Are you looking for a chance to grow your revenue smartly? Then, investments could be your next logical move. However, you don’t know exactly how and where to begin? You can think in terms of national and international perspectives too. Many individuals and corporations alike do the same. Why would you limit your possibilities solely to the US market?
Join us in this article to find out how economic investments work. Most of all, we will focus on revealing how foreign investors contribute to the development of the American economy.
The US economy thrives with non-American investors
First, you must know some fundamental things. Investments propel the economy. An economy without suitable long-and short-term financial investments will have a bleak future. In other words, it leads to recession. Financing, investing in real estate, and new businesses add to the authorized capital stock. The quantity of money available determines a state’s productivity. Investments grant economic growth.
A country heavily relies on investors. These can be either its citizens, major corporations, or foreign lenders and shareholders. The gist of things is that everyone should enjoy decent compensation for their financial input.
The foreign direct investment (FDI) dropped by 40-50% in 2020. It was a hard hit by all means. Even so, in US history and economy, a new chapter is about to open. In November 2021, the US will lift the ban for EU travelers. Many analysts believe this will herald a financial boom in the European Union and United Kingdom’s investments on US soil. According to the most optimistic estimates, FDI will grow up to 20% by the end of the current year.
Addressing the concerns about foreign investments in America
Undoubtedly, there are some vocal nationalist groups here and overseas as well. They claim that foreigners represent a threat to US interests. However, they are in the minority. Public statements underline that the US financial world enjoys the benefits of FDI.
First of all, US laws regulate American bonds and stocks. There are no such legal measures that prevent foreign citizens from investing in the American stock market. Also, many investment agencies try to convince business clients overseas to buy US stocks.
FDI in statistics before 2020
In 2018, the total FDI stock mounted to an impressive $4.3 trillion in revenue. While in terms of innovations in research and development, foreigners spent $62.6 billion in 2017 (source: Select USA.)
Non-US investors create good-paying jobs and encourage industrial innovations. In 2018, the US affiliates of foreign companies employed roughly 7.4 million American workers. 2.5 million US employees worked in manufacturing jobs in non-US-owned firms. While 5.9 million people worked in “additional jobs attributable to sourcing, increased incomes, productivity gains, and other economic effects of foreign-owned firms.”
The median yearly compensation of American workers is also commendable, $81,000 in 2016.
Furthermore, foreign investors also increase US exports. Before the pandemic, in 2017, the US economy reached an impressive peak. Foreign-owned companies exported American goods totaling about $383 billion. They paid 16 percent of their revenue in the form of federal corporate income taxes.
Therefore, foreign direct investment has an essential role. It contributes to assuring and protecting American economic growth.
FDI figures changed in 2021 moderately
The United Nations Conference on Trade and Development (UNCTAD) recently submitted its World Investment Report. According to this report, there was a 40 percent drop in foreigners’ investments in the US.
In plain numbers, this translates to a $105-billion-loss for the US economy in 2020. The deficit hit the following industries the hardest. Foreign capital in the finance sector dropped by 45%. The US wholesale trade suffered a drought due to an FDI withdrawal of 87% compared to 2019. There was a 15% decrease in investments made by European multinational corporations. Besides, Asian corporations reduced their US investments by 53%.
Nevertheless, the USA holds firm, according to this report. It remained the greatest beneficiary of FDI worldwide. We can explain this slightly paradoxical situation with the following factors. On the one hand, the US maintained its vast consumer base and prolific workforce. Furthermore, the American economy benefits from a developed infrastructure. Another essential advantage is that the business environment welcomes innovations.
The United Kingdom, France, Germany, Ireland, Canada, and Japan are the top countries that invest in the US.
Foreigners and US real estate investments
One should give in to far-fetched ultranationalist concerns. Buying real estate in a different country doesn’t imply stealing the other’s land. And it can go both ways. There are no restrictions for you either to invest in properties in a country overseas.
Similar to the stock market regulations, there are no constraints on non-US ownership of real estate. Only in extreme cases can the US government seize properties under foreign license. Even so, they must carry out the non-discriminatory seizure for a public purpose and in uniformity with international laws. Additionally, they have to give fair compensation for the confiscated property.
Over the years, realtors realized the tremendous potential of foreign real estate buyers as an essential niche. Agents specialized in working with businesspeople from another country will tell you this. First, they master the “art” of how to work with foreign investors in the US. Only then will agents find out the big profits the business will bring them.
Foreign property investment in numbers
In 2019, foreign property investment in America and property sales to non-US buyers added up to $78 billion. (source: Statista Research Bureau.) Chinese, Canadian, and Mexican businesspeople were the top investors and residential property buyers. Most of all, they prefer suburban estates to houses in small towns and downtown areas.
The value of foreign investments in US property decreased to $54.4 billion in 2021. The fundamental reason behind this was the virus quickly spread. And the travel restrictions mentioned before. Again, the Chinese represent six percent of the foreign property buyers in America. At the same time, Europeans instead spent approximately 2.28 billion in US real estate.
As we have underlined with statistics in this article, foreign investments boost the US economy! Non-US investors buy houses and invest in trade and manufacturing. Their financial involvement creates well-paying jobs, and it spurs innovations. And let’s not forget, they also pay taxes.
Let’s compare the pre-pandemic figures with the current economic situation. We now start to realize the enormous financial deficit the COVID-19 caused. The absence of vital international players had a fair share in this loss.
The time seems ripe for Americans to profit from foreign investors. In many European countries, they are still struggling. The pandemic resulted in disastrous economic aftermath. As a result, businesses overseas are looking for investment opportunities. The United States found itself in the lucky position to fulfill this void and offer international business and investments a chance!