International finance is that branch of financial economics that deals with the monetary or the macroeconomic inter relations between two or more nation states. This field studies the relationships and dynamics that exist in the global financial systems or the international monetary system such as balance of payments, stock exchanges, exchange rates, foreign direct investment as well as international trade. Multi-national organizations hire the experts in international financial management to study the inter-play between the various elements of international finance and accordingly formulate strategies for international business for their organization. It is also referred to as multinational finance, international monetary economics or international macroeconomics.
International trade and related financial activities provide both opportunities and associated risks for investors, exporters and capitalists. By understanding the emerging trends in this field, they can learn how to invest fruitfully in today’s environment. The field of international finance has seen a significant growth over the past decade. Some of the recent and emerging trends in this field are as below –
- Countries are Re-balancing Their Import Export Trade
This trend is visible in the way countries like China are trying to balance their import and export trade. The country’s fast growth in the last decade was fueled by its major dependence on its import and export trade. The country is known for large amounts of export of inexpensive goods all over the globe. This happened at a large scale which was not sustainable. Now China is importing goods in exchange for investment. It is now focusing on producing everything they need for domestic use. This puts the countries that relied on Chinese investment in a spot as they struggle to find comparable markets for their products. In addition, the tariffs imposed on China by US and EU have slowed down its trade and has provided benefits to domestic manufacturers.
- There is New Found Cooperation Among Countries
There is a growing need for cooperation in trade among many countries. Countries are getting involved in treaties and international organizations in a way that is mutually beneficial to all the member countries. For example, the significant growth of data economy has led to businesses realizing the need of cross border data transfer. Hence, large scale multi-national corporations have eased up on their data transfer related restrictions. This helps the organizations to share online resources for trading, export and for collecting relevant data from around the world.
- There Exists Growth in Export Opportunities in India and South America
India and many countries in South America such as Brazil, Chile, El Salvador and Peru have been expanding their economic opportunities. India is growing market for US exporters. It purchases precious metals and diamonds, machinery, optical equipment and agricultural products from the USA. Brazil imports aircraft, machinery, petroleum products and electronics from the USA. These countries have a strong and growing economy as well as an ever-expanding middle-class segment who is eager to purchase premium merchandise.
- There is a Rising Popularity of Euro Markets
Euro market is a financial market that deals with euro-currencies. It consists of banks outside the country from where the currencies originate. Euro banks are a popular choice for many multinational corporations for their financial plans because they are free from any regulation and they have the ability to expand a stock of money and credit outside the control of national authorities.
- There is a Visible Emergence of Multi-National Corporations from Emerging Economies
In 2006, it was observed that out of the 100 big multi-national corporations of the world, 22 of them came from emerging economies. This figure has been on an increase and big multinational corporations from the developing or transitional economies are playing a significant role in world economics.
- There is an Increase in Cross Border Mergers and Acquisition Based Activities
Due to the rise in the level of foreign direct investment (FDI), there has been a spike in mergers and acquisitions (M&A) within the financial domain across the globe. The acquisition of ABN-AMRO by the consortium of Royal Bank of Scotland, Fortis and Santander was one of the largest deals in the history of banking industry.
- There is a Deregulation of the Financial Markets
The world is witnessing an internationalization of money and the capital markets. Countries like the USA and many European countries offer free financial markets to investors. Singapore and Hongkong have also emerged as strong financial markets. This has led to the creation of a worldwide banking structure.
As organizations are going global, there is an increased interest in international finance for investors and global business owners. And, they can make the most of their presence in the international finance market by being aware of the latest trends in this field.