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Foreign Direct Investment inFlow in The US
The Largest Sources of FDI in The United States
And, The Benefits of FDI In-Flow
The Inflow of Foreign Direct Investment (FDI) in the United States was increased by US $50,582 Million in the third quarter of 2019 per the data compiled from the U.S. Bureau of Economic Analysis.
The average of the FDI-inflow in the US for the period 1994-2019 was US $26,140 Million. It was peaked an all time high of US $55,831 Million in the second quarter of 2018, and a record low of US $-9,988 Million in the fourth quarter of 2001 { Source: U.S. Bureau of Economic Analysis }.
In contrast, Global FDI flows was decreased by 27% in 2018 to USD 1,097 billion, largely due to the US tax reform. This continues the 2017 trend where FDI flows decreased by 16%. But, FDI is expected to see a rebound in developed economies as the effect of these tax reforms had winded down in 2019.
Global FDI in-Flow—in Comparison:
The tax-driven fall in FDI was cushioned by increased transaction activity in the second
half of 2018. The value of cross-border merger and acquisitions (M&As) rose by 18 percent, fueled by United States MNEs using liquidity in their foreign affiliates that was no longer encumbered by tax liabilities.
As for the United States, usually the largest outward investor, registered negative outflows in the first half of 2018 but regained its position as the major source of FDI outflows worldwide in the second half of the year.
Inflows to the OECD area decreased by 23%, largely driven by disinvestments from Ireland and Switzerland and reduced flows to the United Kingdom, the United States and Germany. Outflows from the OECD area decreased by 41% as US multinationals repatriated large amounts of earnings held by foreign affiliates.
FDI inflows to non-OECD G20 economies increased by 8% while FDI outflows decreased by 26% as outflows from China declined for the second consecutive year.
Japan, China and France were the largest sources of FDI outflows worldwide. China’s FDI inflow into the United States has been on steep decline since the 2017. China’s share for FDI Inflow, as well as its FDI outflow, is on the rise.
FDI flows to and from Special Purpose Entities (SPEs) dropped to negative levels for the first time since 2005, due to large equity disinvestments to and from SPEs in Luxembourg, the Netherlands and Hungary.
Despite concerns about an economic slowdown, FDI income paid by affiliates in OECD countries to foreign parents increased by 17% and FDI income received by OECD parents increased by 9% in 2018.
Financial centres accounted for more than half of OECD income receipts, but receipts from offshore financial centres dropped in 2017, perhaps in response to tax policies addressing Base Erosion and Profit Shifting (BEPS).
China, on the other hand, is expected to see sharp rise in both the out-flow and in-fllow of FDI thaks in large parts to the Belt and Road Initiative & Made in China 2025 projects.
The Benefits of FDI In-Flow in The United States
Foreign direct investment (FDI) plays an essential role in ensuring U.S. economic growth and prosperity, creating highly-compensated jobs, spurring innovation, and driving exports.
The following information and data presents the major benefits of FDI inflow to the U.S. economy in aggregate.
CapitalUS$4.3 trillion | InnovationUS$62.6 billion |
US$253.6 billionTotal FDI flows in the United States in 2018 (FDI measured over a specific period of time) | 53%*Percentage of U.S. utility patents filed from foreign sources in 2016 |
U.S. ExportsUS$382.7 billion | U.S. Taxes:16% |
The Significant Sources of FDI In-Flow US
The total Foreign Direct Investment in the US was reported to have declined significantly in 2018. Data is not available for the year 2019.
The following tables show data for the largest sources of FDI in the United States for the year 2018—as compiled from the U.S. Department of Commerce and, also, the fastest-growing sources of FDI by percentage for the year. The changes in comparison to the past year are due in part to the US ‘Tax Reforms’.
Largest Sources of FDI in the United States
[Note: Values are in Millions of US Dollars]
| Rank | Market | 2018 Position | Share of Total |
|---|---|---|---|
| 1 | United Kingdom | 597,219 | 13.7% |
| 2 | Canada | 588,399 | 13.5% |
| 3 | Japan | 488,714 | 11.2% |
| 4 | Germany | 474,472 | 10.9% |
| 5 | Ireland | 385,322 | 8.9% |
| 6 | France | 326,437 | 7.5% |
| 7 | Netherland | 228,144 | 5.3% |
| 8 | Switzerland | 222,491 | 5.1% |
| 9 | Belgium | 84,661 | 1.9% |
| 10 | Spain | 76,380 | 1.8% |
| 11 | Australia | 71,460 | 1.6% |
| 12 | Bermuda | 60,750 | 1.4% |
| 13 | China | 60,182 | 1.4% |
| 14 | South Korea | $57,623 | 1.3% |
| 14 | Sweden | 55,424 | 1.3% |
Fastest-Growing Sources of FDI in the United States
| Rank | Market | 2018 Positions | CAGR: 2013-2018 |
|---|---|---|---|
| 1 | Argentina | 4,896 | 57.9% |
| 2 | China | 60,182 | 35.2% |
| 3 | Thailand | 2,056 | 35.0% |
| 4 | Ireland | 385,322 | 34.2% |
| 5 | Chile | 3,483 | 23.9% |
| 6 | Singapore | 54,227 | 23.0% |
| 7 | Bermuda | 60,750 | 21.0% |
| 8 | Belgium | 84,661 | 20.1% |
| 9 | Turkey | 2,357 | 17.2% |
| 10 | Canada | 588,399 | 17.1% |
| 11 | Austria | 6,290 | 15.9% |
| 12 | Hong Kong | 16,888 | 15.4% |
| 13 | South Africa | 4,991 | 15.1% |
| 14 | Malaysia | 2,417 | 13.3% |
| 15 | South Korea | 57,623 | 13.2% |
{ Source: U.S. Department of Commerce | SelectUSA }
[ Note: UBO refers to Ultimate Beneficial Owner. CAGR refers to Compound Annual Growth Rate. ]
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