International Investment Position

Canada's international investment position is the statistical statement that presents the value and composition of the stock of Canadian financial claims on non-residents and Canadian financial liabilities to non-residents.

Canadian international financial assets are those owned by Canadian residents and which embody future economic benefits from non-residents. Canadian international financial liabilities are owned by non-residents and embody future economic benefits from Canadian residents. Financial assets store a value, but unlike most non-financial assets, they are not directly employed in productive activity. Instead, they are convertible into cash or other financial instruments.

The difference between total international financial assets and total international financial liabilities is referred to as the net international investment position. Put another way, Canada's net investment position is the difference between what Canada owns outside Canada (its external assets) and what Canada owes to non-residents (its external liabilities).

There are four classes of financial assets and financial liabilities, referred to as functional categories, in Canada’s international investment position: direct investment, portfolio investment, other investment and reserve assets. These four classes largely reflect the different nature of the investment and the motivation for investment. Financial derivatives, which international standards recommend be shown as a separate functional class, are included in the other investment category and are partially covered in the Canadian international investment position.

In ‘direct investment’, the investor residing in one country has a significant influence on the management of an enterprise residing in another country. This means that the direct investment also encompasses investment where there is a substantial influence, to the point of having a controlling interest. In ‘portfolio investment’, the investor does not have a significant influence on the non-resident issuer of the instruments. With ‘other investment’, there is equally no influence from the investor's viewpoint, but unlike portfolio investment, there is generally no market in which to trade the instruments used to carry out the investment. ‘Reserve assets’ are a distinct class of assets because they are managed in different ways from all other assets. They are owned by monetary authorities and are used for balance of payments financing needs.