The U.S. direct investment abroad position, or cumulative level of investment, increased $427.3 billion to $6,013.3 billion at the end of 2017 from $5,586.0 billion at the end of 2016, according to statistics released by the Bureau of Economic Analysis (BEA). The increase mainly reflected a $243.6 billion increase in the position in Europe, primarily in Switzerland, the United Kingdom, Ireland, and the Netherlands. By industry, affiliates in manufacturing and holding companies accounted for the largest increases.
The foreign direct investment in the United States position increased $260.4 billion to $4,025.5 billion at the end of 2017 from $3,765.1 billion at the end of 2016. The increase mainly reflected a $128.2 billion increase in the position from Europe, primarily Ireland, Switzerland, and the Netherlands. By industry, affiliates in manufacturing and wholesale trade accounted for the largest increases.
The increase in the U.S. direct investment position abroad in 2017 mainly reflected financial transactions of $300.4 billion, primarily reinvestment of earnings. The increase in the foreign direct investment position in the United States in 2017 mainly reflected financial transactions of $277.3 billion, primarily equity investment other than reinvestment of earnings.
U.S. direct investment abroad (tables 1 – 4)
U.S. multinational enterprises (MNEs) invest in nearly every country, but their investment in foreign affiliates in five countries accounted for more than half of the total position at the end of 2017. The U.S. direct investment abroad position was largest in the Netherlands at $936.7 billion, followed by the United Kingdom ($747.6 billion), Luxembourg ($676.4 billion), Ireland ($446.4 billion), and Canada ($391.2 billion).
By industry of the immediate foreign affiliate, investment was highly concentrated in holding companies, which accounted for nearly half of the position in 2017. By industry of the U.S. parent, investment by manufacturing MNEs accounted for 55.6 percent of the position, followed by MNEs in finance and insurance (12.4 percent).
U.S. MNEs earned income of $470.9 billion on their investment abroad in 2017.
Foreign direct investment in the United States (tables 5 – 8)
By country of the immediate foreign parent, five countries accounted for more than half of the total position at the end of 2017. The United Kingdom was the top investing country with a position of $540.9 billion, followed by Japan ($469.0 billion), Canada ($453.1 billion), Luxembourg ($410.7 billion), and the Netherlands ($367.1 billion).
By country of the ultimate beneficial owner (UBO), the top five countries in terms of position were the United Kingdom ($614.9 billion), Canada ($523.8 billion), Japan ($476.9 billion), Germany ($405.6 billion), and Ireland ($328.7 billion). On this basis, investment from the Netherlands and Luxembourg was much lower than by country of foreign parent, indicating that much of the investment from these countries was ultimately owned by investors in other countries.
Foreign direct investment in the United States was concentrated in the U.S. manufacturing sector, which accounted for 39.9 percent of the position. There was also sizable investment in finance and insurance (13.4 percent).
Foreign MNEs earned income of $173.8 billion on their investment in the United States in 2017.
Updates to Direct Investment Statistics
BEA statistics for U.S. direct investment abroad for 2014–2016 and for foreign direct investment in the United States for 2015–2016 are revised to incorporate newly available and revised source data, including results of the 2014 benchmark survey of U.S. direct investment abroad. For more information on the benchmark survey, see “Worldwide Activities of U.S. Multinational Enterprises: Revised Results From the 2014 Benchmark Survey.”
Next release: July 2019
Direct Investment by Country and Industry: 2018
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Definitions
Direct investment is an investment by an entity resident in one economy that represents a lasting interest, defined as 10 percent or more voting ownership, in an enterprise resident in another economy.
A foreign affiliate is a foreign business enterprise that is at least 10 percent owned by a single U.S. person or entity.
A U.S. parent is a U.S. person or entity that owns 10 percent or more of a foreign business enterprise.
A U.S. affiliate is a U.S. business enterprise that is at least 10 percent owned by a single foreign person or entity.
A foreign parent is the first person or entity outside the United States in a U.S. affiliate’s ownership chain that has a direct investment interest in the affiliate.
The ultimate beneficial owner (UBO) is that person or entity, proceeding up a U.S. affiliate’s ownership chain, that is not owned more than 50 percent by another person or entity.
The direct investment position is the value of direct investors’ equity in, and net outstanding loans to, their affiliates. Changes in the position result from financial transactions and other changes, including capital gains and losses, currency-translation adjustments, and other changes in volume and valuation, such as adjustments to book value from affiliates’ current sale or purchase price.
Direct investment financial transactions are financial transactions that increase or decrease financial claims and liabilities between the parent group and their affiliates. Direct investment financial transactions consist of reinvestment of earnings, equity investment other than reinvestment of earnings, and investment in debt instruments.
Reinvestment of earnings is the difference between an affiliate’s total earnings less dividends. It represents the part of earnings that are reinvested in the affiliate rather than repatriated to the parent.
Equity investment other than reinvestment of earnings is measured as the difference between equity increases and decreases. Equity increases are transactions that result in the parent increasing their equity interest in their affiliate. Equity decreases are transactions that result from the parent reducing their equity interest in their affiliate.
Debt instruments investment reflects parent group lending to and borrowing from their affiliates.
Income earned on direct investment includes income on equity—whether profits or losses and whether distributed or reinvested—and net interest on debt.
Statistical conventions
BEA’s direct investment statistics are primarily based on data reported in the Quarterly Survey of U.S. Direct Investment Abroad (BE-577) and the Quarterly Survey of Foreign Direct Investment in the United States (BE-605). Both surveys are conducted by BEA.
The countries identified in this release reflect the location of the immediate counterpart, unless otherwise noted. The countries identified for the U.S. direct investment abroad position may not reflect the ultimate destination of the funds. Likewise, the countries identified for the foreign direct investment position in United States may not reflect the ultimate source of the funds, which is often the ultimate beneficial owner.
The direct investment positions in this release are valued at historical cost. Positions reflect the book value of direct investors’ equity in, and net outstanding loans to, their affiliates. This valuation is derived principally from the accounting records of affiliates, which are primarily compiled under U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). This differs from the market value measure featured in the U.S. net international investment position accounts.
This release presents statistics on a directional basis rather than the on the asset/liability basis featured in the U.S. international transactions accounts and the U.S. net international investment position accounts. On a directional basis, direct investment claims and liabilities are classified according to whether the direct investor is a U.S. resident or a foreign resident. U.S. direct investment abroad occurs between a U.S. parent and its foreign affiliates. Foreign direct investment in the United States occurs between a foreign parent and its U.S. affiliates. On an asset/liability basis, direct investment statistics are organized according to whether the investment relates to an asset or liability for U.S. parents or for U.S. affiliates of foreign parents.
