MIL OSI – Source: Deutsche Bundesbank in English –
Headline: Mixed developments in foreign direct investments in 2015
Germany’s primary direct investment stocks abroad (outward FDI) continued to rise in 2015. By contrast, the foreign direct investment stocks in Germany (inward FDI) fell slightly.
German corporate assets abroad
Germany’s primary direct investment stocks abroad continued to rise in net terms in 2015 (+€79 billion) and, at €1,051 billion, exceeded the one-trillion-euro mark for the first time. This was mainly due to the increase in primary investment capital abroad (+€70 billion). By contrast, loans to German direct investment enterprises abroad and to foreign sister companies of German enterprises rose only slightly, by a total of €15 billion. Similarly, liabilities from loans by foreign investment enterprises to their German investors and to domestic sister companies of German enterprises played only a subordinate role, with a gain of €6 billion.
A key reason for the expansion in Germany’s direct investment stocks abroad was that the most important currencies appreciated against the euro (+€30 billion). This meant that there were valuation gains when the foreign assets were converted into euro. For instance, the value of German direct investments in the United States climbed by €39 billion to €227 billion, with much of this amount, namely €20 billion, being attributable to the appreciation of the US dollar. Of the increase in Germany’s direct investment stocks in China (it rose by €6 billion to €65 billion), €4 billion alone can be ascribed to the stronger renminbi. In the euro area, meanwhile, the expansion of direct investments rose by €23 billion to €386 billion in the reporting period, largely as a result of transactions. The increase of investments in Brazil and Argentina was neutralised by the substantial depreciation of the Brazilian and Argentinian currencies against the euro (-25% each). As a result, German direct investments in these countries remained roughly unchanged (€13 billion in Brazil and €2 billion in Argentina).
Foreign corporate assets in Germany
The foreign direct investment stocks in Germany amounted to €670 billion at the end of 2015, which represents a year-on-year decrease of €2 billion net. Although both, primary equity capital and loans provided by foreign capital owners still showed slight growth (+ €6 billion and + €3 billion, respectively), these components were more than offset by the €12 billion increase in loans of domestic enterprises on their foreign investors and sister companies abroad.
In addition, a new breakdown enables FDI in Germany to be allocated to the country in which the corporate headquarters and thus the unit controlling the group’s international financing are resident. This concept of the ultimate controlling institutional unit (corporate headquarter) is taken from the statistics on the structure and activity of foreign affiliates (FATS) and refers to the investor that has ultimate legal control over the domestic enterprise. In this context, control means the ability to determine the general business policy of a dependent enterprise. In practice, an investor is deemed to have control if its direct or indirect holdings amount for more than half of the capital or voting rights. The results of the breakdown differ substantially from the breakdown by the direct country of origin of investors. For instance, inward FDI from the United States almost triples in the new breakdown from €53 billion to €156 billion. And investments attributed to the Asia region almost doubles from €33 billion to €63 billion. By contrast, the volume of primary foreign direct investment stocks in Germany from the Netherlands and Luxembourg, which are well-known holding locations, drops from €153 billion to €41 billion stemming ultimately from the Netherlands and from €121 billion to €40 billion from Luxembourg. Allocating FDI to the country in which the corporate headquarters are resident also reveals that just under €49 billion of primary FDI in Germany was attributable to German investors because the domestic investment enterprises are indirectly controlled via foreign investment enterprises (round-tripping). Tables allocating the foreign direct investment stocks to the countries in which corporate headquarters are resident will be published on this publication date for the first time in the Special Statistical Publication 10.
Change in the reporting of foreign direct investment in holding companies
The new European System of National and Regional Accounts (ESA 2010) was applied to the classification of economic activities in the foreign direct investment stock statistics starting at the end of 2014. The classification “Activities of head offices (activities of holding companies)”, which accounted for 60% of Germany’s primary FDI stocks abroad and 70% of primary FDI in Germany in the past, was divided into two classifications pursuant to ESA 2010. Holding companies with management activities are still assigned to the services sector (“Professional, scientific and technical activities”); holding companies without management activities, ie those which serve as internal group financiers, are assigned to the economic sector “Financial and insurance activities”. The distinction between holding companies with and without management activities is based on the number of employees: a holding company is deemed to have management activities if it has more than one employee.
Detailed results of FDI broken down by country and economic activity as well as methodological notes can be found in the Special Statistical Publication 10 “Foreign direct investment stock statistics”.