The German economy’s international capital links
Further rise in corporate assets abroad
Despite the rather sluggish global economic momentum in 2012, German investors stepped up their outward primary foreign direct investment (FDI) during this period considerably by €53 billion to just under €1.2 trillion. This occurred mainly by raising equity stakes, including the reinvestment of earnings. Europe was the main focus of Germany’s outward FDI. During the same period, foreign investors and affiliated enterprises abroad, particularly from euro-area countries, provided their affiliates in Germany with additional capital totalling €22 billion, chiefly in the form of intra-group loans. At the end of 2012, their direct investment stock in Germany came to €800 billion.
As the bulk of primary foreign direct investment relationships are with holding companies – 44% of Germany’s outward FDI and as much as 63% of inward FDI – it is important to additionally record secondary investment via dependent holding companies when analysing the main trends in cross-border investment. According to the consolidated data compiled for this purpose, German primary and secondary corporate assets held abroad increased in 2012, especially in affiliates of the manufacturing sector (+ €20 billion), in particular among makers of pharmaceuticals and motor vehicles. Besides these financial and insurance activities, wholesale and retail trade, and energy supply played a major role. Foreign investors in Germany were chiefly interested in investing in the areas of financial and insurance activities and trade.
Extended data supply on foreign subsidiaries
Furthermore, the Foreign Affiliates Statistics (FATS), which are harmonised within the European Union, provide information on the activities of cross-border majority-owned enterprises. For these statistics, the Bundesbank records all financial and non-financial corporations abroad, provided their total assets exceed €3 million and a German investor has ultimate control over the enterprise, ie there is a direct or indirect majority stake. The key data that are calculated currently comprise the number of foreign subsidiaries as well as their number of employees and turnover. For the first time, the Bundesbank is publishing a very detailed breakdown of these data (outward FATS) by country and economic activity for the period 2008 to 2011. A corresponding comprehensive dataset on enterprises in Germany that are controlled by foreign investors (inward FATS) is being compiled by the Federal Statistical Office.
According to the FATS data, at the end of 2011, more than 26,000 enterprises abroad were ultimately majority-owned by German investors. Most (three-fifths) of these enterprises were domiciled in other European countries; 2.7 million people were employed by them, generating turnover totalling €1 trillion. A further one-fifth of the enterprises were based in the Americas, with almost two-thirds of them (3,500 enterprises) located in the United States. The enterprises in the Americas employed 1.1 million people and generated €500 billion in turnover during the reporting year. China alone accounted for 1,250 of the 3,700 majority-owned enterprises in Asia. The disproportionately high number of employees in Asian affiliates indicates that – given average turnover levels – rather labour-intensive processes are being used in those subsidiaries.
In terms of economic activity, wholesale and retail trade accounted for the largest number of foreign enterprises controlled by German investors in 2011 (7,900), followed by the manufacturing sector (6,800 enterprises), professional, scientific and technical activities (sector M, 2,700 enterprises) and financial and insurance activities (2,400 enterprises). This ranking changes for the number of employees. Of a total of 4.9 million employees in majority-owned foreign enterprises, 2.3 million were employed in the labour-intensive branches of manufacturing, 1.2 million in wholesale and retail trade, 230,000 in financial and insurance activities and only 76,000 in sector M, which also includes holding companies. Subsidiaries in the manufacturing and trade sectors each accounted for 35% of the total turnover of €1.8 trillion.
Detailed data and methodological notes on the Bundesbank’s "Foreign direct investment stock statistics" can be found in Special Statistical Publication 10 on our website under Publications.
The statistics on the structure and activity of foreign affiliates of German investors (outward FATS) can also be found on our website under Statistics/External sector.