Net International Investment Position (NIIP)

What is a 'Net International Investment Position (NIIP)'

A net international investment position (NIIP) is a nation’s stock of foreign assets minus its foreign liabilities. The Net International Investment Position (NIIP) can also be defined as the value of overseas assets owned by a nation minus the value of domestic assets owned by foreigners. The NIIP can therefore be regarded as a nation’s balance sheet with the rest of the world at a specific point in time. NIIP includes overseas assets and liabilities held by a nation’s government, the private sector and its citizens. A negative NIIP figure indicates that a nation’s foreign liabilities exceed its foreign assets, while a positive NIIP figure indicates that its foreign assets exceed its liabilities. Most nations release NIIP figures quarterly.

BREAKING DOWN 'Net International Investment Position (NIIP)'

A nation’s NIIP is a key component of the national balance sheet, since NIIP plus the value of nonfinancial assets equals the economy's net worth. In addition, the NIIP together with the balance of payments transactions comprise the economy’s set of international accounts.

The NIIP position is an important barometer of a nation’s financial condition and creditworthiness. Two metrics used to assess the NIIP's size in relation to the economy's size are the ratio of NIIP to GDP and the ratio of NIIP to the economy’s total financial assets, both expressed as a percentage.

In the NIIP, assets are divided into direct investment, portfolio investment, other investment and reserve assets (which include foreign currencies, gold and special drawing rights). Liabilities are reported with the same classification, except for “reserve assets,” which have no equivalent on the liabilities side.

For an NIIP example, consider the U.S. position as of the second quarter of 2013. This data is published by the Bureau of Economic Analysis and contains a wealth of information on the subject.

The U.S. NIIP was -$4,504.1 billion at the end of the second quarter of 2013, which means that the value of overseas U.S. investments was well below the value of foreign investments in the U.S. Here’s how the numbers stacked up:

  1. U.S.-owned assets abroad at end-Q2 2013 = $20,984.3 billion
  2. Foreign-owned assets in the U.S. at end-Q2 2013 = $25,488.4 billion
  3. Net International Investment Position = a - b = -$4,504.1 billion
RELATED TERMS
  1. Net Foreign Assets (NFA)

    The value of overseas assets owned by a nation, minus the value ...
  2. Translation Risk

    The exchange rate risk associated with companies that deal in ...
  3. Foreign Investment

    Flows of capital from one nation to another in exchange for significant ...
  4. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  5. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central ...
  6. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
Related Articles
  1. ETFs & Mutual Funds

    2 Catalysts That Could Derail China, and 3 Mutual Funds to Avoid (FHKAX, TCWAX)

    Learn about the conditions behind a possible financial crisis in China, and the potential effects on three mutual funds that invest heavily in the country.
  2. ETFs & Mutual Funds

    FXI: 4 Reasons to Still Avoid Chinese ETFs

    Learn about the economic factors that have created a slowdown in the Chinese economy and why investing in Chinese stocks is still a risky endeavor.
  3. ETFs & Mutual Funds

    3 Reasons Why Hedge Funds Are Bearish on China (GWLLF, 0590.HK)

    Learn some of the major reasons why many top hedge fund managers are adopting or maintaining a bearish stance toward China.
  4. Investing

    What is Net Worth?

    Net worth is the amount by which assets exceed liabilities. Another way to say this is, it's the value of everything you own, minus all your debts.
  5. Markets

    This Central Bank Owns U.S. Equities Worth 20% of GDP

    Discover more about Swiss National Bank's holdings of financial assets, and look into its recent accumulation of foreign equities.
  6. Investing

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  7. Markets

    10 Countries With The Biggest Forex Reserves

    Without adequate reserves, a nation's economy can grind to a halt. Here are the 10 nations with the biggest forex reserves.
  8. Managing Wealth

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  9. Managing Wealth

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  10. Managing Wealth

    What's an Asset?

    An asset is a resource with economic value.
RELATED FAQS
  1. What types of assets and payments are recorded in the capital account?

    Read a brief overview of the definitions of the capital account, where it is used, and what types of assets and payments ... Read Answer >>
  2. What is the difference between an expense and a liability?

    Learn what liabilities and expenses are, which financial statements they are listed on, and the differences between liabilities ... Read Answer >>
  3. What are the components of a financial account?

    Understand what the financial account is and how it relates to a country's balance of payments. Learn about the components ... Read Answer >>
  4. What are some examples of a Foreign Institutional Investor (FII)?

    Discover some examples of foreign institutional investors, and learn information about the nature of foreign institutional ... Read Answer >>
  5. What does a positive capital account balance mean?

    Learn about a capital account, the four categories of transactions that comprise it and the meaning of a positive capital ... Read Answer >>
  6. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center