Multinational Corporations’ Internal Trade And The Impacts On Chinese Enterprises Internationalize

With the growing trend of economic globalization, MNCs (multinational corporations) use their abundant capital, high-tech research team, flexible marketing strategies and efficient global management network to carry out international business activities on a global scale, and they dominate the world economy gradually. The large-scale development of multinational corporations promotes the global economic integration, at the same time their international production networks promote the development of their internal market. In order to pursue their overall profit maximization all over the world, multinational corporations began to use internal trade frequently to shift profits, evade taxes and affect the host countries’ financial tax. As the largest investment among development countries, China has suffered by the negative impact of MNCs’internal trade on its balance of payments, technology introduction, fiscal and tax national economic security and so on.On the basis of related trade theories and literature, this article tries to understand the definition, characteristics and development status of MNCs’ internal trade. It use Company G, a centry old company, for example, analyzes the reason of Company G to carry out the internal trade, calculate and argument the transfer pricing method, then it concludes that intra-firm trade plays a positive role in reducing the overall tax, achieving technology monopoly and industry monopoly, avoiding foreign exchange risk and exchange control, regulating units’interests,etc. It finds the existing problems and potential risks in Company G. At the perspective of the host country, it analyzes the positive and negative effects of MNCs’ internal trade in China, negative influence is in the majority. Finally, it summarizes the enlightenment for Chinese enterprises’internationalization from the successful experience and imperfections of Company G’s internal trade, reminds our enterprise should take many factors into account, including their own operating conditions, external market environment, etc. They should improve their own transfer pricing system, give full play to the positive role of internal trade, achieve the overall long-term profit maximization and steady development.