*********************************************************

Content of the Press Release

Statistics on Hong Kong's Gross National Product (GNP) and external factor income flows (EFIF) for the fourth quarter of 2000 and the whole year of 2000 are released today (March 19) by the Census and Statistics Department.

Hong Kong's GNP for the fourth quarter of 2000 was estimated at $333.6 billion at current market prices, representing a slight decline of 1.1% over a year earlier. The difference of $3.0 billion from the Gross Domestic Product (GDP) for the same quarter (estimated at $330.6 billion) represented a net factor income inflow equivalent to 0.9% of GDP in that quarter. After netting out the effect of price changes, Hong Kong's GNP rose by 4.6% in real terms in the fourth quarter of 2000 over a year earlier.

Total factor income inflow into Hong Kong, estimated at $98.5 billion, declined by 2.7% in the fourth quarter of 2000 over a year earlier, while total factor income outflow increased by 4.8% to $95.5 billion. These inflow and outflow were equivalent to 29.8% and 28.9% respectively of GDP in that quarter. Taking the inflow and outflow together, net EFIF amounted to $3.0 billion in the fourth quarter of 2000, as compared to $10.2 billion in the same quarter last year.

Within the total factor income inflow, direct investment income (DII) decreased by 16.1% in the fourth quarter of 2000 over a year earlier. This was partly related to the slower growth in some of the overseas economies towards the end of last year. Portfolio investment income (PII) rose markedly by 21.6%, mainly attributable to the increase in interest pay-outs on debt securities. A marginal growth of 0.3% was recorded for other investment income (OII), mainly due to a general increase in interest rates on external claims of the local banking sector, despite the continued contraction in Japanese-related offshore lending.

Within the total factor income outflow, DII grew by 9.7% in the fourth quarter of 2000 over a year earlier, reflecting a continued growth in the earnings from direct investment in Hong Kong. However, PII declined by 8.4%, mainly due to a decrease in dividend pay-outs distributed by a number of companies in the fourth quarter of 2000, and a change in the timing of dividend pay-outs from the fourth quarter to the third quarter of 2000 by several prominent companies. OII also decreased, by 2.9%, largely due to a decline in external liabilities of the local banking sector.

Analysed by country/territory, British Virgin Islands remained the largest source of Hong Kong's external factor income inflow in the fourth quarter of 2000, accounting for 16.7% of the total value, mainly reflecting investment income inflow from this tax haven territory where Hong Kong companies had set up a considerable number of holding companies. Other major source countries/territories were the mainland of China (the Mainland) and the United States, at 14.9% and 13.6% respectively.

The major destination for Hong Kong's external factor income outflow in the fourth quarter of 2000 was the Mainland, accounting for 13.8% of the total value. This was followed by the British Virgin Islands (12.1%) and the United States (12.0%).

For 2000 as a whole, Hong Kong's GNP increased by 2.1% to $1,293.2 billion at current market prices. The difference of $21.5 billion from GDP for the same year (estimated at $1,271.7 billion) represented a net factor income inflow equivalent to 1.7% of GDP in the year. After netting out the effect of price changes, Hong Kong's GNP rose by 9.2% in real terms in 2000. The total factor income inflow was estimated at $411.1 billion or 32.3% of GDP in 2000, and the corresponding outflow at $389.6 billion or 30.6% of GDP.

Commentary

A Government Secretariat spokesman noted that external factor income flows continued to be sizeable in the fourth quarter of 2000, with the inflow and outflow each amounting to nearly 30% of GDP in that quarter. This clearly demonstrates the highly externally-oriented nature of the Hong Kong economy.

The spokesman also pointed out that the factor income account continued to attain an overall net inflow in the fourth quarter of 2000. Yet as the total factor income inflow fell while the corresponding outflow increased, the net factor income inflow was smaller than a year earlier, resulting in a slower GNP growth than GDP growth in the fourth quarter of 2000. The decrease in the total factor income inflow in the fourth quarter was largely attributable to the decline in direct investment income inflow, as the global economic environment turned less sanguine towards the end of last year. Nevertheless, for 2000 as a whole, both total factor income inflow and outflow recorded notable growth.

Further Information

GDP and GNP are closely related measures of economic performance. GDP is the total value of production of all resident producing units within the territory. GNP denotes the total income earned by residents of a particular territory, regardless of the place in which the economic activities giving the income are undertaken. In other words, GNP is obtained by adding to GDP factor income earned by residents from outside the territory and deducting factor income earned by non-residents within the territory.

The above EFIF figures are compiled based on data obtained from the Survey of External Claims, Liabilities and Income (SECLI), supplemented by data from other sources.

Figures of GNP and EFIF from the fourth quarter of 1999 to the fourth quarter of 2000, and years 1999 and 2000 analyzed by income component are presented in Table A, while the country/territory breakdowns of external factor income inflows and external factor income outflows for the same period are presented in Tables B(1) and B(2) respectively.

The statistics of GNP and EFIF for the fourth quarter of 2000 and the whole year of 2000 are preliminary figures. They are subject to revisions when more data become available. In light of latest information available, figures of GNP and EFIF for the four quarters of 1999 and 1999 as a whole have been revised (see Table C).

Enquiries about GNP and EFIF statistics may be directed to the Balance of Payments Branch (2) of the Census and Statistics Department at 2116 5150.

End/Monday, March 19, 2001

NNNN