The US remains top investment destination
Canadian foreign direct investment (FDI) reached new heights in 2023, with an increase in both Canadian direct investment abroad (CDIA) and FDI in Canada (FDIC). The data released by Statistics Canada revealed that the stock of CDIA rose by $138.8 billion (+6.8%), reaching $2,171.3 billion by the end of 2023. Simultaneously, the stock of FDIC grew by $52.4 billion (+4.0%), totaling $1,360.3 billion.
The resulting net direct investment position for Canada with the rest of the world increased by $86.4 billion in 2023, hitting a record high of $811.0 billion. This trend marks a significant expansion of Canada’s net direct investment position over the past decade, with CDIA consistently outpacing FDIC in growth.
The US at the top of both lists
The US remained the focus for CDIA in 2023, with the stock of Canadian direct investment in the US growing by $63.7 billion to $1,078.1 billion. This growth was attributed to equity investments, including acquisitions and reinvested earnings by Canadian investors. However, a downward revaluation effect of $26.3 billion due to the appreciation of the Canadian dollar against the US dollar moderated the overall growth. Despite this, the US accounted for 49.7% of all Canadian direct investment holdings abroad at the end of 2023.
Other key regions for Canadian direct investment included Europe, which represented 21.2% of all holdings by the end of 2023, and Asia/Oceania, with a 12.6% increase in 2023 to $167.4 billion. This latter region, although smaller in absolute terms compared with the US and Europe, saw the highest percentage growth, driven primarily by the finance and insurance sector.
On the flip side, the US also dominated the FDIC, with holdings up $35.5 billion to $618.2 billion in 2023, representing 45.7% of all FDIC. Europe followed, with 34.3% of the total, led by countries such as the UK, Luxembourg, and the Netherlands. Meanwhile, Asia/Oceania accounted for $160.9 billion in FDI, led by Japan and Hong Kong.
Notably, the manufacturing sector in Canada saw the most significant increase in FDI, with a $25.9 billion boost, bringing the total stock to $236.9 billion. According to the report, this sector’s growth was primarily driven by investments in food manufacturing, paper manufacturing, and transportation equipment manufacturing.
The broader picture
In 2023, Canada’s FDI from Europe represented 20.7% of the total on an ultimate investor country basis, significantly lower than the 34.3% on an immediate investor country basis. Conversely, the US, Japan, China, Australia, and Brazil held more FDIC on an ultimate investor country basis than on an immediate investor country basis.
At the end of 2023, more than half (53.9%) of Canadian direct investors’ holdings abroad were in foreign affiliates operating in a different industry from their own. This trend was driven by sectors like management of companies and enterprises, wholesale trade, and utilities. In contrast, Canadian investors in finance and insurance, transportation and warehousing, and mining and oil and gas extraction tended to invest within their own industries.
