Foreign Direct Investment in the United States 2013 Preliminary Data Organization for International Investment (OFII)
Key Findings: Foreign Direct Investment in the United States, 2003-2013 1 Foreign direct investment in the United States (FDIUS) 2 in 2013 totaled $193.4 billion, an increase of 16% compared with $ 166.4 billion in 2012. 3 Although a solid year, FDIUS was lower than several previous years (seee Chart 1). Foreign direct investment in the United States reached a record high for the decade of $ 310.1 billion in 2008. Net equity capital inflows surged 56% to $92.8 billion in 2013, from $59.6 billion in 2012. Traditional sources of investment (e.g., the European Union, Japan, and Canada) remain dominant, with six nations accounting for three-quarters of all FDIUS in 2013. Japan was the largest source of FDIUS last year at $40 billion, followed by the United Kingdom, Canada, Ireland, and the Netherlands. Manufacturing constituted the largest industry for foreign investors in 2013 at $65.9 billion, ahead of wholesale trade, information, and finance and insurance. Finance and insurance and information were the fastest growing industriess for FDIUS, both ncreasing over 500% between 20122 and 2013. Chart 1. Foreign Direct Investment in the U.S.., 2003 2013p $310.1 B $243.2 B $221.2 B $205..9 B '11 '12 28% '12 '13 $230.2 B +16% $193.4 B $146.0 B $150.4 B $166.4 B $112.6 B $63.8 B 2003 2004 Source: 2005 2006 2007 2008 2009 20100 2011 U.S. Bureau of Ec conomic Analysis, International Transactions Account data; p prelimina ary 2012 2013p 1 The U.S. Bureau of Economic Analysis (BEA) released the most recent foreign direct investment statistics on, including preliminary 2013 data. Alll the foreign direct investment statistics in this report are shown by FDIUS inflows. 2 Foreign direct investment in the United States measures equity capital flows, reinvested earnings, and intercompany debt flows between U.S. affiliates and their parents abroad. 3 FDIUS data for 2013 are preliminary and subject to sometimes large revisions as BEA gathers more informationn from survey respondents. 1
Analysis and Background 2013 was a solid year for foreign investment in the United States. Foreign firms invested more than $190 billion in the U.S. economy in 2013, up 16% from 2012, reflecting the United States continued position as the world s preferred investment location for foreign companies. Foreign direct investment flowing to the United States in 2013 outpaced global foreign direct investment flows, which rose by 11%, to $1.5 trillion in 2013, according to preliminary data from the United Nations Conference on Trade and Development (UNCTAD). Global competition for investment dollars is fierce. In 2013, a significant share flowed to second-ranked China and third-ranked Russia. The overall U.S. economy benefits from foreign direct investment. In 2013, inward direct investment flows from foreign firms constituted 9% of total nonresidential domestic investment spending. These investments supported more than 5.6 million well-paid insourced jobs and contribute to the health of the U.S. economy by boosting capital formation, adding to a competitive business environment, and enhancing domestic productivity. A particular strength of direct investment inflows last year was equity capital spending by foreign firms, which accounted for nearly half of the total amount of foreign direct investment in 2013, a 56% year-over-year increase. In 2013, there was a net outflow of intercompany debt investment and a small decrease in reinvested earnings. Foreign direct investments in several important sectors of the U.S. economy rose in 2013 from the amount invested in 2012. For instance, foreign investors substantially increased their investments in sectors such as finance and insurance and information, each growing more than 500% between 2012 and 2013, reaching a total of $17.3 billion and $20.9 billion, respectively. Manufacturing accounted for more than one-third of total foreign direct investment, but the amount invested dropped between 2012 and 2013 as a proportion of total foreign direct investment. Finally, in 2013, firms headquartered in the Asia Pacific region contributed more to inward investment than firms headquartered in all of the 28 European Union countries. Looking at foreign direct investment more broadly, foreign companies invest in the United States for many reasons. A list of positive factors include the large U.S. market, world-class research universities, a stable regulatory regime, and a solid infrastructure that allows businesses to easily access the U.S. market. For certain foreign investors, the United States has become an excellent export base to the world. Good domestic energy resources and low energy prices are another positive characteristic drawing foreign investors to the United States. Still, any future trends in FDIUS are subject to foreign investors concerns about the macroeconomic climate and financial conditions in the United States as well as worldwide economic and political developments. Globally, foreign investors are increasing their investments in developing countries, which in 2013, accounted for more than half of foreign direct investment flows. UNCTAD s latest Global Investment Trends Monitor forecasts that global foreign investment will rise in 2014 and 2015 to $1.6 trillion and $1.8 trillion, respectively, as multinationals are expected to shift large cash holdings in to new capital investments. All current indications are that foreign companies will maintain, and perhaps increase, their investment spending in the United States in coming years. 2
FDIUS Share by Major Countries, 2013 Japan led in FDIUS in 2013 at $40 billion, followed by the United Kingdom and Canada at $36.5 billion and $25..8 billion, respectively (see Chart 2). Ireland, the Netherlands, and U.K. Islands (Caribbean) also ranked among the leading foreign investor countries in 2013. Together, these six countries represented three-quarters of all foreign direct investment in the United States in 2013. BEA did not release data for Switzerland in 2013, traditionally one of the top investing countries in the United States, becausee of disclosure issues. Chart 2. Leading Countries by Foreign Direct Investment in the United States, 2013p All Other Countries 25% Japan 21% U.K. Islands, Caribbean 6% United Kingdom 19% Netherlands 6% Ireland 8% Canada 14% International Transactions Account Data, p preliminary Source: U.S. Bureau of Economic Analysis 3
Top 20 Countries by FDIUS, 2013 As the top investor in the United States last year, Japan also more than doubled its investment over 2012, one of the fastest growth rates among the top 20 FDIUS investors between 2012 and 2013 (see Table 1). Ireland s investments rose over 900% between 2012 and 2013. Along with Japan and Ireland, Germany also posted a triple-digit increase (171%) in its investments in the United States between 2012 and 2013. Table 1. Foreign Direct Investment Inflows by Leading Countries 2012 and 2013* (in millions of dollars) Rank Country 2012 2013* % Change World $166,411 $193,360 16% 1. Japan $19,169 $40,041 109% 2. United Kingdom $20,547 $36,455 77% 3. Canada $16,460 $25,805 57% 4. Ireland $1,460 $14,939 923% 5. Netherlands $29,934 $11,959-60% 6. U.K. Islands, Caribbean $7,689 $11,271 47% 7. Luxembourg $6,216 $9,874 59% 8. Germany $3,103 $8,423 171% 9. France $21,664 $6,476-70% 10. South Korea $5,240 $5,822 11% 11. Sweden $2,671 $2,281-15% 12. China $1,370 $2,241 64% 13. Spain $1,486 $2,044 38% 14. Mexico $2,801 $1,995-29% 15. Italy $1,972 $1,871-5% 16. Denmark -$173 $1,507 n/a 17. Hong Kong $1,461 $1,422-3% 18. Singapore $2,655 $1,265-52% 19. Taiwan $526 $660 25% 20. Austria $441 $530 20% *2013 data are preliminary Source: Bureau of Economic Analysis, U.S. International Transactions Accounts 4
Top 5 Countries by FDIUS, 20122-2013 Of the top five countries by U.S. direct investmentt inflows in 2013, all but the Netherlands invested more in 2013 than in 2012 ( see Chart 3) ). The Netherlands invested 60% less in the United States in 2013 than in 2012. Chart 3. FDIUS by Leading Countries, 2011 2013p $48.9 B $40.0 B $36.5 B $19.2 B $19.0 B $20.5 B $ 25.8 B $20.5 B $16.5 B $14.9 B $1.5 B $29.9 B $12.0 B 2011 2012 2013 Japan United Kingdom Canada $1.8 B Ireland $1.9 B Netherlands Source: U.S. Bureau of Economic Analysis, International Transactions Account Data, p preliminary FDIUS by Brazil, Russia, India, and China (BRICs), 20011-2013 Investment inflows from China, the world s largest emerging market, were up 64% last year over 2012. Brazil posted a smaller disinvestment in 2013 than in the previous year, while India s investments in the United States increased just slightly (see Chart 4). Russian FDIUS is not currently available for 2013, but will be later this year. Disinvestment, or net negative financial inflows, occurs when flows from U. S. affiliates to their parent companies are greater than flows from parents to affiliates. Net negativee flows may be due to reductions of equity (selloffs) in their affiliates by parents, distributions of earnings by affiliates to their parents, or net loan payments from affiliates to parents. 5
$3.7 B Chart 4. FDIUS by BRICs, 201 1 2013p $2.2 B $0.6 B $0..2 B $1.0 B $ $0.2 B * $0.7 B $0.4 B $0.4 B $1.4 B $0.5 B 2011 2012 2013 Brazil Russia India China Source: U.S. Bureau of Ec conomic Analysis, International Tran nsactions Account Data, p prelim minary, *2013 data a for Russia will be available later th is year FDIUS by Region, 2013 As in previous years, Europe was the largest regional investor in the United States, representing 52% of all foreign direct investment in 2013 (see Table 2). At $51 billion in 2013, companies headquartered in the Asia and Pacific region exceeded investments from companies headquartered in the European Union. Less than 10% of foreign investments weree from companies headquartered in the Latin America and other Western Hemisphere region. Table 2. Foreign Direct Investment by Select Region, 2013* March 19, 2014 (in millions of dollars) Region 2013* Percent of Total Foreign Direct Investment Europe European Union (28) $98,096 $45,292 52% 24% Asia and Pacific Latin America & Other Western Hemisphere $50,593 $13,056 27% 7% Middle East Africa *2013 data are preliminary Source: Bureau of Economicc Analysis, International Transaction Accounts $ 181 -$202 0.1% n/a 6
FDIUS by Industry, 2012-2013 U.S. manufacturing remains the dominant industrial sector for foreign firms. Foreign direct investment inflows in manufacturing totaled $65.9 billion in 2013, declining 17% from $79.5 billion in 2012 (see Table 3). Wholesale trade also attracted considerable foreign direct investment in 2013 at $26.9 billion, up 40% from $19.1 billion in 2012. Finance and insurance and information were the fastest growing industries by far, with foreign investment in both expanding more than 500% between 2012 and 2013. Table 3. FDIUS by Industry 2012-2013* (in millions of dollars) Industry 2012 2013* % Change % of 2013 Total Manufacturing $79,504 $65,868-17% 35% Wholesale Trade $19,146 $26,881 40% 14% Information $3,398 $20,907 515% 11% Finance & Insurance $2,568 $17,279 573% 9% Depository -$2,421 $5,377 n/a 3% Institutions Retail Trade $4,456 $5,353 20% 3% Professional, $11,060 $2,727-75% 1% Scientific, and Technical Services Real Estate and $1,039 -$105 n/a n/a Rental and Leasing Other Industries $41,819 $43,241 3% 23% *2013 data are preliminary Source: U.S. Bureau of Economic Analysis 7
FDIUS in Manufacturing, 2012-2013 Within the manufacturing sector, chemicals made up two-thirds of all FDIUS flows, followed by food at $11 billion (see Table 4). The chemicals sector includes pharmaceuticals, cleaning compounds, paint, resins, and pesticides, but excludes petroleum products. Table 4. Foreign Direct Investment in the U.S. Manufacturing Industry 2012-2013* (in millions of dollars) 2012 2013* % Change Manufacturing Total $79,504 $65,868-17% Chemicals $39,860 $44,263 11% Food -$22 $10,991 n/a Machinery $4,459 $9,169 106% Electrical Equipment, $23,341 $2,786-88% Appliances, & Components Transportation Equipment $6,559 $1,443-78% Primary & Fabricated $148 -$94 n/a Metals Computers & Electronic $1,803 -$4,130 n/a Products Other Manufacturing $3,357 $1,440-57% *2013 data are preliminary Source: U.S. Bureau of Economic Analysis 8
Chart 5. FDIUS by Manufacturing Sector, 2013* 2% 14% Chemicals 17% 67% Food Machinery *2013 data are preliminary Source: U.S. Bureau of Economic Analysis Other Manufacturing 9