News Release

FOR WIRE TRANSMISSION: 10:00 a.m. EDT, Monday, June 30, 2003
BEA 03-26

U.S. Net International Investment Position at Yearend, 2002




The tables in this release are available in an XLS spreadsheet and the entire release is available in PDF format.
Also available: a brief summary of highlights.


                                                                            BEA 03-26
                                             
Elena L. Nguyen:    (202) 606-9555

Christopher Bach:   (202) 606-9545
       
          
                                        
   
		     U.S. Net International Investment Position at Yearend 2002

    At yearend 2002, the value of foreign investments in the United States exceeded the value of
U.S. investments abroad by $2,387.2 billion (preliminary) with direct investment valued at current
cost (Table 1).  At yearend 2001, foreign investments in the United States exceeded U.S. investments
abroad by $1,979.9 billion (revised).

    The $407.3 billion increase in the negative net investment position from yearend 2001 to yearend
2002 was mainly due to large net foreign purchases of U.S. securities (mostly of corporate bonds and
Treasury securities), a shift by U.S. investors to net sellers of foreign securities, and large stock
market price declines that lowered the value of U.S.-owned assets abroad more than foreign-owned
assets in the United States.  Partly offsetting these negative effects, appreciation of most foreign
currencies against the U.S. dollar raised the dollar value of U.S.-owned assets abroad, especially of
U.S.-held foreign stocks and U.S. direct investment.  

    With direct investment valued at the current stock market value of owner's equity, the negative
net investment position was $2,605.2 billion at yearend 2002, compared with $2,314.3 billion
(revised) at yearend 2001.  The $290.9 billion increase on this basis resulted from the same factors as
above.  Other highlights include: 
   
   
      In regard to transactions, foreign acquisitions of assets in the United States in 2002 were $707.0
   billion, down from $765.5 billion in 2001 and down from a record $1,026.1 billion in 2000. 
   Foreign direct investment in the United States slowed substantially to the lowest level since
   1992, as a result of a further drop off in foreign acquisitions of U.S. companies and reductions in
   debt owed by affiliates to their foreign parents.  Net foreign purchases of U.S. securities other
   than U.S. Treasury securities also slowed; net purchases of U.S. stocks dropped to the lowest
   level since 1998, but net purchases of U.S. bonds were the third highest on record.  Net foreign
   purchases of U.S. Treasuries rebounded after three years of net sales.  Inflows reported by U.S.
   banks slowed but remained relatively strong, and inflows reported by U.S. nonbanks increased
   somewhat. 

      U.S. acquisitions of assets abroad in 2002 were $179.0 billion, down from $349.9 billion in 2001
   and down from a record $569.8 billion in 2000.  U.S. investors shifted to net sellers of foreign
   securities for the first time, as a result of substantially reduced net purchases of foreign stocks
   and stepped up net sales of foreign bonds.  U.S. banks' claims on foreigners decelerated to the
   smallest increase since 1994.  U.S. nonbanks' claims on foreigners rebounded somewhat.  U.S.
   direct investment abroad accelerated.

      Price depreciation of U.S. stocks reduced the value of foreign holdings of U.S. stocks and
   substantially reduced the value of owners' equity of foreign direct investment in the United
   States on a market value basis.  Price depreciation of foreign stocks also diminished the value of
   U.S. holdings of foreign stocks and substantially reduced the value of owners' equity of U.S.
   direct investment abroad on a market value basis.

      Appreciation of most foreign currencies against the U.S. dollar from yearend 2001 to yearend
   2002 raised the dollar value of all foreign-currency denominated assets and liabilities, especially
   the value of U.S.-held foreign stocks and U.S. direct investment abroad.
_________________________________________________________________________________

              Valuation Methods for Direct Investment
   
The current-cost method values the U.S. and foreign parents' share of their affiliates' investment in
plant and equipment using the current cost of capital equipment, in land using general price indexes,
and in inventories using estimates of their replacement cost.  

The market-value method values the owners' equity component of the direct investment position
using indexes of stock market prices.

The historical-cost method values all assets and liabilities at their book value.  Country and industry
detail can be shown only under this method.  Data on this basis are not presented in this release.

_________________________________________________________________________________
                                             
    U.S.-owned assets abroad increased $1.8 billion to $6,189.2 billion with U.S. direct investment
valued at current cost, and they decreased $417.7 billion to $6,473.6 billion with U.S. direct
investment valued at market value. 

    Claims on foreigners reported by U.S. banks increased $31.9 billion to $1,455.1 billion,
reflecting a sharp slowdown in lending to foreigners amid weak economic and financial conditions
abroad and a further reduction in merger and acquisition activity.

    U.S. holdings of foreign securities decreased $267.8 billion to $1,847.0 billion.  Holdings of
foreign stocks decreased sharply as a result of large price depreciation that more than offset exchange
rate appreciation and small net U.S. purchases.  Holdings of foreign bonds were almost unchanged as
a result of price appreciation and exchange rate appreciation that were more than offset by net U.S.
sales. 

    U.S. direct investment abroad at current cost increased $153.8 billion to $1,751.9 billion; at
market value, it decreased $265.7 billion to $2,036.2 billion.  In 2002, net financial outflows
accelerated to $137.8 billion, but remained well below record outflows of $224.9 billion in 1999.  At
current cost, financial outflows and exchange rate appreciation more than accounted for the increase
in the position.  At market value, financial outflows and exchange rate appreciation were more than
offset by large declines in U.S. owners' equity, as foreign stock market prices fell sharply in 2002. 

    Claims on unaffiliated foreigners reported by U.S. nonbanking concerns increased $55.2 billion
to $891.0 billion, reflecting strong U.S. deposits in Western Europe and a pickup in U.S. deposits at
the Caribbean banking centers.  Exchange rate appreciation also increased the value of claims.

    U.S. official reserve assets increased $28.6 billion to $158.6 billion, as a result of strong price
appreciation in the market value of the U.S. gold stock and of exchange rate appreciation.
                                   
    Foreign-owned assets in the United States increased $409.1 billion to $8,576.4 billion with
foreign direct investment valued at current cost, and they decreased $126.8 billion to $9,078.7 billion
with foreign direct investment valued at market value.  

    U.S. liabilities to private foreigners and international financial institutions reported by U.S.
banks increased $101.0 billion, to $1,407.4 billion.  Although inflows were down from last year,
U.S. banks continued to receive sizable amounts of funds from securities brokers and from parents
and branches overseas.

    Foreign holdings of U.S. securities other than U.S. Treasury securities, excluding official
holdings, increased $5.4 billion to $2,861.1 billion.  Holdings of U.S. bonds increased as a result of
relatively strong net foreign purchases, price appreciation, and exchange rate appreciation.  Holdings
of U.S. stocks decreased substantially, as moderate net foreign purchases were more than offset by
sharp price depreciation. 

    Holdings of U.S. Treasury securities by private foreigners and international financial institutions
increased $114.6 billion to $503.6 billion, reflecting a sizable shift in foreign transactions to net
purchases of $96.2 billion after three years of net sales.  Sizable price appreciation at a time when
interest rates were falling to historical lows also increased the value of foreign holdings. 

    Foreign direct investment in the United States valued at current cost decreased $9.9 billion to
$1,504.4 billion; at market value, it decreased $545.8 billion to $2,006.7 billion.  In 2002, net
financial inflows decreased sharply to $39.6 billion, the lowest level since 1992.  At current cost, net
financial inflows were more than offset by negative valuation adjustments resulting from price
depreciation, capital losses of affiliates, and other valuation changes.  At market value, net financial
inflows were more than offset by substantial price depreciation in owners' equity resulting from the
decline in U.S. stock market prices.

    Liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns increased $71.1
billion to $870.3 billion, reflecting U.S. corporate borrowing, mostly from Western Europe and the
Caribbean.        

    U.S. currency held by foreigners increased $21.5 billion to $297.1 billion.  The pace of
shipments slowed a little, but the increase remained relatively strong as a result of economic
problems in several areas of the world.

    Foreign official assets in the United States increased $105.3 billion to $1,132.5 billion, the
largest increase since 1996.  Net foreign official purchases of U.S. Treasury securities increased
sharply, and were augmented by price appreciation.

                       *          *          *

                             Revisions

    The previously published estimate of the net international investment position in 2001 at current
cost was -$1,948.1 billion, and at market value was -$2,309.1 billion.

    Revisions this year include the incorporation of results from the U.S. Treasury Department's
Benchmark Survey of U.S. Portfolio Investment Abroad as of December 2001 and results from
BEA's Benchmark Survey of U.S. Direct Investment Abroad for 1999.  Results from the Benchmark
Survey of U.S. Portfolio Investment Abroad indicate an overstatement in the previously published
estimates of U.S. holdings of foreign bonds.  Consequently, U.S. holdings of foreign bonds for 1998-
2001 are revised down.  The survey results also indicate that U.S. holdings of foreign stocks are
overstated for 1998 and 1999, but are understated for 2000 and 2001.  Consequently, 1998 and 1999
are revised down, and 2000 and 2001 are revised up.  For the entire period of 1998-2001, revisions to
estimates of U.S. holdings of foreign securities have little effect on the size of the U.S. net
international investment position.  BEA's Benchmark Survey of U.S. Direct Investment Abroad for
1999 indicates a small understatement in direct investment abroad in 1999.  The direct investment
abroad estimates also incorporate updated data from annual surveys for 2000-2001.

    In addition to the above improvements, all estimates are revised as a result of newly available or
revised quarterly and annual survey results and other data.  Revisions attributable to updated source
data are for 1998-2001.       

    A more detailed discussion of the U.S. net international investment position in 2002 and the
revised historical data will appear in the July issue of the Survey of Current Business.  That issue
will also contain an article about historical-cost direct investment positions, with detail by country
and industry, and revised direct investment historical data.  Historical-cost data that previously
appeared in this release will be posted on BEA's Web site at <www.bea.gov>.
          
                      *          *          *

    BEA's major national, regional, international, and industry estimates, the Survey of Current
Business, and BEA news releases are available on BEA's web site:
   
                           <www.bea.gov>
                           
    Most of BEA's estimates and analyses appear in the Survey of Current Business, BEA's monthly
journal.  Subscriptions and single copies of the printed Survey are for sale by the Superintendent of
Documents, U.S. Government Printing Office.  Internet: <bookstore.gpo.gov>: 
phone: (202) 512-1800; fax: (202) 512-2250; mail: Stop SSOP, Washington, DC 20402-0001.    
                                  
                                  

    Table 1.--International Investment Position of the United States at Yearend, 2001 and 2002

                                    [Millions of dollars]


                                                                                                          Changes in position in 2002 (decrease (-), increase (+))


                                                                                                    Attributable to:


                                                                                                               Valuation adjustments
Line                                 Type of investment
                                                                                         Position,                                                             Position,
                                                                                          2001 /r/                          Exchange                           2002 /p/
                                                                                                    Financial     Price       rate       Other
                                                                                                      flows      changes  changes /1/ changes /2/    Total
                                                                                                       (a)         (b)        (c)         (d)      (a+b+c+d)


    Net international investment position of the United States:
   1    With direct investment positions at current cost (line 3 less line 16)...........-1,979,906    -527,998    -83,284     147,129      56,848    -407,305 -2,387,211
   2    With direct investment positions at market value (line 4 less line 17)...........-2,314,271    -527,998    -42,105     230,053      49,166    -290,884 -2,605,155

      U.S.-owned assets abroad:
   3      With direct investment positions at current cost (lines 5+6+7)................. 6,187,410     178,985   -365,107     182,335       5,568       1,781  6,189,191
   4      With direct investment positions at market value (lines 5+6+8)................. 6,891,251     178,985   -847,812     264,680     -13,542    -417,689  6,473,562

   5    U.S. official reserve assets.....................................................   129,961       3,681     18,492       6,482         -14      28,641    158,602
   6    U.S. Government assets, other than official reserve assets.......................    85,654          32      ....        ....        ....           32     85,686

        U.S. private assets:
   7        With direct investment at current cost (lines 9+11+14+15).................... 5,971,795     175,272   -383,599     175,853       5,582     -26,892  5,944,903
   8        With direct investment at market value (lines 10+11+14+15)................... 6,675,636     175,272   -866,304     258,198     -13,528    -446,362  6,229,274

          Direct investment abroad:
   9        At current cost.............................................................. 1,598,072     137,836     -5,215      25,577      -4,418     153,780  1,751,852
  10        At market value.............................................................. 2,301,913     137,836   -487,920     107,922     -23,528    -265,690  2,036,223
  11      Foreign securities............................................................. 2,114,734     -15,801   -378,384     126,427       ....     -267,758  1,846,976
  12        Bonds........................................................................   502,061     -33,478     21,274      11,927       ....         -277    501,784
  13        Corporate stocks............................................................. 1,612,673      17,677   -399,658     114,500       ....     -267,481  1,345,192
  14      U.S. claims on unaffiliated foreigners reported by U.S.
            nonbanking concerns..........................................................   835,780      31,880      ....       13,301      10,000      55,181    890,961
  15      U.S. claims reported by U.S. banks, not included elsewhere..................... 1,423,209      21,357      ....       10,548       ....       31,905  1,455,114

      Foreign-owned assets in the United States:
  16      With direct investment at current cost (lines 18+19)........................... 8,167,316     706,983   -281,823      35,206     -51,280     409,086  8,576,402
  17      With direct investment at market value (lines 18+20)........................... 9,205,522     706,983   -805,707      34,627     -62,708    -126,805  9,078,717

  18    Foreign official assets in the United States..................................... 1,027,194      94,860     10,476       ....        ....      105,336  1,132,530

        Other foreign assets:
  19        With direct investment at current cost (lines 21+23+24+27+28+29)............. 7,140,122     612,123   -292,299      35,206     -51,280     303,750  7,443,872
  20        With direct investment at market value (lines 22+23+24+27+28+29)............. 8,178,328     612,123   -816,183      34,627     -62,708    -232,141  7,946,187

          Direct investment in the United States:
  21        At current cost.............................................................. 1,514,374      39,633     -6,060         579     -44,098      -9,946  1,504,428
  22        At market value.............................................................. 2,552,580      39,633   -529,944       ....      -55,526    -545,837  2,006,743
  23      U.S. Treasury securities.......................................................   389,000      96,217     18,413       ....        ....      114,630    503,630
  24      U.S. securities other than U.S. Treasury securities............................ 2,855,705     291,492   -304,652      18,570       ....        5,410  2,861,115
  25        Corporate and other bonds.................................................... 1,391,616     236,309     43,801      18,570       ....      298,680  1,690,296
  26        Corporate stocks............................................................. 1,464,089      55,183   -348,453       ....        ....     -293,270  1,170,819
  27      U.S. currency..................................................................   275,569      21,513      ....        ....        ....       21,513    297,082
  28      U.S. liabilities to unaffiliated foreigners reported by U.S.
            nonbanking concerns..........................................................   799,120      72,142      ....        6,179      -7,182      71,139    870,259
  29      U.S. liabilities reported by U.S. banks, not included elsewhere................ 1,306,354      91,126      ....        9,878       ....      101,004  1,407,358


  p Preliminary.
  r Revised.
  1. Represents gains or losses on foreign-currency-denominated assets due to their revaluation at current exchange rates.
  2. Includes changes in coverage, capital gains and losses of direct investment affiliates, and other statistical adjustments to the value of assets.

 Source: Bureau of Economic Analysis