Investment
Bank and the financial support to the Belt and Road Initiative. China & World
Economy, 25(5), pp.23-45.
Steckel, J.C. and Jakob, M., 2018. The role of financing cost and de-risking strategies for clean
energy investment. International Economics, 155, pp.19-28.
Mhlongo, L., 2019. A critical analysis of the Protection of Investment Act 22 Of 2015. Southern
African Public Law, 34(1), pp.1-22.
Brewster, C., 2017. Human resource practices in multinational companies. The Blackwell
Handbook of Cross‐Cultural Management, pp.126-141.