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Spurred in part by a steady appreciation of the Canadian dollar over most foreign currencies, direct foreign investment in Canada increased by 2.6% to $561 billion in 2010.

Foreign direct investment is deemed to occur when a foreign company owns at least 10% of the voting equity in a domestic company.

The recent gain in foreign direct investment was largely due to a 5% rise of investment from the United States which accounted for 54.5% of total foreign investment during the year. It is worth noting that although the share of US investment in Canada increased from 53.2% to 54.5% in 2010, it has been trending steadily lower over the past ten years and is well below the peak of 69.7% it reached in 1999.

According to Statistics Canada, the Netherlands held onto its position as the second largest direct foreign investor in Canada in 2010, and the source of 9.2% of total investment. The Netherlands assumed second place from the United Kingdom, our third largest foreign investor in 2004.

In 2010, China spent $16 billion in Canada making it the seventh largest source of foreign direct investment. While it accounted for just 2.5% of the total, its share has increased from less than 0.5% in just four years.

Across major industries, a 7% increase in the finance and insurance sector accounted for approximately one third of the gain in total direct foreign investment. Next, driven in large part by a 15% rise in crude oil prices, spending on oil and gas extraction increased by 5.2%, accounting for just over 25% of the annual increase.

Foreign direct investment in information and cultural industries rose by 20.5% in 2010 accounting for just over 15% of the annual increase while investment in the retail industry was up by 9.4% and accounted for close to 10% of the annual gain.

Although manufacturing continues to attract the largest share of direct foreign investment, a 1.5% drop in investment in the industry caused its share to shrink from 36.2% to 34.8% during the year.

Looking forward, sustained upward pressure on commodity prices, a relatively strong fiscal position, credible monetary policy, a strong currency, declining corporate tax rates and a generally open approach toward foreign ownership should contribute to sustained moderate growth of foreign direct investment over the near term.

Foreign direct investment in manufacturing and mining, oil and gas

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