Foreign direct investment (FDI).

In plain English

Foreign direct investment is investment where the investor takes a durable interest in an enterprise in another country, counted once the stake reaches a set share of voting power. It covers building a factory, buying a controlling position in a local company, and reinvesting profits earned there. It is contrasted with portfolio investment, which is buying shares or bonds without control and can be sold in an afternoon. Because plants and subsidiaries cannot be unwound quickly, FDI is treated as the stickier form of foreign capital and a stronger vote of confidence.

01Why it matters

Where this money flows tends to show up later in local jobs, wages, and productivity, and a sudden stop is a signal that investors have lost confidence in a country's rules or its currency.

02The math, step by step

Say a carmaker spends 800 million dollars on an assembly plant abroad and hires 2,000 workers. That 800 million counts as FDI in the host country's balance of payments. A fund buying 800 million dollars of that country's listed shares counts as portfolio investment instead, and can sell the lot inside a week.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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