Assessed blog 8- A brief analysis of EVS Broadcast Equipment`s dividend policy

In the modern and complex environment, globalization and privatization have brought deep competition in every field of activity. It is very difficult for the companies to compete in the markets of stunning nature. Shareholders’ wealth is shown in the market price of the company’s common stock. Management of a company want to maximize shareholders' wealth. This is possible when the price of the company’s common stock is maximum. Shareholders like cash dividends and they also like the growth in earning per share that result from investing the earning of business back into it. The best dividend policy is the one that maximizes the company's stock price which leads to maximization of shareholders' wealth and also ensures more quick economic growth.

Dividend payment is the distribution of net profit after tax to a company’s shareholders after keeping a specific amount of earnings to reinvest in the business. Dividend policy is a significant concern of both financial managers in shareholding firms and outside investors.

EVS Broadcast Equipment, the leading provider of live video production systems, on 9^th April 2014, the Board of Directors published a dividend proposal, which is the payment of a total gross dividend of EUR 2.16, implying a final gross dividend of EUR 1.00 to be paid on June 2, 2014.The proposal takes into account the 18.5% decrease of net profit in an uneven year 2013 (18.2% lower than 2012). Mainly due higher investments in future-proof equipment, the willingness to keep some financial flexibility if the company needs to accelerate investments for growth and the cautiousness of the EVS management relating to the short term market conditions (as announced in 2013 results press release). The Board has also decided to adapt the dividend policy. As from 2013, the Board of Directors has established a dividend policy which aims at paying a high portion of the net profit, taking into account the cash needed to finance the company growth, and with a maximum pay-out ratio of 100%. This EUR 2.16 dividend represents a pay-out ratio of 85.7% (in line with average of last 10 years) and a dividend yield of 4.4% (gross dividend divided by average share price in 2013).

According to Modigliani & Miller (1961) through the dividend irrelevance theory stated that share value depends on corporate earnings, which reflect the investment policy of the company, the net profit of EVS Broadcast Equipment decreased, because of the high investment in future-proof equipment, therefore, in the following year, the company will not have big investment anymore. It depends only on investment decisions and it is independent of the level of dividend paid. First of all that theory assume that capital markets are perfect, there are no transactions costs associated with converting shares into cash by selling them and firms can issue shares without incurring flotation or transactions costs to raise equity, whenever needed. Continuing with the assumptions Modigliani & Miller stated that in a perfect capital market there are no conflicts of interests between managers and security holders, which is known as the Agency Problem. Shareholders, actually, own a company but managers are the ones who make the business run and decide. Modigliani and Miller argues that rational investors, in other words those who prefer their wealth maximization, do not care whether they receive dividends on their shares or investing retained earnings in new opportunities, they have identical borrowing and lending rates and were apathetic to the timing of dividends. Furthermore shareholders can simply sell some of their shares for cash, if dividend are too small. That is another reason the EVS Broadcast Equipment pay out high dividend. According to Modigliani and Miller a company’s choice of dividend policy is a choice of financing strategy and the investment decision is separate from the dividend decision. They also argued that investors calculate the value of companies based on their future earnings capitalized value and is not affected by the dividends that a company pay and neither how dividend policies are set from company.

The theory is established and argued by famous economists and we cannot challenge them, but under a real market conditions we cannot use the Irrelevance theory and that is because some of the assumptions made by Miller and Modigliani are not realistic.

From the case, it is clear to find out that the determinants of dividend policy of a company are classified into a large number of financial and non-financial determinants Lintner (1956). According to the dividend irrelevance theory, the share value depends on corporate earnings, while gearing and liquidity were found to have a strong relationship with dividend rates of company. While gearing is found to be negatively associated, liquidity was positively related. Dividend distribution is cash payments, and cash expenditure is bound to affect the company's debt paying ability. Therefore, taking into account the cash needed for the company growth, maintaining a strong ability to pay the debt, EVS Broadcast Equipment changed a dividend policy which aims at paying a high portion of the net profit, in order to maintain the company's reputation and borrowing capacity.

The company paying out dividends is obviously generating incomes for an investor, however even if the firm takes some investment opportunity then the incomes of the investors rise at a later stage due to this profitable investment.

Source:

Lintner, J. 1956. Distribution of Incomes of Corporations among Dividends, Retained Earnings and Taxes. The American Economic Review, May, 46(2): 97 – 113.

Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411-433.

Assessed blog 7- The application of capital structure

• ·         Capital Structure

Capital structure refers to the make up a firm’s capitalization. It represents the mix of different sources of long term funds in the total capitalization of the company like equity shares, preference shares, retained earnings, long-term loans etc. In other words it can be precisely told as financing plan of the company.

The cost of capital is the rate of return that the enterprise must pay to satisfy the providers of funds. The cost of equity is the return that ordinary stockholders expect to receive from their investment. The cost of loan stock is the rate, which the company must provide its lenders. The weighted average cost of capital (WACC) firm’s capital structure is the average of the cost of its equity, preferred stocks and loan stocks. (Aghion, 2006) An ideal mix of debt, preference stocks and common equity can maximizes the share prices. Debt capital is regarded, as cheap source of finance to the business but will also increase the finance risk of the company. Common stocks regarded as less risky but might lead to loss of voting rights if bought by outsiders. (Aghion, 2006)

In the following analysis, the Ford Motor Company will be chosen as the example to analyse Ford Motor Company’s capital structure to understand the financial risks and companies financial make up.

• ·         Ford Motor Company Capital Structure

In the beginning of 2013, with automotive gross cash of $24.3 billion, exceeding debt by $10 billion. A strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011. In 2012, pre-tax operating profit excluding special items, was $8 billion, or $1.41 per share. Record results of $8.3 billion in North America, continued solid performance from Ford Credit of $1.7 billion, positive results in South America, continued investment in Asia Pacific Africa and began a challenging transition in Europe. With an eye to the future, Ford continued the largest and fastest manufacturing expansion in more than 50 years, adding capacity to support growth plans in North America and Asia Pacific Africa. (Ford, 2012) Although Ford has debt of over $14 Billion they are still positioned to continue to be the top automotive maker in the US. Their debt can be attributed to the decision made by CEO Alan Mulallys decision to borrow $23.6 Billion in 2006 to avoid the recession and ultimately causing others to require government assistance (Taylor, 2009). This decision has afforded Ford the room to make decisions to better their market share in the future.

Below is the capital structure as of September 2013. Equity is represented by the Orange equalling 20.5 Billion, with company debt of over 110 Billion.

What the Modigliani and Miller theory of capital structure means to the Ford and its investors is that since the company was able to get a large amount of cash through taking on debt, to increase the value of the company it needs to use this capital to generate more revenue. Investors will not respond to a rise in the debt levels of the company until they become excessive, what will increase the value of the company is a rise in sales revenue. This is not to say that there is no adverse effects of the company taking more debt and the shareholders will not be any worse off as debt levels go up. There is considerably more risk as the company becomes more and more leveraged. This is the basis for the second proposition to Modigliani and Miller’s theory, which says that as risk increases the investor’s expected return also rises to compensate for the additional exposure to risk. The second theorem is what dictates that Ford use its additional capital to generate more income. Without a significant rise in demand for automobiles, Mulally’s only choice was to shed assets that were costing too much money and take market share.

·         Optimal Capital Structure at Ford

Ford Motor Company has seen a large increase in their debt to equity ratio since their decision in 2006 to borrow against their assets. Currently they are seeing a decrease in that ratio to 5.4 as of Sept 2013. According to company disclosure Ford Motor Co has Debt to Equity of 5.4 times. This is 550.0% higher than that of Consumer Goods sector, and 355.56% higher than that of Auto Manufacturers - Major industry (axis, 2014).

Date	debt to equity ratio %
Sept. 30, 2013	5.405
March 31, 2013	6.102
Sept. 30, 2012	4.586
March 31, 2012	6.051
Sept. 30, 2011	15.06
March 31, 2011	39.71
Sept. 30, 2010	-65.94
March 31, 2010	-23.84
Sept. 30, 2009	-15.29
March 31, 2009	-8.303

Figure: debt to equity ratio of Ford from 2009 to 2013

Source: annual report of Ford 2013, 2011, 2009

Ford Motor Company has multiple revenue streams including Ford Motor Company as well as Ford Financial services. Ford Motor can be impacted not only by economic recession or the public’s review of American made vehicles including trucks that have high gas mileage. With the current increasing gas prices Ford must ensure they are investing in the development of the cost and gas efficient vehicles within its portfolio. Fords decision toincrease debt may have given them positive public relations but has put them in a difficult position with limited cash flow needed to continue to grow products. 

References

Aghion. P., & Patrick B. (2006) An Incomplete Contracts Approach to Bankruptcy and the Financial Structure of the Firm

Axis, M. (2014). Ford Debt to Equity. Retrieved from macro axis: http://www.macroaxis.com/invest/ratio/F--Debt-to-Equity Ford. (2012).

Annual Report, 2013, 2012. Retrieved from Corporate.ford.com: http://corporate.ford.com/doc/ar2012-2012%20Annual%20Report.pdf Taylor III,

Assessed blog 6- Family business

The E.U. commission defines a family-owned business as any business in which two or more family members are involved and the majority of ownership or control lies within a family.

In the current challenging economic climate, times are tough for the majority of Businesses out there. The outlook appears gloomy. The family business context is one of the most important components in the world of entrepreneurship, however, taking a look at the family business sector, which creates an estimated 70% to 90% of global GDP annually. To support the statement above, it is needed to mention that, for example, a recent study by Campden FB revealed some insights into the top 50 fastest growing family businesses around the world and indicates the sector is booming. In Europe, a large percentage of these small-medium sized enterprises are owned and controlled by families. In the UK for example, almost one-third of UK employees work in family-owned enterprises, which account for 65% of all UK businesses and contribute nearly 41% of GDP, like Sainsbury’s. In the U.S., according to figures compiled by the Family Firm Institute, a big percentage, that in some cases exceeds the 80% of domestic companies, are family businesses. These companies account for 60 percent of total U.S. employment, 78 percent of all new jobs and 65 percent of wages paid. According to Gaebler Ventures, a Chicago-based business incubator, “Here is why: 35 percent of Fortune 500 companies are family companies.”

Therefore, the development of family businesses become a concern among whole economy. Family businesses, whether private or public are presented for simplifying the conflicting objectives of the business and its shareholders with respect to the fundamental issues of capital, as well as various financial alternatives available to the family business.

For the family businesses, it is no accident that self-finance and debt are the two most popular forms of finance for family businesses. Both forms of finance do not alter the share ownership of the company and thereby preserve family ownership and control. While family-owned businesses often steer away from equity finance in a bid to retain ownership of their business, it is also the case that external investors are often deterred from offering equity finance to family-owned ventures due to the limited opportunities to secure an exit.

However, staying within these financial constraints can retard the development of the venture and sometimes even be the cause of its downfall. Most high performing modern family businesses take external finance in order to achieve their potential.

Of course, finance plays a big part in attempts to resolve typical family business issues, such as passing on a business to children but extracting value for the parents’ retirement, or many family members receiving an income from the business and so on. Any solution requires the dual challenge of satisfying both the emotional and rational financial considerations of fairness.

How do family businesses perform when only the strong survive?

To answer this question, the performance of family-owned companies with businesses using Standard & Poor’s Compustat database will be compared. 

It is clear to find that family businesses handily outperformed non-family companies during both the 2001 and 2010 recessions in terms of a key metric, Tobin’s q.  (Tobin’s q is the ratio between a company’s market capitalization and the replacement cost of its tangible assets, with a higher ratio indicating that a company has more intangible assets such as patents, brands, leadership etc., and is likely to grow more in the future than one with a lower Tobin’s q.)

For instance, in our sample, the average Tobin’s q of all the family businesses remained at 0.86 regardless of the economic cycle, but that of the non-family corporations reached 0.95. Thus, the former coped better with the recessions than the latter.

A Family system tends to be orientated around emotions whereas a Business system tends to focus on profit and efficiency. However, when managed effectively, family firms can far outperform their non-family owned counterparts; think IKEA, think Wal-Mart, think Clarks Shoes. Here, we set out some of the qualities of family businesses that can make them very special indeed:

• ·         A Long Term View

Family Businesses tend to have a longer term view than other business models. This is because families often have a horizon for success which is a generation or more.

• ·         Quality Time

Successful business owning families tend to spend time together. Family firms which are successful, whatever the size of the family and business, tend to have a family behind it which is aligned behind a common vision and set of values.

• ·         Good Governance

Those family businesses that we see that are really special, understand the importance of good family governance and not only that, they work at it. 

• ·         Self-Awareness

Family Businesses who are successful are also self-aware. They understand their strengths and weaknesses and are open to new ideas.

Aronoff and Ward (1990) have made the excellent point that many of the virtues of family enterprise cannot be bought and, therefore, should not be sold. Just the same, to keep the family business in the family during the next decade and beyond will require extensive self-examination and the will to make some hard decisions (Lansberg, 1988). Getting empathetic and timely professional assistance will be a key component to achieving an outcome appropriate to the business, equitable, and well thought out with respect to the family that built it.

Assessed blog 5- Crowdfunding in the category of Film & Video in 2014

Crowdfunding in its broadest definition is: ‘an alternative method of raising finance for business, project or idea’ (Adams, 2012). With more specific definition, in reflection to the major websites, crowd funding focuses on presenting the idea –whether it is a single project, business or concept – in the profile format required by the website, and after choosing a limited time frame and amount. The individual or company has to try and raise the set target fund using social networking and spreading the pitch page to various unknown individuals across the internet. The goal of each profile is to find the financial amount (and if possible more) within the timeframe set for them.

When a profile reaches its financial target, the website will charge the fee of 3-5% from their successful earnings, and the project will go ahead with fulfilling its set out goal. Crowdfunding criteria varies for each project and website, however, for creative projects, these are the main principles on the major websites. Focusing on Kickstarter – the biggest current funding platform – and Indiegogo – one of its closest competitors – both websites request both a financial target and time limit in which the target must be met. The main difference that is seen in crowd funding can be summarized where “instead of raising the money from a very small group of sophisticated investors, the idea of crowd funding is to obtain it from a large audience (the “crowd”), where will provide a very small amount.” (Thomas Lambert, 2010). One of the main advantages with crowd funding is the fact that all money earned through the profile is established as donations and don’t need to be paid back.

Renowned Oscar filmmaker David Fincher, who is a man has financed features such as Fight Club and The Social Network, and launched a campaign on the crowdfunding website Kickstarter for his new production of the cult comic book adaptation of The Goon, requesting members to donate money towards developing a story reel for the film on the internet. By the end of 11th of November, the project raised the staggering amount of $441,900, all of the money will not be paid back or replaced anywhere other the initial goal of the project. The success of the film via using crowdfunding is one of a recent examples of how renowned filmmakers turning their backs on traditional studio funding via crowdfunding sources to create completely independent features. The world of crowdfunding has only existed for just over a decade, but its effects on the independent film market are being recognized all over the world.

The following tables will demonstrate the latest results about the category of Film & Video in 2014.

 Table 1 total funded projects in all categories and in film & video

Table 2 successful funded project in all categories and in film & video

Table 3 unsuccessful funded project in all categories and in film & video

Source from:  https://www.kickstarter.com/help/stats?ref=footer

The information provided demonstrates that not only is film/video the largest category for launched projects, but also the largest amount of both successful and (even more) unsuccessful projects. It can be sympathized that the film industry is what can be called an ‘expensive game’, however appears to be a vast contrast on how a small-scale and large-scale project operates.

There is no denial that the use of crowd funding in the film industry has drastically grown in interest and practise over the short time it has existed. In relation to Kickstarter, Journalist Sarah Hughes of the Independent states in a recent article that: “Since its conception in 2009 the site… [Kickstarter] has become the poster child for a new artist-led method of production and distribution with over $86million (£53m) raised for various film and video projects to date.” Over the past few years, an array of film projects have risen into high levels of success on various crowd funding platforms, particularly in Kickstarter and Indiegogo.

Despite of the success of crowdfunding, there are still many Problems with the Independent Crowdifunding, according to Sørensen (2012), "It is not only the material capital, but very much also the cultural capital that a project is able to accumulate which determines whether a film receives funding in the first place and, subsequently, reaches a significant audience,"

Hence, in order to make sure the funds are enough and stable, multi-sources of financing of a project may be the method with lower risk compare with only crowdfunding method.

Sources:

Adams, G.-K. (2012). What is crowdfunding? Retrieved 14^th Mar. 2014, from http://www.startups.co.uk/what-is-crowdfunding.html

Sørensen, I. E. (2012). Crowdsourcing and outsourcing: the impact of online funding and distribution on the documentary film industry in the UK. Media, Culture & Society, 34(6), 726-743.

Lambert, T., & Schwienbacher, A. (2010). An empirical analysis of crowdfunding. Social Science Resea

Assessed blog 4- International mergers and acquisitions (M&As)

During the past decades an unprecedented increasing of international mergers and acquisitions (M&As) has been witnessed, possibly due to increased economic integration and international trade, and the strong global financial market to finance M&As (Kiymaz, 2004). By definition, according to Brealey, Myers and Marcus (2004), a merger is defined as "combination of two firms into one, with the acquirer assuming assets and liabilities of the target firm". And acquisition is the "takeover of a firm by purchase of that firm's common stock or asset. The unprecedented wave will be shown by the following table.

Figure 1: Mergers and Acquisitions Involving UK Companies, Q4 2013

Source: http://www.ons.gov.uk/ons/rel/international-transactions/mergers-and-acquisitions-involving-uk-companies/q4-2013/stb-m-a-q4-2013.html?format=contrast

Case study of the merger of Chiquita and Fyffes

•  Background

The most significant reason for the wave is an international firm can compensate for lost profit margins in its domestic market through international M&As. The shareholder wealth of bidders can be increased if the cross-border M&As can increase the bidders' market share and economies of scale or scope, and/or can reduce their operating risk and expense.

Therefore, nowadays, Irish fruit firm Fyffes and US rival Chiquita are to merge to create the world has a new banana behemoth, worth about $1bn (£597m).  The combined company will control about 14 per cent of the global banana market, according to Patrick Higgins, analyst at Goodbody Stockbrokers in Dublin, “The industry has been suffering from overcapacity for the past few years, so a combination of the two major players should resolve some of the volatility in the market,” he said. The new firm, named ChiquitaFyffes, is expected to sell about 160 million boxes of bananas annually, more than any rival.

The global market is currently controlled by four firms - Chiquita, Dole Food Company, Fresh Del Monte and Fyffes. Chiquita is the large company in the US, with annual revenues in excess of $3bn compared with €1.1bn at Fyffes in the Europe. Along with other main companies like Del Monte and Dole, Chiquita accounts for half the world’s banana exports.

• ·         Benefits to both parties

The deal would help bring down Chiquita’s net debt, currently 4.7 times earnings before interest, tax, depreciation and amortisation. The merged entity will have net debt to ebitda of 2.7 times.

Chiquita shareholders will own about 50.7 per cent of the merged entity, on a fully diluted basis, while Fyffes shareholders will own about 49.3 per cent.

The deal gives Fyffes an equity value of €379m or €1.22 a share – a 38 per cent premium to the closing share price on Friday (7^th Mar. 2014).

Combined, ChiquitaFyffes would have sales of more than 160m boxes of bananas annually, giving it scale to negotiate better deals with retailers, according to Mr Higgins. The companies hope to achieve $40m a year in pre-tax cost savings while gaining share in the melon, pineapple and packaged salads markets.

After it agreed to combine with Chiquita Brands to create the world’s biggest banana company, Fyffes`s share price rocketed 31 per cent to 98p in a stock-for-stock transaction that values Fyffes at $526m.

• ·         Reason for merge

A banana price war between large supermarkets, which often sell the fruit as a loss leader, has hit profit margins for distributors at a time when adverse weather and diseases are raising wholesale prices, squeezing producers’ profits to a certain degree. Some large retailers were also increasingly sourcing their bananas directly from producers, further damaging the revenues of distributors such as Chiquita and Fyffes. Their operating margins have been shrinking: Chiquita’s from 3.5 per cent in 2004 to minus 0.1 per cent for 2012, and Fyffes’ from 4.4 per cent to 3.5 per cent over the same period, say their annual reports.

After merge, ChiquitaFyffes will have more negotiating power with suppliers, although the Fairtrade Foundation warns that the merger would only squeeze banana producers further. Because the new company will have combined sales of $4.6bn. It will distribute about 160m cases a year in total, compared with 117m at Del Monte and 110m at Dole, giving it scale to negotiate better deals with retailers.

“The current low prices are not sustainable for the industry,” said Mr Smith, international co-ordinator for Banana Link, a UK-based campaigner for sustainable trade, “They are damaging the industry and the people who work for them.”

"This is a milestone transaction for Chiquita and Fyffes that brings together the best of both companies," said Chiquita boss Ed Lonergan. Personally, at present situation, this merger is a successful merger and both shareholders and stakeholders hold positive attitudes towards it. Hence, the merger is a good beginning for both parties.

Source:
http://www.ft.com/cms/s/0/43b73338-a825-11e3-a946-00144feab7de.html?siteedition=uk#axzz2wFmXsRL4

Kiymaz, H., 2004, Cross-border acquisition of US financial institutions: Impact of macroeconomic factors. Journal of Banking and Finance 28, 1413-1439.

Brealey, R. A., Myers, SC y Marcus, AJ (2004). Fundamentals of corporate finance.

Assessed blog 3-Foreign Direct Investment (FDI) in China

In this world, investment and trading is very essential for its progress of globalisation in the economy activities and this has creates many foreign investment in the market. Thus, it can defined foreign direct investment is a direct investment that involves another country or firms to set up a branch, joint ventures or subsidiary in another country.

The People's Republic of China also known as China is one of the fastest developing countries in this world. The speed of economy of China developed around 8% to 11% every year. China also has the largest population. Through their huge populations, China has the cheapest labor forces and it is also considered to be one of the countries that would invite potential foreign direct investors. In the past decade, China has been the second largest foreign direct investment (FDI) recipient destination in the world, after the Unite States.Launched in 1978, China's "open door policy" constituted a unique and vast laboratory for the study of major structural changes in China and the world economy. Since then, foreign direct investment has become an important source for China's investment in fixed assets. According to the statistics of IMF, in the following chart, it shows the China`s net foreign direct investment from 1982 to 2014.

Foreign investment remains a strong element in China's remarkable expansion in world trade and also as a new emerging market. According to the statistics of labour forces in China on 2006, the labour force of China is 798 million people. With the high labour force, stiff competition has arisen and this has reduced the labour cost and eventually reduced its cost of production. In addition to this, China has paid great attention to the education of its people such as nine-year universal compulsory education. Therefore, these labourers are of relatively high quality and there are comparatively numerous technical personnel.  Thus, this has given China an advantage to welcome foreign manufacturers and investors to open its market, optimize its cost and maximize its profit. However, the huge potential of labour force is not just one reason that foreign company chooses China as their invested destination. With a population of 1.4 billion, China seems to be considered as a large potential market rather than potential labour market. For instance, the famous soft drink company, Pepsi, has considered China as a potential soft drink market, thus, Pepsi construct its first manufacturing factory in China at 1980. Since then, Pepsi has established more than 30 manufacturing plants in China by investing around 5 billion US dollars and hiring 10 thousands employees. (Xinhuanet, 2013) 

China is a developing country in its industrialization stage. With the development of the economy, the increase in population and the higher living standards, the living amount of primary energy consumed will undoubtedly increase in the future. These absolute increases will occur despite the continued technological improvements and reductions in energy intensity. Being the world's fourth largest country with the total area of 9,596,960 kilometres and second largest country in land, foreign investors has established their manufacturing in China. To further illustrate this point, China has become a key centre for hardware design and manufacturing by such companies such as Ericsson, General Electric and Hitachi Semiconductors. 

Share markets in China are also another way that of attracting FDI inflow. It has been authorized by some of the foreign banks to open branches in Shanghai, thus allowing foreign investors to purchase special "B" shares in selected companies that are listed on the Shanghai and Shenzhen Securities Exchange. These class B shares are special Renminbi-denominated ordinary shares sold to foreigners, but it does not carry ownership rights in a company and it is also traded in foreign currency. On the other hand, many China dot com companies collect their funds for their development in NASDAQ, such as SINA.COM, SOHU.COM and XINHUAT.NET. These companies are invested by individuals from all around the world, thus this can be considered a foreign direct investment.

China performance has been impressive up to know, foreign direct investment has played an important role in the Chinese economic reforms. Foreign investment in the country has reduces the problem of working capital, per capita GDP has increase, fixed asset investment has increased, these are some of the key benefits achieved through foreign direct investment. Chinese economy is confronting numerous serious problems, which needs to be address. The Chinese government need to promote domestic demand especially consumption in order to reduce china reliance on investment and export. 

In the third quarter of 2013, The BNP Paribas Cardif SA Group of France agreed to acquire a 50 percent interest in ING BOB Life Insurance Co Ltd, from ING Insurance. The ING BOB Life Insurance is an insurance agency and a 50/50 joint venture between ING Insurance International BV and The Bank of Beijing; it operates eight branches in seven provinces and municipalities in China, offering 
savings and protection products.

Governments play an important role in FDI, Chinese government has formulated and revised law and regulations and policy documents completely according to the requests of the market economy as it promised when joining WTO, and will make it just, fair and open when setting up a new law and regulation and policy. Meanwhile, combining the transformation of the government functions, China will improve the examination and approval of investment management while reduce the links, and increase the service efficiency.

While in my point of lecture review, taking the accession to the WTO as the turning point, China has ushered in a completely new phase for its opening-up and become a popular foreign investment destination,Chinese natural investment environment is the most attractive piont, which is rich in agricultural resources and mineral resources, and made China has a competitive advantage in attracting foreign investment. Meanwhile, rich resources serves better for the investment of manufacturing and service industries.

Assessed blog 2- Exchange rate risk Management

International Trade drives the need for foreign currency transactions. While if the Scotland become independent, they will issue its own currency. Indeed, there are many examples of countries of similar size and level of income (for example, Norway, Sweden, Switzerland, Denmark) which all have their own currency. The transition from using sterling to introducing a new currency might be long and difficult, but it is possible. What's more, the transition between an independent Scotland and England will become international. According to the UK government, if Scotland independent from UK, and Scotland will be separated from the sterling union, because of this, the new currency exchange problems and costs will be accrued between these two countries.

Exchange rate risk is simply the risk to which investors are exposed because changes in exchange rates may have an effect on investments that they have made.

The most obvious exchange rate risks are those that result from buying foreign currency denominated investments. The commonest of these are shares listed in another country or foreign currency bonds.

Investors in companies that have operations in another country, or that export, are also exposed to exchange rate risk. A company with operations abroad will find the value in domestic currency of its overseas profits changes with exchange rates.

Similarly an exporter is likely to find that an appreciation in its domestic currency will mean that either sales fall (because its prices rise in terms of its customer’s currency) or that its gross margin shrinks, or both. A depreciation of its domestic currency would have the opposite effect.

However the two risks can often hedge each other. Suppose an investor in the US buys shares in a British company. There will be a risk that the value of the investment in dollar terms may decline if the pound falls against the dollar.

Now suppose that the British company makes a substantial proportion of its sales in the US and most of the rest of its sales are dollar denominated exports. This situation is not uncommon in sectors like pharmaceuticals or IT, or any which sell into truly global product markets.

In these circumstances a fall in the value of sterling is likely to reduce the value of the shares of the British company in dollar terms, for a given share price in sterling terms. However if the pound depreciates, the share price is likely to rise as the value in pounds of its dollar denominated sales rises.

The end result is that the two types of exchange rate risk neatly hedge each other.

This type of offsetting of risks can also be important when dealing with investments in emerging markets (especially small emerging markets) that often combine a volatile currency with high dependence on imports and exports. Small economies tend to be particularly open to the global economy because an economy that lacks technology must import many things or do without, and because an economy that produces a small range of goods or service in quantities that far exceed domestic demand (at reasonable prices), must depend on exporting them.

In addition, that indicates quite clearly that the Spanish government will have no stance to take on the question of Scottish membership of the European Union." And European Commission President Jose Manuel Barroso has said it would be "extremely difficult, if not impossible" for an independent Scotland to join the European Union. Mr Swinney also denied Scotland would have to join the euro if it became a member of the EU in its own right. He said to adopt the euro, countries first had to be a member of the exchange rate mechanism and Scotland had "no intention" of signing up. Therefore, there are still potential risks for Scottish currency.