Canada’s net foreign asset position, the difference between Canada’s international financial assets and international liabilities, was down by $352.6 billion to $1,150.0 billion at the end of the first quarter of 2022, its lowest level since the end of the third quarter of 2020.
The revaluation effect resulting from market price changes (-$248.1 billion) contributed the most to the decrease in Canada’s net foreign asset position. Global stock markets moved in different directions in the first quarter. While the Canadian stock market grew by 3.1%, the US and European stock markets fell by 4.9% and 9.2%, respectively. Canada’s international investment position is strongly exposed to the performance of stock markets. At the end of the first quarter, 72.5% of Canada’s international assets and 48.2% of its liabilities were held in the form of equities.
The decline in the net foreign asset position was the first one since the first quarter of 2020 when global equity markets fell sharply at the onset of the COVID-19 pandemic.
The revaluation effect resulting from fluctuations in exchange rates (-$74.3 billion) further decreased Canada’s net foreign asset position. Over the first quarter, the Canadian dollar gained 1.5% against the US dollar, 3.9% against the euro, and 6.9% against the Japanese yen. At the end of the quarter, 96.8% of Canada’s international assets were denominated in foreign currencies, compared with 34.9% of its international liabilities.
On a geographical basis, Canada’s net foreign asset position with the United States was down by $139.6 billion to $833.8 billion at the end of the first quarter, and was down by $213.0 billion to $316.2 billion with the rest of the world.
Canada’s international assets down significantly
Canada’s international assets were down by $393.1 billion to $7,350.6 billion at the end of the first quarter, almost offsetting the strong growth of the previous quarter. The downward revaluation attributable to market price changes (-$217.3 billion) led the decline, followed by revaluation resulting from fluctuations in exchange rates (-$110.6 billion). Substantial sales of foreign equity securities by Canadian investors also contributed to the decline. At the end of the quarter, 70.7% of Canada’s international assets were held by the financial sector.
On the other side of the ledger, Canada’s international liabilities were down by $40.5 billion to $6,200.6 billion. Financial transactions (-$45.4 billion) such as the withdrawal of currency and deposits in Canada by non-residents as well as the downward revaluation coming from the fluctuations of the Canadian dollar against foreign currencies (-$36.3 billion) contributed to the overall reduction. Revaluations due to market price changes (+$30.8 billion), led by higher Canadian equity prices, moderated the decline. At the end of the quarter, financial corporations’ international liabilities represented 44.7% of Canada’s total international liabilities, compared with 40.3% for non-financial corporations.
The financial sector was by far the largest contributor to Canada’s net asset position to the rest of the world at the end of the first quarter, their international assets exceeding their international liabilities by $2,425.7 billion. On the other hand, non-financial corporations and the government sector both posted a net foreign liability position.
Canada’s gross external debt declines
Canada’s gross external debt, or the value of Canadian debt instruments held by foreign investors, was down by $174.5 billion to $3,213.4 billion in the first quarter in market value terms, a first decline in one year. It represented 119.1% of Canada’s gross domestic product, down from 130.2% in the previous quarter and the lowest level since the first quarter of 2019. The financial sector, largely deposit-taking corporations, was the greatest contributor to the decline (-$111.5 billion), followed by the government sector (-$40.8 billion). At the end of March, the financial sector still contributed to the highest proportion of Canada’s gross external debt (56.6%), followed by the government sector (20.1%).
Note to readers
The international investment position is the value and composition of Canada’s assets and liabilities to the rest of the world.
Canada’s net international investment position is the difference between Canada’s assets and liabilities to the rest of the world. An excess of international liabilities over international assets can be referred to as Canada’s net foreign debt. An excess of international assets over international liabilities can be referred to as Canada’s net foreign assets.
Foreign direct investment is presented on an asset–liability principle basis (that is, a gross basis) in the international investment position. Foreign direct investment can also be presented on a directional principle basis (that is, a net basis), as shown in supplementary foreign direct investment tables 36-10-0008-01, 36-10-0009-01 and 36-10-0659-01. The difference between the two foreign direct investment conceptual presentations resides in the classification of reverse investment such as (1) Canadian affiliates’ claims on foreign parents, and (2) Canadian parents’ liabilities to foreign affiliates. Under the asset–liability presentation, (1) is classified as an asset and included in direct investment assets, and (2) is classified as a liability and included in direct investment liabilities.
International investment position data for the second quarter of 2022 will be released on September 9, 2022.
The Canada and the World Statistics Hub () is available online. This product illustrates the nature and extent of Canada’s economic and financial relationship with the world through interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China, and Japan. 13-609-X
The product Canada’s international trade and investment country fact sheet () is available online. This product provides easy and centralized access to Canada’s international trade and investment statistics, on a country-by-country basis. It contains annual information for nearly 250 trading partners in summary form, including charts, tables and a short analysis that can also be exported in 71-607-XPDF format.
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; email@example.com) or Media Relations (firstname.lastname@example.org).
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn to double workforce, investment in India by ‘this time next year’
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