What is net capital outflow?
It's the net flow of funds being invested abroad by a country over a certain period of time. When the net capital outflow (NCO) is positive, domestic residents are buying more foreign assets than foreigners are purchasing domestic assets.
Key takeaways
Net capital outflow (NCO) is the net flow of funds a country invests abroad over a period; when positive, domestic residents buy more foreign assets than foreigners purchase domestic assets.
Net capital outflows take two main forms: foreign direct investment, which involves active management of acquired assets or interests, and portfolio investment, which requires no management role.
Capital outflow is generally considered undesirable for a country as it typically results from political or economic instability and perceived weakness in the domestic economy.
Asset flight occurs when investors sell holdings in a country due to perceived economic weakness and the belief that better investment opportunities exist abroad.
Where have you heard about net capital outflow?
You'll probably have read about various countries' capital outflows in leading newspapers. Here, for example, the South China Morning Post is reporting on China's capital outflows, which remain persistent amid growing appetite for foreign assets.
What you need to know about net capital outflow.
Net capital outflows take two main forms: foreign direct investment, which implies active management of the asset or interest acquired; and portfolio investment, which requires no role at all in management.
Broadly speaking, capital outflow is considered undesirable for a country as it tends to result from political or economic instability. The flight of assets occurs when investors sell off their holdings in a country because of perceived weakness in its economy and the assumption that there are better opportunities abroad.
Find out more about net capital outflow.
Take a look at our guide to foreign direct investment to learn more about buying assets in other countries.