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Contents of the press release

The Census and Statistics Department today (June 24) released the preliminary external debt (ED) statistics for Hong Kong for the first quarter of 2002. This is the first time that ED statistics are compiled and published for Hong Kong.

Gross ED, at any time, is the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to non-residents by residents of an economy.

According to this international definition, apart from borrowing from abroad, ED of Hong Kong can also arise through normal trading and banking businesses. For instance, a trade credit extended by an exporter of the United States to an importer in Hong Kong is part of Hong Kong's ED. Likewise, deposits placed by non-residents in a bank in Hong Kong constitute ED of Hong Kong's banking sector.

While the international investment position (IIP) statement records the stock of external financial assets and liabilities of an economy, gross ED refers only to the non-equity liability components of the IIP statement. Figures as presented in the IIP statement on external financial assets and liabilities of Hong Kong for the years 2000 and 2001, which were already released on 21 June, showed that Hong Kong was a net creditor in both 2000 and 2001, with Hong Kong's total external financial assets much exceeding its total external financial liabilities.

Following release of detailed balance of payments (BoP) statistics in June 2000 and the IIP statement on 21 June 2002, the availability of ED statistics for publication is another notable statistical development in Hong Kong, in line with enhancing the transparency of financial markets and supporting financial surveillance. It is in compliance with the new requirement stipulated in the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF), to which Hong Kong has subscribed.

In compiling and presenting the ED statistics, the standards promulgated by IMF are adopted.

ED Statistics for the First Quarter of 2002

At end-March 2002, Hong Kong's gross ED, measuring the total outstanding gross external liabilities other than equity liabilities, amounted to $2,807.9 billion, equivalent to 223.3% of GDP.

At end-March 2002, ED of the General Government was zero, reflecting the fact that the Government of the HKSAR is debt free. A major proportion of Hong Kong's ED came from transactions of the banking sector, which accounted for 61.2% of the total. Other ED consisted of debt liabilities to affiliated enterprises and direct investors under direct investment (DI) (with a share of 29.3%), ED of other sectors (8.5%), and ED of the Hong Kong Monetary Authority (HKMA) (1.0%).

Reflecting the position of Hong Kong as an international banking centre, ED of Hong Kong's banking sector, as the largest component of Hong Kong's ED, amounted to $1,719.0 billion at end-March 2002, equivalent to 136.7% of GDP. Of this, 97.4% ($1,675.0 billion) were short-term liabilities, within which 95.8% ($1,604.9 billion) were held in the form of currency and deposits. This was mainly attributable to inter-bank placements from non-resident banks.

DI debt liabilities (inter-company lending) constituted the second largest component of Hong Kong's ED, at $821.9 billion at end-March 2002. Within this, 71.9% ($590.8 billion) were debt liabilities to direct investors.

ED of other sectors stood at $238.0 billion at end-March 2002. Within this, loans (including both short-term and long-term loans) took up 53.9% ($128.3 billion of the debt liabilities), while money market instruments, and bonds and notes accounted for another 30.6% ($72.8 billion).

For the $28.9 billion worth of ED of HKMA, 96.0% were in the form of short-term borrowings under the repurchase agreements and securities lending arrangements.

Relationship between BoP, IIP and ED

While the 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 these 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.

ED of an economy is basically the sum of the non-equity liability components in the IIP statement of the economy. Shares and other equity participation, and financial derivatives that are owed to non-residents, are not included.

Commentary

A Government Secretariat spokesman noted that Hong Kong's external debt position was healthy, with a major proportion of it arising from normal operations of the banking sector and with the Government incurring no external debt at all. The large external liabilities of the banking sector were mostly in the form of inter-bank placements from overseas banks, which reflected the intermediation role of Hong Kong as an international financial centre. As to the private non-bank sector, the level of external debt other than direct investment was low, indicating that it generally did not rely too much on external borrowing as a source of finance.

Further information

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

The present ED statistics for the first quarter of 2002 are only preliminary. The figures are subject to revision upon the availability of more data. ED statistics will also be published in the report "Balance of Payments Statistics of Hong Kong, First Quarter 2002" to be released on 27 June 2002. In future, the ED statistics of Hong Kong will be released together with the quarterly BoP statistics.

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End/Monday, June 24, 2002

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