Japanese Pass British to Become Largest Foreign Investors in U.S.

The Japanese leapfrogged the British to become by far the largest direct foreign investors in the United States in 1987, with almost $200 billion in assets, the Commerce Department said Tuesday.

Foreign direct investment was concentrated in California, with $42 billion in gross property, plant and equipment; Texas, with $41 billion, and New York, with $23 billion, according to a study by the Commerce Department’s Bureau of Economic Analysis.

Affiliate employment was concentrated in manufacturing and retail trade and was largest in California, with 324,200; New York, with 300,100, and Texas, with 207,600, the BEA said.

Nearly one-half of affiliates’ commercial property was in the three states: California, with $17 billion; New York, with $13 billion, and Texas, with $10 billion.

During 1987, non-bank U.S. affiliates of foreign companies continued expanding employment, assets and sales, primarily due to acquisitions of U.S. companies, the report said.

Total affiliate assets increased 11% to $926 billion in 1987. Sales grew 9%, to $731 billion, with $622 billion in goods and $91 billion in services, the BEA said.

Net income of affiliates also increased to $10 billion in 1987 from $2.5 billion the year before.

For the first time, Japanese-owned affiliates accounted for the largest shares of both assets and sales in 1987.

The report does not include indirect investments such as portfolio investments, bank loans or official holdings of U.S. bonds. Such investments amounted for the Japanese to about $161 billion at the end of 1987, said Russell Scholl, an economist with the BEA.

As a result of a $98 billion jump, total assets of Japanese-owned U.S. affiliates doubled in 1987, reaching $196 billion. British affiliates placed second, with $156 billion, and Canadian affiliates came third, with $141 billion.

In 1986, Japan ranked third in total assets, with $98 billion, after Britain, with $137 billion, and Canada, with $130 billion. In 1987, Japanese-owned affiliates ranked first in sales, with $182 billion, a $15-billion advance from 1986. The British came second in 1987, with $130 billion, and the Canadians third, with $89 billion.

Yet the Japanese-owned affiliates ranked fourth in employment, since a large portion of their assets was in finance and a large portion of their sales in wholesale trade.

The sharp rise in Japanese-owned affiliates’ assets in 1987 was concentrated in the financial industry, the report said. In that industry, assets increased $82 billion, to $119 billion.

British Had Most Employees

Employment by U.S. affiliates of foreign companies increased 8% in 1987 to 3.2 million, after advancing 3% in 1986.

Based on employment, the British, with 630,000 employees, were the largest investors, followed by the Canadians, with 591,000, and the West Germans with 363,000 employees. The Japanese ranked fourth with 285,000 employees in the United States.

Foreign companies’ U.S. affiliates employed 1.5 million manufacturing workers, nearly one-half of all affiliate employment in 1987. Affiliates in retail trade ranked second with 567,000 employees. In manufacturing, almost one-half of the total was in chemicals and machinery. In retail trade, more than one-third was in food stores, the report said.

The report said the gross book value of affiliates’s property, plant and equipment was $346 billion.