Focus: Direct investment

Direct investments are international investments by which entities resident in one economy acquire or hold control or significant influence over the management of an enterprise resident in a third economy (direct investment enterprise). By convention, a direct investment relationship is considered to exist when the entity acquires or holds at least 10% of the capital or voting power of the direct investment enterprise. Once a direct investment relationship has been established, all cross-border financial relationships (lending, borrowing, trade credit, equity investments, reinvested earnings) between the direct investor, the companies it controls, the direct investment enterprise and the companies it in turn controls are also considered direct investments and are recorded as such.

Real estate investments are included in direct investments under cross-border asset acquisitions.

All direct investment transactions (carried out abroad by a French resident or in France by a non-resident) in excess of EUR 15 million must be reported to the Banque de France for the purposes of balance of payments preparation within 20 working days. The forms required to report such transactions are available at the direct investment reporting page.

Data on international intra-group company loans and borrowings are collected via specific surveys: the ECO survey for trade outstandings; and the EFI survey for financial outstandings.

All direct investment transactions in excess of EUR 15 million must be reported within 20 working days. The form used depends on the nature and purpose of the transaction. The forms required to report direct investments and disinvestments (including real estate) are available on the reporting page and should be sent to invest.direct@banque-france.fr.

Benchmark methodology for direct investment

The Banque de France applies the official methodology to measure direct investments. The manuals defining the rules and standards for recording international transactions and international investment position stocks are drafted under guidance from the International Monetary Fund (IMF). The Organisation for Economic Co-operation and Development (OECD) has published a benchmark manual on direct investment methodology.

Two different direct investment presentations

Direct investment flows, income and stocks can be recorded and presented according to different principles. The choice of presentation can symmetrically affect the level of flows, income and stocks of French direct investment abroad and foreign direct investment in France, but the overall balance remains unchanged.

The asset/liability principle consists in adding together all claims and obligations (equity or debt – loans and borrowings) within an international group, based on the direction of the investment: a subsidiary's claim on its parent company is thus treated as an investment by the subsidiary in the parent company. Under current international methodology, the asset/liability principle is the benchmark for balance of payments presentation and is therefore applied in the preparation of France’s monthly and quarterly balance of payments reporting.

The extended directional principle consists in presenting transactions and positions according to the economic decision-making unit: claims (equity or loans) between companies belonging to the same international group are not classified according to the direction of the claim, but according to the country of residence of the parent or head office. A subsidiary’s loan to, or equity investment (of less than 10% of the capital) in, its parent company, considered as having been decided by the parent company, are treated as reverse investments and are reclassified as disinvestments by the parent company in the subsidiary. By extension, the directional principle is also applied to dealings between "fellow enterprises”, i.e. enterprises with a “common parent” belonging to the same international group but with no direct equity link between them. For a company resident in France holding a claim on a non-resident fellow enterprise, the claim is treated as a foreign investment if the common parent is also a resident of France. However, the claim is recorded as a foreign disinvestment in France if the common parent is non-resident.

The Banque de France favours "directional principle" data in its analyses of direct investment. These data allow analysts to differentiate more easily between the operations of resident direct investors and non-resident investors, and thereby to better interpret the behaviour of both.

Regulatory framework for direct investment data collection

Any foreign direct investment in France (or resident direct investment abroad) in excess of EUR 15 million must be reported for the purposes of balance of payments preparation within 20 working days of its effective execution.

Article L. 141-6 of the French Monetary and Financial Code (Code monétaire et financier) authorises the Banque de France to obtain any documents and information required for the preparation of France’s balance of payments and international investment position.

Article R. 152-3 of the French Monetary and Financial Code specifies that the reporting obligation covers:

1. Foreign direct investment in France as defined in paragraph 4 of Article R. 151-1 and their liquidation;
2. Acquisitions or disposals of non-resident companies by French residents;
3. Acquisitions or disposals of real estate assets abroad by French residents and real estate assets in France by non-residents.

Decision No. 2007-01 of the Monetary Committee of the Banque de France General Council on the collection of statistics for the compilation of the balance of payments and international investment position of France, the euro area and the European Community sets out its application (Articles 5 and 7).

Decision No. 2021-01 of the Governor of the Banque de France on the declaration of statistical information by financial intermediaries for the preparation of the balance of payments and international investment position covers the scope of declarations expected from financial intermediaries.

Statistical data on France’s direct investment

Direct investment statistics form part of the financial account of France’s balance of payments and international investment position. Income actually paid is reported in the current account of the balance of payments. Reinvested earnings, which are the subject of a flow in the opposite direction, are also reported in the financial account.

The table of France’s quarterly direct investment flows contains data prepared according to both the extended directional principle and the asset/liability principle. The sub-headings can be used to analyse the change from one set of statistics to another.

Annual direct investment stock, flow and income data are published in The French balance of payments and international investment position Annual Report. They are broken down by country and by sector. Flow data by type are updated quarterly. Total direct investment is estimated on a monthly basis and published in Stat Info – Balance of Payments.

A wide range of direct investment data is available on the Webstat statistics portal.

Statistics on direct investment (carried out abroad by a French resident or in France by a non-resident) are a measure of France’s integration in the global economy.