Income Flows (EFIF) for the Second Quarter of 2005
************************************************************
Statistics on Hong Kongˇ¦s Gross National Product (GNP) and external factor income flows (EFIF) for the second quarter of 2005 are released today (September 20) by the Census and Statistics Department.
ˇ@ˇ@
In the second quarter of 2005, Hong Kongˇ¦s GNP increased by 7.0% over a year earlier to $333.2 billion at current market prices. The Gross Domestic Product (GDP), estimated at $328.4 billion at current market prices in the same quarter, recorded a 5.7% increase during the period. Compared with GDP, the value of Hong Kongˇ¦s GNP was larger by $4.8 billion in the second quarter of 2005, representing a net external factor income inflow of the same amount, and equivalent to 1.5% of GDP in that quarter.
After netting out the effect of price changes, Hong Kong's GNP increased by 8.1% in real terms in the second quarter of 2005 over a year earlier. This was higher than the corresponding increase of 6.8% recorded for GDP in the same quarter.
Total factor income inflow into Hong Kong, estimated at $133.0 billion in the second quarter of 2005 and equivalent to 40.5% of GDP in that quarter, increased substantially by 44.1% over a year earlier. At the same time, total factor income outflow, estimated at $128.3 billion in the second quarter of 2005 and equivalent to 39.1% of GDP of the same period, also recorded a marked increase of 40.1% over a year earlier. Taking the inflow and outflow together, a net external factor income inflow of $4.8 billion was recorded in the second quarter of 2005.
Within total factor income inflow, Direct Investment Income (DII) rose considerably by 52.6% over a year earlier, mainly due to increased earnings of some prominent local enterprises from investment abroad. Portfolio Investment Income (PII) increased by 8.9%, mainly attributable to increase in interest income from holding of non-resident debt securities during the period. Other Investment Income (OII) surged by 106.9% over a year earlier, mainly on account of increased interest income from offshore loans and deposits of the local banking sector due to increases in interest rates.
Within total factor income outflow, DII increased substantially by 36.6% over a year earlier, largely attributable to increased earnings of some prominent multinational enterprises from investment in Hong Kong during the period. PII increased significantly by 28.3%, mainly due to increased dividend pay-outs by a number of resident publicly listed companies. OII surged by 98.9%, mostly on account of increased interests paid arising from external loans and deposits of the local banking sector due to increases in interest rates.
Analysed by country/territory, the British Virgin Islands was the largest source of Hong Kongˇ¦s external factor income inflow in the second quarter of 2005, accounting for 29.2%, reflecting continued investment income inflow from this tax haven economy where Hong Kong companies had set up a considerable number of holding companies. This was followed by the mainland of China, with a share of 25.7%. Other major source countries/territories were the United States and the United Kingdom, at 9.5% and 4.9% respectively.
The mainland of China and British Virgin Islands were also the most important destinations for Hong Kongˇ¦s external factor income outflow in the second quarter of 2005, accounting for 20.6% and 16.9% respectively. Other major destination countries/territories included the United States, at 15.3%, and the Netherlands, at 9.9%.
Commentary
A Government Secretariat spokesman noted that reflecting Hong Kongˇ¦s role as a financial centre and a regional hub in facilitating external investment activities, huge amounts of investment income flow into and out of Hong Kong. The inflow and outflow of such income are both equivalent to about two-fifths of Hong Kongˇ¦s GDP. Both the inflow and outflow of such investment income posted substantial increases in the second quarter of 2005, on the back of improved corporate profitability worldwide as well as increased interest income due to higher interest rates.
The spokesman further pointed out that with investment income inflow rising faster than outflow leading to a much larger net external factor income inflow, GNP therefore rose at a faster pace than GDP in the second quarter.
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 generating 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, supplemented by data from other sources. The entire GNP and EFIF series have been revised following the completion of an exercise by the Census and Statistics Department to implement the latest international guidelines on dealing with financial intermediation services provided by banks in the estimation of national accounts statistics of Hong Kong in mid-August 2005.
Figures of GNP and EFIF from the third quarter of 2003 to the second quarter of 2005 analysed 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.
Statistics on GNP and EFIF for 2004 and 2005 are preliminary figures. They are subject to revision when more data become available.
ˇ@ˇ@
Enquiries about GNP and EFIF statistics may be directed to the Balance of Payments Branch (2) of the Census and Statistics Department at 2116 5102.
Ends/Tuesday, September 20, 2005
Issued at HKT 16:17
NNNN
