Module:

International Trade, Finance and Investment

Lecturer: Mr Crishain Jayalath.

Individual report

Student Name: M H M ADHIL

UWL ID: 21577106

Word count: 3200

Submission Date: 17/01/2023

1|Page
 ACKNOWLEDGEMENT
In performing my assignment, it is a success I had to take help and guidance from
some respected people. First, I’m grateful to my lord. Who gives me sound mind and
sound health to accomplish my assignment. And my special thanks to Mr Crishain
Jayalath the lecture of “International Trade, Finance and Investment” of ANC for
making the subject interesting and giving a great support to make this report
successful.

Also, I would like to thank my parents for gave me the valuable opportunity of
building up my future.

Further thanks to my colleagues who have been sharing knowledge and helping
each other to clear any doubts.

2|Page
Table of Contents
ACKNOWLEDGEMENT...............................................................................................2

3.0 BACKGROUND OF FINANCIAL MARKETS OF INDIA & CHINA.........................7

1. Definition of Financial Markets........................................................................7

2. Functions of Financial Markets.......................................................................7

3. The disruptive impact of government interventions........................................8

4. Types of Government intervention..................................................................8

PROTECTIONIS POLICIES..................................................................................8

ATTITUDE TOWARDS FDI’S...............................................................................9

ATTITUDE TOWARDS FREE TRADE.................................................................9

4.0 INTERNATIONAL EXPANSION...........................................................................11

The attractiveness of international expansion........................................................11

Trade and Finance Theories...................................................................................11

Mercantilist Theory of trade.................................................................................11

Modern theory of trade........................................................................................12

New theories of Trade.........................................................................................12

Trade liberalization..............................................................................................12

Ricardo’s comparative advantages.....................................................................12

Preferential Trading Agreements........................................................................12

1. Free trade area..........................................................................................12

2. Custom union.............................................................................................13

5.0 Evaluation: Indian & Chinese Economies............................................................14

Demographics factors.............................................................................................14

Gender parity.......................................................................................................14

Income level........................................................................................................14

Social classes......................................................................................................14

Religion................................................................................................................15

3|Page
 Races...................................................................................................................15

Sectorial Performance............................................................................................15

Primary sector.....................................................................................................15

Secondary sector.................................................................................................15

Tertiary sector......................................................................................................16

Introduction to the economy....................................................................................16

Size of GDP to India............................................................................................16

Size of GDP to China..........................................................................................16

Economy indicators.............................................................................................16

6.0 Evaluation of challenges.......................................................................................18

INDUSTRIALIZATION............................................................................................18

Employees working condition..............................................................................18

Distribution of income..........................................................................................18

Effect on resources.............................................................................................18

Natural and man-made........................................................................................18

TRADE POLICIES..................................................................................................19

Tariff........................................................................................................................19

India.....................................................................................................................19

China....................................................................................................................19

Quotas......................................................................................................................20

India.....................................................................................................................20

Subsidies...................................................................................................................20

India.....................................................................................................................20

China....................................................................................................................20

Other regulations.......................................................................................................20

India.....................................................................................................................20

China....................................................................................................................20

4|Page
 WTO (World trade organization)................................................................................20

India.........................................................................................................................21

Conclusion..................................................................................................................22

References.................................................................................................................23

Table of Figures
Figure 1: Flows of funds through the financial system.................................................7

5|Page
 3.0 BACKGROUND OF FINANCIAL MARKETS OF INDIA &
CHINA
1. Definition of Financial Markets.
 The term financial market refers to any type of marketplace where the
exchange of values is carried out. There are various types of financial market
such as bonds, money, and foreign exchange.
 The financial market is a type of market that involves the exchange of assets
and securities.
 If the financial market fails, it can cause various economic consequences.
These include unemployment and economic decline.

Basically, the development of the financial market is very important for the country's
economic growth. It can help boost the country's productivity and develop its
technological capabilities. It can also encourage the flow of foreign capital.

2. Functions of Financial Markets.

Figure 1: Flows of funds through the financial system

According to figure 1 which shows the indirect finance method. Where the funds of
lender savers will be used to fund the intermediaries of financial firms, such as banks
and insurance companies. They can also be directed to the borrower spenders, such
as government and business firms. However In the direct finance method, the money
is given to the market by the lenders.

6|Page
 3. The disruptive impact of government interventions.
Some of the government's inventions include tax increases, government bailouts,
price controls, minimum wage increases, and regulations.

 INDIA.
These inventions can result in weak price implementation and distortions of the
market. Subsidizations and taxes can also raise or decrease the price of goods and
services. These can affect how the market distributes scarce resources.

 CHINA.
The second-largest economy in the world, China, is under increasing pressure from
its trading partners. Due to its protectionist policies, it has been the subject of
numerous international investigations. In the United States, President Barack Obama
has accused China of unfairly supporting car exports. Another issue that China's
government is facing is its refusal to appreciate the value of its currency.

4. Types of Government intervention.

PROTECTIONIS POLICIES.
Protectionist policies are policies that aim to safeguard private industries from foreign
competition. They can include implementing quotas, tariffs, and other restrictions on
the import of foreign goods.

 INDIA
India's trade protectionism can cause it to rise in value and slow down the country's
export growth. It can also help boost the domestic production of goods and services.
When the country follows a policy of protectionism, it can encourage domestic
producers.

India can also limit the imports of certain products and services by implementing
tariff policies. This can prevent a company from making profit from its operations in

7|Page
the country. Since the government holds 70% of the country's profits, a company
cannot make profit from its activities.

8|Page
  CHINA
The second-largest economy in the world, China, is under increasing pressure from
its trading partners. Due to its protectionist policies, it has been the target of
numerous international investigations. For instance, US President Barack Obama
stated that China was supporting car exports.

Due to the COVAID 19, China's import tariff decreased in 2019. The rate was at
2.53. If we compare it with the rates from 2018, the tariff rate has dropped to 0.86%.

ATTITUDE TOWARDS FDI’S.

Foreign Direct Investment is a type of investment that is made by a foreign company.
It involves buying a specific business or organization from another country.

 INDIA
The Indian government has been very positive about foreign direct investment since
the 1990s. It has been able to attract more foreign investment due to its low taxes
and favorable business environment. This will help the country develop its
technology and create jobs.

 CHINA
Compared to other major economies, China's government is more against foreign
direct investment. It allows international companies to establish their operations in
the country, and then it copies the process of an international firm.

ATTITUDE TOWARDS FREE TRADE.

Free trade is a policy where imports and exports will be not restricted.

 INDIA
India is against the full implementation of free trade. It has tried to have a mixed
economy where the government and free trade is involved. When India starts to
believe in the benefits of free trade, its economy will grow. This can lead to lower
government spending.

9|Page
  CHINA
China supports the changes in the international trade rules. It is because it can
understand the fast-moving changes in the trade system. It also proposes to reform
the rules regarding foreign investment.

10 | P a g e
 4.0 INTERNATIONAL EXPANSION
The concept of international expansion is a strategy that businesses can use to grow
their operations. It can help them increase their profitability and reduce their risk.
When a company decides to expand, it should carefully plan and implement the
strategy.

The attractiveness of international expansion.

 INDIA
The country is expected to grow at a rate of 7.5%. It has a robust board market and
the government has taken various steps to improve the country's infrastructure and
economic growth. Some of these include the Digital India, Land Aquations, and
Goods and Services Tax reforms. Going global can provide India with more
employment opportunities.

 CHINA
In purchasing-power groups, China has become the largest economy. Its gross
domestic product was at 66% in 2017. It is also one of the most connected countries
in the world. Going global can help the country expand its market and create new
customer bases. When China begins to expand its international presence, it can gain
a competitive advantage over other countries such as the US.

Trade and Finance Theories

The concept of trade and finance is a broad study of how the world's current trade
works and how it affects the domestic economy.

 Mercantilist Theory of Trade

 Modern theory of trade
 New theories of Trade

11 | P a g e
Mercantilist Theory of trade
The Mercantilist theory is a framework that supports the government's rule of
international trade. It aims to ensure that the country's national power is
strengthened and wealth is produced.

Modern theory of trade

The modern trade theory known as the Heckscher-Ohlin theory is also known as the
endowment factor theory. This concept focuses on the factors that influence the
export of a country.

New theories of Trade

The new trade theory is an integral part of the international trade theory. It focuses
on the expansion of network effects and return to scale.

Trade liberalization
The concept of trade liberalization refers to the reduction or elimination of barriers
that prevent goods from being traded between nations. These include tariffs and
non-tariff barriers.

 India
The Indian trade liberalization started on 1991 as part of larger reform capability.
After the trade liberalization India’s economy grew to become the 5 th largest country.

 China
China has complete liberalization measures in China world trade organization
(WTO). Succession packages will help to simplicity this problem as there will be
reduction in tariff where the prize of the domestic input’s exporters. WTO dedication
will also lead to ending most of the nontariff barriers and quotas of textile and
clothing.

Ricardo’s comparative advantages

This theory defines the nations who are using this theory can gain an international
trade advantage when they are well focused on producing goods that will produce
the lowest chances of cost as compared to other nation.

12 | P a g e
Both China and India will enjoy the comparative advantages for the employee
advantages and the resources intensive sectors in global market.

Preferential Trading Agreements

1. Free trade area
Free trade area assembles of countries within which tariff and non-tariff trade
barriers between the members.

 India
The Indian free trade area (AIFTA) is a free trade area among the ten member states
of union of southeast Asian nations (ASEAN) and the republic of India. The first
framework argument was signed in 08th October 2003.

 China
There is common view as weaker than the investment treaties the United States
seeks to negotiate. China has agreement of 17 free trade agreements (FTAS) with
the trade and investment colleague.

2. Custom union
Is an agreement between two or more adjacent countries. So, they can take down
the trade barrier. They can have less or completely remove the custom duties and
get rid of the eliminate quotas.

 India
An agreement was made on customs co-operation and mutual admirative on 28 th
April 2004.

I think India is a better choice than China due to its lower barriers. Also, as it has an
AIFA, it is more likely to attract investment.

13 | P a g e
 5.0 Evaluation: Indian & Chinese Economies
Demographics factors
Gender parity
Parity means all gender should be presented equally. It’s a display of the quality
service which includes the approach that the same opportunities are given both to
woman and men and the rights.
 India
India’s ranking in general has an improvement in the year 2022. Where India has
135 to 146 slandered this year. This world’s economic forum (WEF) is the newest
gender Gap reported here.
 China
In China gender parity started since 1954. There were more than 100 laws were
regulated by the Chinese government regarding the women’s development and
women’s rights and interest. 50% of the China’s poverty and more than 40% is
employed population in China.
Income level
Income level means the total mixed income from any source.
 India
India is a lower income country. When the Indian income group increases the tax
payers will be increased by the government of India. India’s NIAA was
approximately 135 thousand rupees in the year 2020.
 China
If we focus on the national Bureau of statistics (NSB) China’s GDP per capita was
approximately $12,551. When we see the national Bureau of statistics the chin ais
coming under high income country. China has been defined as the high-income
country by World Bank and go pass the global average GDP per capita.
Social classes
Social class is also known as class. Social class is bunch of people with the
community who passes the same social economic status.
 India
There are five main cast in India. They are Brahmin, Kshatriya, Vaishya, Shudra, and
the Dalits (which means untouchables). The main basis of this classification is the
myth of Hindu god Manu in the earliest the book of books of Hinduism.

14 | P a g e
  China
There are four social class of in China. The four social classes are Emperor, social
bureaucrats and gentry, working class which include peasants’ workers and
merchants. The last is the lower class.
Religion
The service and worship of God or the supernatural.
 India
India has the biggest population is various as well as devout. Rather than Hindu,
Janis and Sikhs. For the population of Muslim and Christian and Buddhism is also
an Indian’s massive population.
 China
China has a lot of religions which include Buddhism, Taoism, and Islam are the most
famous religions in China. Where some of the Chinese also has population who
believes on Christian.
Races
Race is described as a group of people. Race can be defined by the colour of skin of
the people and the nationality plus the citizenship.

Sectorial Performance
There are four types of sectors
 Primary sector
 Secondary sector
 Tertiary sector
Primary sector
Primary sector is the process that will be done utilizing natural resources.
 India
India primary sector is 21.82%. in the present India primary sector which include
primary sector and the agricultural 20.19%.
 China
According to China the primary sector includes agriculture, Forestry, animal,
husbandry, and fishery.
Secondary sector
Secondary sector includes the activities consisting in different point of processing of
raw materials.

15 | P a g e
  India
The secondary sector comes up with 24% of the share of the economy of India.
Secondary sector in India includes miming, manufacturing, and constructing.
 China
China’s secondary sector has the 40.5% of China’s GDP. China’s secondary sector
focuses on the electronic market which is the main thing for the China’s growth.
Tertiary sector
Tertiary sector is also known as the service sector. The tertiary sector includes
supplying of services rather than end products.
 India
The tertiary sector improved the India’s economic growth. The tertiary sector of India
has no limited schools, financial institutions, insurance companies, bank institution,
restaurants, hotel, and many more.
 China
China tertiary sector has developed form export ordinary economy to consumption
driven economy.

Introduction to the economy

Size of GDP to India
India size of GDP has been increasing form 1987- 2023. At 1987 the GDP of India
was 283.75 now in present the GDP has gone up to 3820.57.
Size of GDP to China
China size of GDP has been increasing from 1985- 2023. At 1985 China’s GDP was
310.10 and in present GDP was 21, 643.25.
Economy indicators
 GDP growth in India
India size of GDP has been increasing form 1987- 2023. At 1987 the GDP of India
was 283.75 now in present the GDP has gone up to 3820.57.
 Size of GDP to China
China size of GDP has been increasing from 1985- 2023. At 1985 China’s GDP was
310.10 and in present GDP was 21, 643.25.
 Inflation rate in India
Form 1960- 2020 I the inflation rate was increasing. Form 1960 the inflation rate was
1.7% and 2020 the inflation rate was 2.13%.

16 | P a g e
  Inflation rate in China
Form 1960- 2020 I the inflation rate was decreasing. Form 1990 the inflation rate
was7.23% and 2020 the inflation rate was 2.42%.
 Interest rate India
India interest rate is 6.25%.
 Interest rate in China
China interest rate is 4.05%
 Exchange rate in India
Dollar rate is 0.012 united states dollars – one Indian rupee.
Exchange rate in China.
I Chinese yuan is 0.14 united states dollars.

17 | P a g e
 6.0 Evaluation of challenges

INDUSTRIALIZATION.
Employees working condition.
A positive working condition for the employees will make a good teamwork among
the employees.
 India
In India, the various acts that are related to the establishment of a workplace are the
S&E Act, the FA Act, and the IESO Act. The S&E Act provides for the flexible
working arrangements of employees. The FA Act ensures that the employees are
provided with the necessary health and safety benefits. The IESO Act provides for
the establishment of a holiday and overtime holiday policy. The CLRA concept
provides for the establishment of a variety of facilities for the employees.

 China
In China, the standard working hours for a full-time employee are eight hours and 40
minutes per week. For those working in extended hours, the normal wage is around
150%. On rest days, workers are paid the same rate as on regular days. About
300% of the salaries of employees are paid on public holidays.

Distribution of income
 India
India’s distribution of income has an inequality in the year 2021. The adults
population earns INR 204,200. The other bottom earns 50% where they earns INR
53,610. The other 10% earns 20times more than the other INR 1,165,520.
 China
The demography shows the difference of income distribution of China as at from
2004-2021.
Effect on resources.
Natural and man-made.
 India natural sources
India’s natural resources are iron, ore, manganese mica, bauxite. Chromite, natural
gas, diamonds, limestone, and thorium.

18 | P a g e
  China natural resources
China’s main 2 resources are coal and rare earth material. Timber is another main
thing found in China.
 China mad-made resources
China has the highest and longest Glass bottom Bridge. China has the largest high-
speed rail. China has the largest radio telescope, China has the largest ice city,
China has the highest bridge.
 India mad-made resources.
India is good in manufacturing vehicles in low cost. They produce mobile phones as
vivo and oppo.
Intellectual property
Intellectual property includes formation of mind, innovation.
 India
India has involved in foreign direct investment (FDI). Where India has become top
country for the inflow in the upcoming years. This agreement is signed by the
confederation of India industry and EY in 2020. India and south Korea relationship
where a economic partnership agreement was signed in 2010.
 China
Intellectual property has been accepted and protected in China since 1980s.

TRADE POLICIES
Under the trade policies China and India is focused on Tariff, Quotas, subsidies, and
other regulation.
Tariff
India
India upcoming trade policies is form 2021- 2026. Where the Indian government of
India decided to expand merchandise exports with important on the share of MSME.
In the year 2020 the tariff rate was 6.19%. If we compare the year 2020 to 2019 in
2019 it ha decline about 0.4%. India has war subsidies. India has subsidies to
industries and products form the fuel gas.
Indian government has lot of regulations and these are some of the regulations.
AERB regulation, IBBI regulation, CDSCO regulation.
China
China current trade strategy are having four agreements. In the year 2017 US
average tariff rate 1.51%. US trade weighted average tariff rate on imports to China
has 2.68 %.in the year 2018 US average tariff rate 1.95%. US trade weighted

19 | P a g e
average tariff rate on imports to China has 4.08%. in 2019 US average tariff rate
2.97%. US trade weighted average tariff rate on imports to China has 9.11%. China
quotas 46% versus 13 billion tomes. China government has 100og billion dollars in
subsides to preferred domestic every year.
Quotas
India
The quota system in Indian law is form of approving action. Where the percentage of
sales or quotas are taken by the public sector units.
Subsidies
India
The Indian government is about 5% of the its total budget on subsiding food. In the
yar 2022-2023 5.2 % of the total budget is used to country’s food subsidy program.
China
The Chinese government has spent hundreds of billions of dollars in subsidies to
favored domestic companies every year.
Other regulations
India
There are 08 main regulation in Indian regulatory law system
The factories act (1948), The industrial disputes Act (1947), The minimum wages
act (1948), The employees provident fund act 1952, The workmen compensation
Act ( 1923), The shops Establishment Act (1948), The payment of Bonus act
(1985), The payment of Gratuity Act of 1972.
China
China has lot of regulations. They have the dominant industries where agricultural
has 08%, Construction and manufacturing 38% and services 54%. Chinese
population and Languages, business culture, key business and economic events.
WTO (World trade organization)
WTO is known as world trade organization. This is one of the global international
organizations which is negotiating with the trade between two nations.

India
I have selected India has my country. I will be focusing on WTO.
20 | P a g e
The reduction of tariffs by the World Trade Organization has been a positive factor
for India's export competitiveness. It helps the country to become more productive
and contribute to the global economy. The organization has also improved the
country's growth and development by implementing trading technology.

When it comes to supporting India, the World Trade Organization has a negative
side. The agreement that they support, the TRIPS, was opposed to Indian patents.

When the patents for various products were introduced in India by the WTO, the
country's multinational companies (MNCs) caused the prices of drugs to increase.

21 | P a g e
 Conclusion

In this section, I discussed the financial back ground of China and India. Then, I
talked about the various inventions of the two countries. I also explored the concept
of international expansion and its trade and finance theories. I then assessed the
economies and the trade and finance issues of both countries.

22 | P a g e
 References
There are no sources in the current document.

23 | P a g e