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Canada's international investment position

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Third quarter 2010 (Previous release)

Canada's net foreign debt rose by $20.4 billion to $223.8 billion by the end of the third quarter. International liabilities continued to expand, largely on the strength of continued foreign investment in Canadian debt securities, while international assets declined.

Net foreign debt has increased over most of the past seven quarters, in line with current account deficits and reflecting exchange rate fluctuations, to reach 13.8% of Canada's gross domestic product. However, this was below the 40% range of the mid-1990s.

Canada's international investment position

New Canadian borrowing on foreign markets, as well as non-resident purchases of existing Canadian debt securities on secondary markets, led the increase in net foreign debt.

Note to readers

The international investment position presents the value and composition of Canada's foreign assets and liabilities to the rest of the world. Canada's net international investment position is the difference between these foreign assets and liabilities. The excess of international liabilities over assets can be referred to as Canada's net foreign debt. The excess of international assets over liabilities can be referred to as Canada's net foreign assets. The valuation of the assets and liabilities in the international investment position are measured at book value, unless otherwise stated. Book value represents the value of assets and liabilities recorded in the books of the enterprise in which the investment is made.

Currency valuation

The value of assets and liabilities denominated in foreign currency are converted to Canadian dollars at the end of each period for which a balance sheet is calculated. Most of Canada's foreign assets are denominated in foreign currencies while less than half of our international liabilities are in foreign currencies. When the Canadian dollar is appreciating in value, the restatement of the value of these assets and liabilities in Canadian dollars lowers the recorded value. The opposite is true when the dollar is depreciating.

Exchange rate fluctuations continued to have an impact on the value of Canada's international assets and liabilities. Over the quarter, the Canadian dollar gained 3.5% against the US dollar, but lost 7.2% against the Euro, 2.4% against the Japanese Yen and 1.6% against the British pound.

International liabilities continue to rise

International liabilities increased a further $6.9 billion to $1,648.3 billion in the third quarter, albeit at a slower pace than the previous quarter. The large inflows of foreign funds into Canadian bonds were largely offset by a decline in foreign direct investment in Canada and a reduction in the value of foreign currency denominated liabilities. The latter resulted from the downward revaluation effect of the appreciation of the Canadian dollar vis-à-vis the US currency.

International assets continue to be affected by exchange rate variations

Canada's international assets declined $13.5 billion to $1,424.5 billion in the third quarter. With only $0.5 billion of Canadian funds repatriated from abroad in the quarter, this was led by the downward revaluation effect on international assets due to the appreciation of the Canadian dollar against the US dollar. Given the large portion of Canadian foreign investments denominated in US dollars, this more than offset the upward revaluation effect of the depreciation of the Canadian dollar against other currencies.

Reduced foreign direct investment in Canada

Direct investment positions decreased in the third quarter, with foreign direct investment in Canada declining more than Canadian direct investment abroad. For the first time since the second quarter of 2009, foreign direct investors repatriated funds from their Canadian affiliates in the third quarter. The $9.2 billion in funds withdrawn from Canada mostly reflected repayments of debt to foreign parents.

On the other side of the ledger, a large Canadian repatriation of funds from foreign affiliates and a downward exchange rate revaluation on direct investment assets were moderated by Canadian direct investment acquisitions in the United States and the United Kingdom. As a result, Canada's net asset position on direct investment edged up.

Direct investment position

Bonds represent an increasing proportion of liabilities to non-residents

Foreign investors further increased their holdings of Canadian bonds in the third quarter by $20.6 billion. The increase was largely due to purchases of private corporate bonds. The balance of the purchases was mainly in federal and provincial bonds, which remained strong, albeit down from the previous quarter. Nevertheless, foreign holdings of these government bonds have increased by nearly 60% since the end of 2008.

Government bonds have increased sharply over most of the last two years to 14% of Canada's international liabilities. This was up from about 10% in 2007/2008 but well below the peak of 27% in 1994.

Canadian bonds held by non-residents

Strength in foreign stock markets moderate increase in net foreign debt

Canada's overall net international investment position can also be calculated with tradable securities valued at market prices. By this measure, Canada's net foreign debt increased $11.1 billion to $223.6 billion by the end of the third quarter.

The relatively larger gains on foreign stock markets helped moderate the increase in net foreign debt. The value of Canadian holdings of foreign shares increased by $50.2 billion, while non-resident investors' Canadian equity assets increased by $32.2 billion.

Available on CANSIM: tables 376-0055 to 376-0057 and 376-0059.

Definitions, data sources and methods: survey numbers, including related surveys, 1534 and 1537.

The third quarter 2010 issue of Canada's International Investment Position (67-202-X, free) will be available soon.

For more information, contact Client Services (613-951-1855; To enquire about the methods, concepts or data quality of this release, contact Christian Lajule (613-951-2062) or Komal Bobal (613-951-6645), Balance of Payments Division.

Table 1

Canada's international investment position at period end
  Fourth quarter 2006 Fourth quarter 2007 Fourth quarter 2008 Fourth quarter 2009 First quarter 2010 Second quarter 2010 Third quarter 2010
Canadian direct investment abroad 518.8 513.1 641.6 593.3 563.6 587.9 581.5
Portfolio investment abroad              
Foreign bonds 124.0 150.3 145.7 123.9 118.9 120.1 117.6
Foreign bonds at market value 133.7 153.5 143.2 124.1 118.8 122.1 123.0
Foreign stocks 227.4 226.4 279.2 255.6 249.4 259.5 262.2
Foreign stocks at market value 582.2 603.2 438.9 508.3 511.5 472.4 522.6
Foreign money market 20.0 7.5 3.5 4.6 5.6 5.1 7.3
Foreign money market at market value 20.1 7.5 3.5 4.6 5.6 5.1 7.3
Other investments              
Loans 72.8 77.8 94.5 103.2 114.1 110.6 106.5
Deposits 132.2 157.9 225.4 223.0 230.3 237.6 230.9
Official international reserves 41.0 40.6 51.4 56.0 56.2 56.6 58.2
Official international reserves at market value 40.9 40.7 53.4 57.1 57.6 59.0 61.3
Other assets 45.5 38.2 52.6 54.9 57.0 60.6 60.3
Total assets              
At book value 1,181.7 1,211.9 1,494.0 1,414.5 1,395.0 1,437.9 1,424.5
With portfolio investment at market value 1,546.2 1,592.0 1,653.2 1,668.5 1,658.6 1,655.2 1,693.3
Foreign direct investment in Canada 437.2 510.1 540.8 549.4 561.0 570.1 560.6
Portfolio investment              
Canadian bonds 410.0 384.7 455.1 495.7 501.4 543.5 564.1
Canadian bonds at market value 432.5 399.7 470.4 525.9 528.9 577.3 609.4
Canadian stocks 96.7 92.1 96.1 112.8 112.5 116.7 118.2
Canadian stocks at market value 317.9 360.0 218.3 313.7 321.1 309.2 341.4
Canadian money market 24.5 22.0 34.9 32.9 32.3 33.4 33.5
Canadian money market at market value 24.7 22.2 35.0 32.9 32.3 33.4 33.5
Other investment              
Loans 55.7 61.8 71.7 61.9 74.3 76.9 73.6
Deposits 226.8 243.5 301.6 282.5 284.9 268.1 265.9
Other liabilities 21.7 27.4 24.5 32.6 32.4 32.6 32.4
Total liabilities              
At book value 1,272.6 1,341.7 1,524.8 1,567.7 1,598.9 1,641.4 1,648.3
With portfolio investment at market value 1,516.5 1,624.8 1,662.4 1,798.9 1,834.9 1,867.7 1,916.9
Net international investment position              
At book value -90.9 -129.8 -30.8 -153.2 -203.8 -203.5 -223.8
With portfolio investment at market value 29.7 -32.9 -9.2 -130.4 -176.3 -212.5 -223.6