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The Census and Statistics Department (C&SD) today (June 13) released the international investment position (IIP) statistics for Hong Kong for the reference year of 2005.
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.
In compiling and presenting the IIP statistics, the standards prescribed in the Fifth Edition of the Balance of Payments Manual (BPM5) of the International Monetary Fund (IMF) are adopted.
IIP Statistics for 2005
Summary
At end-2005, Hong Kong's external financial assets and liabilities amounted to $11,656.5 billion and $8,174.7 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 $3,481.9 billion at end-2005, corresponding to 252% of GDP in that year.
The ratios of both Hong Kong's external financial assets and liabilities at end-2005 to GDP in that year remained substantial, at 843% and 591% 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 net asset positions at end-2005. 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-2004, the positive net IIP at end-2005 increased by $180.1 billion. This was mainly attributable to the increases in the net asset position of portfolio investment (PI) and other investment (OI), which exceeded considerably the increase in the net liability position of DI and the decrease in the net asset position of financial derivatives (FD).
External Financial Assets
Hong Kong's external financial assets amounted to $11,656.5 billion at end-2005. DI was the largest component, accounting for 31.3% ($3,647.5 billion) of the total value at end-2005. This reflected the position of Hong Kong as a major external direct investor in 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.
OI was the second largest component of Hong Kong's external financial assets, accounting for 29.8% ($3,474.5 billion) of the total value at end-2005. 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.
At end-2005, 29.5% ($3,437.4 billion) of Hong Kong's external financial assets were in the form of PI. Within this, 51.5% were equity securities while the other 48.5% were debt securities.
Reserve assets (RA) amounted to $963.6 billion or 8.3% of Hong Kong's total external financial assets at end-2005.
Financial derivatives (FD) assets held by residents were relatively insignificant, accounting for only 1.1% ($133.6 billion) of the total external financial assets at end-2005.
Comparing end-2005 with end-2004, total external financial assets increased by $957.8 billion or 9.0%. Within this total, DI, PI, OI and RA rose by $513.8 billion (16.4%), $321.0 billion (10.3%), $160.7 billion (4.8%) and $3.1 billion (0.3%) respectively, more than offsetting the decrease in FD, by $40.9 billion (23.4%).
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $8,174.7 billion at end-2005. 50.5% ($4,132.0 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 31.0% ($2,534.7 billion) of the total at end-2005. Similar to OI assets, most of the OI liabilities were related to deposits and loans of the banking sector.
At end-2005, PI liabilities accounted for 16.8% ($1,375.7 billion) of Hong Kong's total external financial liabilities. These PI liabilities were concentrated in equity securities, which took up a share of 94.2%.
FD liabilities owed by residents were also relatively insignificant, accounting for only 1.6% ($132.3 billion) of the total external financial liabilities at end-2005.
Comparing end-2005 with end-2004, total external financial liabilities increased by $777.7 billion or 10.5%. Within this total, DI, PI and OI increased by $610.1 billion (17.3%), $168.8 billion (14.0%) and $30.8 billion (1.2%) respectively, more than offsetting the decrease in FD, by $32.0 billion (19.5%).
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 remained sound, with net external financial assets amounting to $3,481.9 billion at end-2005, corresponding to 252% of GDP in that year. Indeed, both Hong Kong's external financial assets and liabilities were enormous, particularly so when expressed as ratios to GDP. This signified the diverse roles of Hong Kong as an international financial centre, and a conduit for channelling direct investment funds to the rest of the world.
The spokesman further pointed out that both external financial assets and liabilities, particularly those related to direct investment, increased noticeably further during 2005. This mainly reflected the generally favourable economic environment, as well as the buoyant performance in many overseas stock markets. With the increase in assets larger than that in liabilities, net external financial assets stayed on the rise and more than doubled over the past five years.
Further information
Table 1 gives the IIP by broad component. Table 2 gives the IIP by standard component. For enquiries on the IIP statistics, please call the Balance of Payments Section of the C&SD (Tel.: 2116 8660).
The present IIP statistics for the reference year of 2005 are only preliminary, and are subject to revision upon the availability of more data.
More details on the estimates of IIP will be published in the publication Balance of Payments Statistics of Hong Kong, First Quarter 2006. This publication will be available on June 27, 2006. Users can download this publication free of charge at the 'Statistical Bookstore, Hong Kong' (www.statisticalbookstore.gov.hk) of the C&SD. Print version of this publication will be available for sale at HK$34 per issue. Purchase can be in person at the Publications Unit of the C&SD (Address : 19/F Wanchai Tower, 12 Harbour Road, Wan Chai; Tel. : 2582 3025) or through mail order by returning a completed order form which can be downloaded from the C&SD's website (www.censtatd.gov.hk/products_and_services/other_services/provision_of_stat/mail_ordering_of_publications/index.jsp). Print version of this publication will also be available for sale online at the Statistical Bookstore and the Government Bookstore of the Information Services Department (www.isd.gov.hk/eng/bookorder.htm). Print versions if purchased online are offered a discount, at 85% of their original prices.
Ends/Tuesday, June 13, 2006
Issued at HKT 16:16
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