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Contents of the press release

The Census and Statistics Department today (June 21) released the international investment position (IIP) statistics for Hong Kong for the reference years of 2000 and 2001. This is the first time that IIP statistics are compiled and published for Hong Kong.

IIP is a balance sheet showing the stock of external financial assets and liabilities of an economy at a particular time point. External financial assets consist of financial claims on non-residents and other financial assets where no debtor is involved (e.g. monetary gold). External financial liabilities refer to financial claims of non-residents on residents of the economy.

Following release of detailed balance of payments statistics in June 2000, the availability of IIP statistics for publication is a major statistical development in Hong Kong, in line with enhancing the transparency of the financial market.

The Special Data Dissemination Standard (SDDS) established by the International Monetary Fund (IMF), to which Hong Kong has subscribed, requires subscribing economies to compile and disseminate annual statistics on IIP as from the reference year of 2001. To facilitate data users in analysing changes in the external investment position of Hong Kong, IIP statistics for 2000 are also released along with those for 2001.

In compiling and presenting the IIP statistics, the standards prescribed in the Fifth Edition of the Balance of Payments Manual (BPM5) of the IMF are adopted.

IIP Statistics for 2000 and 2001

Summary

At end-2001, Hong Kong's external financial assets and liabilities amounted to $8,487.8 billion and $6,364.6 billion respectively. After netting out the external financial liabilities from the external financial assets, Hong Kong stood as a net creditor, with net external financial assets amounting to $2,123.1 billion at end-2001, corresponding to 168.2% of GDP in that year.

The ratios of both Hong Kong's external financial assets and liabilities at end-2001 to GDP in that year were also substantial, at 672.5% and 504.3% respectively, reflecting that Hong Kong is a highly externally oriented economy with considerable cross-territory investment and also a major financial centre in the region with considerable cross-territory fund positions.

Most of the broad IIP components were in a net asset position at end-2001. The only exception was direct investment (DI), with a net liability position as the amount of DI made by non-residents in Hong Kong was greater than that made by Hong Kong residents abroad.

Compared with end-2000, the positive net IIP at end-2001 increased by $393.6 billion. This was mainly attributable to a significant increase in the net asset position of portfolio investment (PI), which exceeded considerably the decrease in the net asset position of other investment (OI).

External Financial Assets

Hong Kong's external financial assets amounted to $8,487.8 billion at end-2001. OI was the largest component, accounting for 35.7% ($3,033.4 billion) of the total value at end-2001. Most of the OI assets were held by the banks in the form of inter-bank deposits and loans, reflecting the role of Hong Kong as an international banking centre in channelling funds to the rest of the world.

DI was the second largest component of Hong Kong's external financial assets, accounting for 33.1% ($2,807.2 billion) of the total value at end-2001. This reflected the position of Hong Kong as a major external direct investor to the rest of the world, notably in the mainland of China. It also partly reflected the common practice of setting up non-operating companies in offshore centres such as British Virgin Islands and Bermuda by Hong Kong enterprises for channelling DI funds back to Hong Kong or to other places.

At end-2001, 19.3% ($1,639.8 billion) of Hong Kong's external financial assets were in the form of PI abroad. Within this, 54.8% were debt securities while the other 45.2% were equity securities.

Reserve assets (RA) amounted to $866.9 billion or 10.2% of Hong Kong's total external financial assets at end-2001.

Financial derivatives (FD) assets held by residents were relatively insignificant, accounting for only 1.7% ($140.5 billion) of the total external financial assets at end-2001.

Comparing end-2001 with end-2000, total external financial assets declined by 4.6% or $411.5 billion. Within this total, OI and DI fell by 13.5% and 7.3% respectively during the year, more than offsetting the increases in PI, FD and RA, by 17.6%, 7.2% and 3.3% respectively.

External Financial Liabilities

Hong Kong's external financial liabilities amounted to $6,364.6 billion at end-2001. 52.6% ($3,349.4 billion) of this total were in the form of DI. Such a high proportion of DI liabilities reflected that Hong Kong had attracted many non-resident enterprises to set up direct investment companies here. It was also partly attributable to round-tripping of investment whereby the investment funds originated from Hong Kong were channelled through offshore centres back to Hong Kong.

OI liabilities also constituted a significant part of Hong Kong's external financial liabilities, accounting for 31.5% ($2,002.4 billion) of the total at end-2001. Similar to OI assets, most of the OI liabilities were related to deposits and loans of the banking sector.

At end-2001, PI liabilities accounted for 14.6% ($930.4 billion) of Hong Kong's total external financial liabilities. These PI liabilities were concentrated in equity securities, which took up a share of 86.4%.

FD liabilities owed by residents were also relatively insignificant, accounting for only 1.3% ($82.4 billion) of the total external financial liabilities at end-2001.

Comparing end-2001 with end-2000, total external financial liabilities fell by 11.2% or $805.1 billion. There was an across-the-board decline amongst the various major components, with PI having the largest decrease by 22.1% during the year, followed by FD, OI and DI being down by 15.5%, 13.9% and 5.7% respectively.

Relationship between BoP and IIP

While IIP measures the stock of external financial assets and liabilities of an economy at the end of a reference period, the BoP financial account measures transactions in these assets and liabilities which have taken place during the period.

Transactions in assets and liabilities will affect the stock of the respective assets and liabilities. In addition, price changes and exchange rate variations as well as other adjustments will also affect the value of the stock, when expressed in the local currency of the economy.

Commentary

A Government Secretariat spokesman noted that Hong Kong's international investment position was sound, with net external financial assets amounting to $2,123.1 billion at end-2001, corresponding to 168.2% of GDP in that year. This compared rather favourably with the latest net external financial asset positions of the G-7 economies, generally in absolute terms and particularly so when expressed as a ratio to GDP. Also, Hong Kong had net asset positions in all the major IIP components, except only DI. Yet the net liability position for the DI component indicated that Hong Kong had received more direct investment from abroad than it had invested overseas.

The spokesman further noted that both external financial assets and liabilities declined during 2001, along with the global economic downturn. But with the asset side declining less than the liability side, net external financial assets went up distinctly, by 22.8% over the year.

Further information

Table 1 (text version) gives the IIP by broad component. Table 2 (text version) gives the IIP by standard component. For enquiries on the IIP statistics, please call the Balance of Payments Section of the Census and Statistics Department (Tel.: 2116 8660).

The IIP statistics for the reference year of 2001 are only preliminary. The figures are subject to revision upon the availability of more data.

More detailed information relating to IIP will be published in the report "Balance of Payments Statistics of Hong Kong, First Quarter 2002" to be released on 27 June 2002.

The price of the publication is $23 per copy. It can be purchased in person from (i) Government Publications Centre, Ground Floor, Low Block, Queensway Government Offices, 66 Queensway, Hong Kong (Tel.: 2537 1910); or (ii) Publications Unit of the Census and Statistics Department, 19th Floor, Wanchai Tower, 12 Harbour Road, Wan Chai, Hong Kong (Tel.: 2582 3025).

Internet users may purchase the publications on-line at the "Statistical Bookstore, Hong Kong" (Address : http://www.statisticalbookstore.gov.hk) with payment made instantly. Soft copies of the publications purchased are available for immediate downloading, while hard copies purchased will be delivered by mail. Subscription to regular publications and advance ordering of upcoming releases are also available. The Statistical Bookstore is hosted on the ESD portal (Address : http://www.esd.gov.hk) together with other public services.

A mail order form for ordering or arranging subscription to hard copies of publications is available in most publications of the Census and Statistics Department. It may be completed and sent back together with a cheque or bank draft covering all necessary cost and postage. The order form is also available for downloading from the website of the Department (Address : http://www.info.gov.hk/censtatd/eng/service_desk/forms_index.html).

Regular subscription can also be arranged with the Publications Sales Section of the Information Services Department (Tel.: 2842 8844 or 2842 8845).

End/Friday, June 21, 2002

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