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Contents of the press release
The Census and Statistics Department (C&SD) released today (June 27) the preliminary Balance of Payments (BoP) accounts and External Debt (ED) statistics for the first quarter of 2006.
I. Balance of Payments Account
A BoP account is an integrated statistical statement of an economy's external transactions with the rest of the world. The BoP account released here contains detailed breakdowns for both the current account and the capital and financial account.
Overall Situation
Hong Kong recorded a surplus amounting to $11.5 billion in its BoP account (at 3.3% of GDP) in the first quarter of 2006, as compared with a surplus of $10.7 billion (at 2.9% of GDP) in the fourth quarter of 2005. Reserve assets correspondingly increased by the same amount in the first quarter of 2006.
Of the major BoP components, there was a current account surplus of $35.5 billion (at 10.2% of GDP) in the first quarter of 2006, smaller than that of $49.5 billion (at 13.3% of GDP) in the fourth quarter of 2005. At the same time, a net outflow of financial non-reserve assets amounting to $37.3 billion (at 10.8% of GDP) was recorded in the first quarter of 2006, smaller than that of $39.4 billion (at 10.5% of GDP) in the fourth quarter of 2005.
Current Account
The current account recorded a surplus of $35.5 billion in the first quarter of 2006, larger than that of $32.8 billion in the first quarter of 2005. Compared with the same quarter in 2005, the current account surplus in the first quarter of 2006 was characterised by an increase in visible trade deficit, an increase in invisible trade surplus, a continued net inflow of external factor income, and a continued net outflow of current transfers.
With imports of goods increasing faster than exports of goods, the visible trade deficit increased to $29.8 billion in the first quarter of 2006, from $19.7 billion in the same quarter in 2005. The invisible trade surplus increased to $61.5 billion in the first quarter of 2006, from $49.9 billion in the same quarter in 2005, with exports of services having increased more than imports of services. Overall, a combined visible and invisible trade surplus of $31.7 billion was recorded in the first quarter of 2006, slightly larger than that of $30.2 billion in the same quarter in 2005.
On factor income flows, external factor income inflow and outflow amounted to $149.2 billion and $141.2 billion respectively in the first quarter of 2006, thus yielding a net inflow of $8.1 billion in the first quarter of 2006, as compared with a net inflow of $7.0 billion in the same quarter in 2005.
A current transfer outflow of $5.7 billion and an inflow of $1.4 billion were recorded in the first quarter of 2006, resulting in a net outflow of $4.3 billion in that quarter, slightly smaller than that of $4.5 billion in the same quarter in 2005.
Comparing the first quarter of 2006 with the fourth quarter of 2005, and bearing in mind that this comparison for the main current account components may be affected by seasonal factors, the visible trade deficit increased notably from $13.1 billion to $29.8 billion, while the invisible trade surplus fell from $70.2 billion to $61.5 billion. Concurrently, the external factor income shifted from a net outflow of $3.2 billion to a net inflow of $8.1 billion, while the net outflow of current transfers slightly decreased from $4.4 billion to $4.3 billion.
Capital and Financial Account
In the first quarter of 2006, a net outflow of capital transfers was estimated at $0.4 billion, similar to that in the fourth quarter of 2005.
An overall net outflow of financial non-reserve assets amounting to $37.3 billion was recorded in the first quarter of 2006, smaller than that of $39.4 billion in the fourth quarter of 2005. The overall net outflow of financial non-reserve assets in the first quarter of 2006 was the combined result of a net inflow of direct investment, a net inflow of portfolio investment, a net inflow due to cash settlement of financial derivatives, and a net outflow of other investment.
On direct investment (DI) flows, Hong Kong's DI abroad increased by $75.3 billion and foreign DI in Hong Kong rose by $102.6 billion during the first quarter of 2006, resulting in a net DI inflow of $27.4 billion, as compared with a net inflow of $51.6 billion in the fourth quarter of 2005.
On portfolio investment (PI) flows, assets increased by $14.3 billion and liabilities rose by $48.3 billion in the first quarter of 2006. Taken together, there was a net PI inflow amounting to $34.0 billion in the first quarter of 2006, as compared with a net inflow of $13.1 billion in the fourth quarter of 2005. The rise in PI assets was mainly due to increased holdings of non-resident debt securities by Hong Kong residents. On the other hand, the rise in PI liabilities was mainly attributable to increased holdings of resident equity securities by non-residents.
On financial derivatives (FD) flows, a net inflow of $2.3 billion due to cash settlement of FD was recorded in the first quarter of 2006, as compared with a net inflow of $2.8 billion in the fourth quarter of 2005.
On other investment (OI) flows, assets increased by $44.0 billion and liabilities decreased by $57.0 billion during the first quarter of 2006. Taken together, there was a net OI outflow of $101.0 billion in the first quarter of 2006, as compared with a net outflow of $106.8 billion in the fourth quarter of 2005. The increase in OI assets was mainly due to an increase in currency and deposit assets of the other sectors. On the other hand, the decrease in OI liabilities was mainly due to decreases in loan liabilities of the other sectors and currency and deposit liabilities of the banking sector.
Change in reserve assets in the BoP account reflects the net change in Hong Kong's foreign currency reserve assets, which come under the management of the Hong Kong Monetary Authority (HKMA). In the first quarter of 2006, reserve assets increased by $11.5 billion, as compared with an increase of $10.7 billion in the fourth quarter of 2005. The accumulation in reserve assets was mainly due to income from foreign currency assets during the quarter.
Table 1 gives the BoP account by standard component. Table 2 gives the detailed current account analysed by sub-account component, while Table 3 gives the detailed capital and financial account analysed by sub-account component.
II. External Debt Statistics
Gross ED, at any point in 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 time 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.
Overall Situation
At end-March 2006, Hong Kong's gross ED, measuring the total outstanding gross external liabilities other than equity liabilities, amounted to $3,468.7 billion, equivalent to 246% of GDP. Compared with end-December 2005, gross ED increased by $5.2 billion. This was mainly attributable to the increases in ED of DI debt liabilities (inter-company lending), the HKMA, the General Government and other sectors, which were larger than the decrease in ED of the banking sector.
Sectoral Analysis
At end-March 2006, a major proportion of Hong Kong's ED was due to transactions of the banking sector, accounting for 64.5% of the total. Other ED consisted of debt liabilities to affiliated enterprises and direct investors under DI (with a share of 25.6%), ED of other sectors (9.5%), ED of the General Government (0.4%) and ED of the HKMA (0.1%).
ED of Hong Kong's banking sector, as the largest component of Hong Kong's ED, decreased to $2,236.8 billion at end-March 2006 (at 159% to GDP), from $2,272.0 billion at end-December 2005 (at 164% to GDP). Of this, 98.1% ($2,194.1 billion) were short-term liabilities, among which 97.6% ($2,140.7 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), constituting the second largest component of Hong Kong's ED, increased to $888.1 billion at end-March 2006, from $849.2 billion at end-December 2005. Within this, 76.5% ($679.7 billion) were debt liabilities to direct investors.
ED of other sectors amounted to $328.8 billion at end-March 2006, larger than that of $328.5 billion at end-December 2005. It was mainly attributable to the increases in loans (including both short-term and long-term loans), from $189.1 billion at end-December 2005 to $195.6 billion at end-March 2006, and in bonds and notes, from $10.9 billion at end-December 2005 to $14.5 billion at end-March 2006. Other debt liabilities (including both short-term and long-term other debt liabilities) on the other hand decreased from $66.9 billion at end-December 2005 to $57.4 billion at end-March 2006. Such loans and bonds and notes took up 59.5% and 4.4% of the ED of other sectors respectively, while other debt liabilities accounted for another 17.5%.
ED of the General Government amounted to $12.8 billion at end-March 2006. All of them were long-term liabilities. This was mainly attributable to the non-residents' holdings of debt securities issued by the HKSAR Government.
ED of the HKMA stood at $2.1 billion at end-March 2006, larger than that of $1.6 billion at end-December 2005. This was mainly due to an increase in short-term borrowings under the repurchase agreements and securities lending arrangements, which took up a share of 72.8% ($1.5 billion) of ED of the HKMA.
Table 4 gives the ED statistics by standard component.
Commentary
A Government Secretariat spokesman noted that Hong Kong's overall balance of payments remained in surplus in the first quarter of 2006, resulting in a further accumulation of reserve assets. On the back of the continued vibrant external trade and resumed net inflow of external factor income, the current account surplus still remained sizeable in the first quarter, though smaller than that in the preceding quarter due partly to seasonality.
The spokesman further noted that inward direct investment continued apace amidst the strong performance of the local economy. There were also increased purchases of local equity securities by non-residents, reflecting the buoyant local stock market activity during the quarter. Yet owing to the still substantial net outflow of other investment, a further net outflow of financial non-reserve assets was seen in the first quarter.
Hong Kong's external debt position remained sound. A predominant share of this debt arises from the normal operations of the banking sector and inward direct investment.
Further information
For enquiries on the BoP and ED statistics, please call the Balance of Payments Section of the Census and Statistics Department (Tel.: 2116 8660).
The present BoP and ED statistics for the first quarter of 2006 are only preliminary, and are subject to revision upon the availability of more data.
In compiling and presenting the BoP account of Hong Kong, the international standards prescribed in the Fifth Edition of the Balance of Payments Manual of the International Monetary Fund (IMF) are adopted. As for ED statistics, the international standards prescribed in the External Debt Statistics: Guide for Compilers and Users published by the Inter-Agency Task Force on Finance Statistics chaired by the IMF are adopted. These are also in compliance with the Special Data Dissemination Standard of the IMF, to which Hong Kong has subscribed.
More details on the estimates of BoP and ED are published in the publication Balance of Payments Statistics of Hong Kong, First Quarter 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 is 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 is also 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 27, 2006
Issued at HKT 16:15
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