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Contents of the press release

The Census and Statistics Department today (November 30) released the preliminary Balance of Payments (BoP) account for the second quarter of 2000.

A BoP account is an integrated statistical statement of an economy's external transactions with the rest of the world. The BoP account released here contains detailed breakdowns for both the current account and the capital and financial account.

Overall Situation

Hong Kong recorded a BoP surplus amounting to $25.4 billion in the second quarter of 2000, equivalent to 8.2% of GDP. This reversed the BoP deficit of $18.2 billion, equivalent to 6.0% of GDP, in the first quarter of 2000.

Of the major BoP components, there was a sizeable current account surplus of $12.2 billion (at 3.9% of GDP) in the second quarter of 2000, larger than that of $10.3 billion (at 3.4% of GDP) in the first quarter of 2000. At the same time, a net inflow of financial non-reserve assets amounting to $13.0 billion (at 4.2% of GDP) was recorded in the second quarter of 2000, as against a net outflow of $20.1 billion (at 6.6% of GDP) in the first quarter of 2000.

Current Account

The current account recorded a surplus of $12.2 billion in the second quarter of 2000, as against the surplus of $11.8 billion in the second quarter of 1999. Compared with the same quarter in 1999, the current account surplus in the second quarter of 2000 was characterised by an increase in visible trade deficit and a continued net outflow of current transfers, yet more than offset by a marked rise in invisible trade surplus and a substantial growth in net inflow of external factor income.

With imports of goods picking up distinctly further upon the recovery in local demand, the visible trade deficit rose to $19.3 billion in the second quarter of 2000, from $7.4 billion in the same quarter in 1999. Exports of services also surged on the back of the robust regional demand, yielding a substantial invisible trade surplus of $28.2 billion in the second quarter of 2000, markedly up from that of $19.0 billion in the same quarter in 1999. Overall, there was still a combined visible and invisible trade surplus of $8.8 billion in the second quarter of 2000, as compared to $11.6 billion in the same quarter in 1999.

In the factor income account, external factor income inflow and outflow amounted to $102.8 billion and $96.4 billion respectively in the second quarter of 2000. Thus the factor income account recorded a net inflow of $6.4 billion in the second quarter of 2000, substantially larger than that of $2.9 billion in the same quarter in 1999.

There was a current transfer outflow of $4.2 billion and an inflow of $1.2 billion in the second quarter of 2000, resulting in a net outflow of $3.1 billion in that quarter. This compared with a net outflow of $2.7 billion in the same quarter of 1999.

Comparing the second quarter of 2000 with the first quarter of 2000, and bearing in mind that this comparison for the main current account components may be affected by seasonal factors, the visible trade deficit was little changed at $19.3 billion, while the invisible trade surplus went up from $23.8 billion to $28.2 billion. Concurrently, the net inflow of factor income fell from $9.2 billion to $6.4 billion, and the net current transfer outflow from $3.3 billion to $3.1 billion.

Capital and Financial Account

In the second quarter of 2000, net outflow of capital transfers was estimated at $3.6 billion, as compared to $1.9 billion in the first quarter of 2000.

An overall net inflow of financial non-reserve assets amounting to $13.0 billion was recorded in the second quarter of 2000, reversing the overall net outflow of $20.1 billion in the first quarter of 2000. The overall net inflow in the second quarter of 2000 was characterised by a substantial net inflow of direct investment, a continued though reduced net inflow of portfolio investment, a shift to net inflow due to cash settlement of financial derivatives, yet a continued net outflow of other investment.

On direct investment (DI) flows, both Hong Kong's DI abroad and foreign DI in Hong Kong increased appreciably, by $78.5 billion and $137.1 billion during the second quarter of 2000, reflecting the improved regional and local investment environment upon the economic revival. With the increase in DI in Hong Kong more than offsetting the increase in DI abroad, there was a large net DI inflow of $58.7 billion in the second quarter of 2000, as against a net outflow of $1.4 billion in the first quarter of 2000.

On portfolio investment (PI) flows, assets increased by $109.7 billion and liabilities increased by $115.2 billion during the second quarter of 2000, resulting in a net PI inflow amounting to $5.5 billion. This followed a net PI inflow of $87.0 billion in the first quarter of 2000. The increase in PI assets in the second quarter of 2000 was due to increased holdings of non-resident equity and debt securities by Hong Kong residents. The increase in PI liabilities in the second quarter of 2000 was mainly due to increased holdings of resident equity securities by non-residents.

On other investment (OI) flows, both OI assets and OI liabilities recorded further decline during the second quarter of 2000, by $79.3 billion and $146.1 billion respectively. Taken together, there was a net OI outflow of $66.8 billion in the second quarter of 2000, as compared to that of $64.2 billion in the first quarter of 2000. The reduction in both OI assets and OI liabilities in the second quarter of 2000 was partly due to the continued contraction in Euroyen Impact Loans booked in Hong Kong.

Change in reserve assets in the BoP account reflect the net change in Hong Kong's foreign currency reserves, which come under the management of the Hong Kong Monetary Authority. In the second quarter of 2000, reserve assets increased by $25.4 billion, indicating an overall BoP surplus of the same magnitude in that quarter. This reversed the situation in the first quarter of 2000, when a decrease in reserve assets amounting to $18.2 billion was recorded.

Commentary

Commenting on these figures, a Government Secretariat spokesman noted that Hong Kong's Balance of Payments position reverted to a sizeable surplus in the second quarter of 2000, from a deficit in the first quarter. While the current account continued to record a large surplus upon the export boom and the net inflow of external factor income, the financial non-reserve assets also switched back to a net inflow in the second quarter, mostly due to a substantial inflow of direct investment into Hong Kong but also upon a continued net inflow of portfolio investment fund.

Further information

Table 1 gives the BoP account by standard component. Table 2 gives the detailed current account analysed by sub-account component, while Table 3 gives the detailed capital and financial account analysed by sub-account component. For enquiries on the BoP estimates, please call the Balance of Payments Section of the Census and Statistics Department (Tel : 2116 8660).

The present BoP estimates for the second quarter of 2000 are only preliminary, and are subject to revision when the estimates on individual components are updated upon the availability of more data.

BoP account for the third quarter of 2000 will be available by December 2000. As from the third quarter of 2000 onwards, quarterly BoP accounts will be released with a time lag of less than one quarter after the end of the reference quarter. This will adequately meet the timeliness requirement of the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF).

In compiling and presenting the BoP account of Hong Kong, the international standards prescribed in the Fifth Edition of the Balance of Payments Manual of the IMF are adopted. It is also in compliance with the SDDS of the IMF, to which Hong Kong has subscribed.

More details on the annual and quarterly estimates of BoP are published in the report "Balance of Payments Statistics of Hong Kong, Second Quarter 2000".

This report will be put on sale shortly at $14 per copy at the Government Publications Centre, ground floor, Low Block, Queensway Government Offices, 66 Queensway, Hong Kong. It may also be purchased at the Publications Unit of the Census and Statistics Department, 19th floor, Wanchai Tower, 12 Harbour Road, Wan Chai, Hong Kong. Regular subscription can also be arranged with the Publications Sales Section of the Information Services Department (Tel : 2842 8844).

Moreover, Internet users may order the publication through the website of the Information Services Department (Address : http://www.info.gov.hk/isd/book_e.htm).

End/Thursday, November 30, 2000

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