Growth in German external assets continued over the course of last year. At the end of 2016, the balance of Germany’s assets and liabilities vis-à-vis non-residents amounted to €1,709 billion, corresponding to 54% of Germany’s nominal gross domestic product (GDP). In comparison to the previous year, net external assets grew by €231 billion.

Data on external assets are recorded in the international investment position. This captures Germany’s assets and liabilities vis-à-vis non-residents at the end of a reporting period. As a measure of holdings at a given point in time, the international investment position complements the balance of payments, which captures the values of all economic transactions between residents and non-residents over a given period.

Net capital exports (€244 billion) were the main driver of this increase and are primarily attributable to the current account surplus last year. By contrast, valuation changes and other adjustments, such as changes in sector classification or other changes for statistical reasons, had a slightly negative impact (-€13 billion). In comparison to the previous year, claims on non-residents rose by 4.6% to €8,215 billion. They thus grew at over twice the rate of liabilities, which were up 2.0% to €6,506. 

Strong demand for foreign securities

In portfolio investments, the positive balance increased further. At the end of 2016, portfolio investment assets exceeded the corresponding liabilities by around €338 billion. This increase was attributable to buoyant acquisition of foreign securities by residents as well as to the sale of domestic securities by non-residents.

At the end of 2016, resident investors held foreign securities worth €2,824 billion, which was 5.8% (€155 billion) higher than the previous year. Of this amount, €97 billion was attributable to additional purchases and €59 billion was a result of both market price effects and exchange rate effects. Demand for foreign long-term debt securities was especially pronounced. There was also stronger demand for foreign shares and investment fund units among domestic investors. By contrast, at €2,486 billion at the end of 2016, non-resident investors held around 3% fewer German securities in their portfolios than at the end of 2015. They again made large-scale reductions in their holdings, primarily of long-term public sector debt (€113 billion). The very low interest rates, a drop in turnover of public sector bonds, and, above all, asset sales to the Bundesbank under the expanded asset purchase programme (APP) all played a part.

Intensified cross-border ties between enterprises

Cross-border relations between enterprises continued to expand in 2016. German direct investment abroad was up on the year by a total of €67 billion to €1,832 billion. This was an increase of 3.8%. In the main, domestic investors boosted their equity capital in affiliated enterprises abroad. Non-resident enterprises, on the other hand, augmented their equity capital in German affiliated enterprises in 2016. Intra-group lending was expanded to an even greater extent, however, with considerable growth being seen above all in loans from foreign-domiciled subsidiaries to parent companies in Germany. Overall, foreign direct investment in Germany reached a figure of €1,310 billion at the end of 2016, exceeding the prior-year value by €54 billion (4.3%).

Other investment, comprising loans and trade credits (where these do not constitute direct investment) as well as currency and deposits, saw a drop in Germany's positive net asset position to €703 billion, putting it €16 billion below the previous year's figure. Claims on non-residents rose by 6.8% to €2,772 billion. In this context, the Bundesbank’s asset position grew by €171 billion, primarily because of an increase in TARGET2 balances during the course of 2016. This also reflected the effects of the APP.

The Bundesbank’s reserve assets amounted to around €176 billion at the end of 2016, up on the end of 2015 by just over €16 billion. This was chiefly attributable to positive valuation effects, especially as a result of the higher price of gold.