Analysis

Statistics on direct investment are an indicator of France’s integration into the global economy.

Foreign direct investment in France goes to both the most robust and the most fragile companies

Since 2015, foreign direct investment in France has been at a high, while companies that are on average larger and more efficient tend to be the target of foreign investors. In this context, the open debate around the concept of attractiveness generally swings between two seemingly contradictory reactions: the satisfaction of attracting foreign investors to finance the development of French companies and the fear of seeing those same investors lay their hands on France’s industrial and commercial treasures. Research on the subject has fuelled both hypotheses by showing that in general non-resident investors “cherry pick” – they buy the most efficient companies. Without settling the debate, this article uses a dispersion analysis to show that while non-resident investors may clearly favour high-potential companies, they also target companies in poor financial health.

French net direct investment flows were back in surplus in 2016

The value of investments abroad made by French residents was more than double the value of non-resident investments in France. France has resumed its investments in non-resident manufacturing and is seeking out new economic growth opportunities in emerging markets.

French direct investment stocks

Direct investment made a positive contribution to France’s net international investment position and generated over EUR 40 billion in net income in 2016. This investment mainly consists of equity holdings. The United States is France’s largest counterparty country.

Strategies for internationalisation in Pharma

The French pharmaceutical industry uses three different strategies for internationalization. The “domestic market model” prevails downstream in the value chain, mainly for foreign groups’ affiliates. The “factories of the world model” is found upstream in the chain, mainly for industrial subsidiaries, most of which are under French control. The “hybrid model” depicts the strategies industrial and trading subsidiaries, often under foreign control.

A new standard for compiling and disseminating direct investment statistics

In 2009, the method used to estimate the market value of foreign direct investments in unlisted equities was changed. In accordance with IMF and OECD recommendations, the same framework is now used for both inward and outward FDI stocks. The implementation of this new methodology led to a substantial change in the market value of the stock of FDI assets and liabilities at end-2008 and for the period 2002-2007. Nevertheless, the net FDI position at the end of 2008 was still positive at EUR 196 billion, equivalent to 10% of GDP.

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invest.direct@banque-france.fr