Direct investment as reflected in the balance of payments from 2008 to 2011
The Direct investment according to the balance of payments statistics, which were published today, provide an insight into direct investment flows between Germany and the rest of the world from 2008 to 2011 as they feature in the balance of payments, broken down by country and economic sector. The publication provides timely and detailed information regarding the significance of investment locations and intra-group cross-border capital links.
In accordance with the typical pattern, the German economy maintained its track record as a net exporter of financial capital in the form of direct investment, recording a total net volume of €138 billion. In the course of the reporting period, German direct investors channelled around €226 billion into investments abroad. After providing around €50 billion each year between 2008 and 2010 in the form of equity capital, German residents limited their new investment to just under €20 billion net during 2011. This cut-back was particularly attributable to subdued capital flows to European counterpart countries. By contrast, the steady improvement in profitability caused retained income from long-term equity investments to increase considerably over time. Following large uncovered losses at the outset of the banking sector crisis in 2008, up-to-date information reports reinvested earnings amounting to around €30 billion in 2011. In good economic times, the reinvestment of earnings therefore plays a significant role in boosting equity capital abroad. During the four-year period under review, the balance of debt transactions initiated by German direct investors fluctuated between net lending activity and net borrowing with respect to foreign subsidiaries. Net borrowing was most pronounced in the case of financial subsidiaries which are often established in selected countries specifically for the purpose of providing funds. German direct investors, especially those operating in the manufacturing sector, saw inflows of funds from their Dutch subsidiaries totalling €9 billion alone in 2011.
Direct investment in Germany on the part of foreign investors came to a total of €87 billion between 2008 and 2011. During the comparative preceding period (2004-2007) non-resident direct investors had still been generous to the German economy, investing just over €130 billion. While the capital inflows seen in the recession year of 2008 were mainly absorbed by large uncovered losses or by dividends in excess of earnings, foreign investors, notably those from countries experiencing financial tensions, were extremely tentative about providing German enterprises with equity capital from 2009 onwards. However, this downturn in the provision of own funds was partly compensated for by an upturn in intra-group lending. From 2008 to 2011, debt capital as a share of direct investment transactions by foreign investors in Germany averaged at 70% and was thus strikingly high. Viewed at a regional level, more than two-thirds of new investment from abroad derived directly from European countries. In this regard, it should be noted that investors based outside Europe frequently hold participating interests in Germany via intermediaries located in selected European Union countries (Netherlands, Luxembourg). The breakdown by economic sector reveals a predominant focus on direct investment in German enterprises involved in service activities. However, since most of this capital was supplied to German management holding enterprises, it can be assumed that a substantial proportion of these funds was ultimately also invested in the manufacturing industry.
The publication, “Direct investment according to the balance of payments statistics”, can be accessed at www.bundesbank.de under Statistics – External sector – Direct investments – Transaction values – Publications.