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The Census and Statistics Department (C&SD) today (June 3) released the international investment position (IIP) statistics for Hong Kong for the reference year of 2007.
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 of the International Monetary Fund are adopted.
IIP Statistics for 2007
Summary
At end-2007, Hong Kong's external financial assets and liabilities amounted to $21,298.8 billion and $17,228.1 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 $4,070.7 billion at end-2007, corresponding to 252% of GDP in that year.
The ratios of both Hong Kong's external financial assets and liabilities at end-2007 to GDP in that year remained substantial, at 1318% and 1066% 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-2007. 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-2006, the positive net IIP at end-2007 increased by $41.0 billion. This was mainly attributable to the increases in the net asset position of other investment (OI) and financial derivatives (FD) and in reserve assets (RA), which exceeded the increase in the net liability position of DI and the decrease in the net asset position of portfolio investment (PI).
External Financial Assets
Hong Kong's external financial assets amounted to $21,298.8 billion at end-2007. DI was the largest component, accounting for 37.6% ($8,009.4 billion) of the total value at end-2007. 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.
PI was the second largest component of Hong Kong's external financial assets, accounting for 28.7% ($6,102.8 billion) of the total value at end-2007. Within this, 66.3% were equity securities while the other 33.7% were debt securities.
At end-2007, 26.4% ($5,620.3 billion) of Hong Kong's external financial assets were in the form of OI. 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.
RA amounted to $1,190.7 billion or 5.6% of Hong Kong's total external financial assets at end-2007.
FD assets held by residents were relatively insignificant, accounting for only 1.8% ($375.6 billion) of the total external financial assets at end-2007.
Comparing end-2007 with end-2006, total external financial assets increased by $6,300.1 billion or 42.0%. Within this total, DI, OI, PI, FD and RA rose by $2,744.9 billion (52.1%), $1,610.8 billion (40.2%), $1,589.3 billion (35.2%), $200.4 billion (114.4%) and $154.7 billion (14.9%) respectively.
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $17,228.1 billion at end-2007. 53.6% ($9,241.2 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 23.2% ($3,997.5 billion) of the total at end-2007. Similar to OI assets, most of the OI liabilities were related to deposits of the banking sector.
At end-2007, PI liabilities accounted for 21.7% ($3,732.9 billion) of Hong Kong's total external financial liabilities. These PI liabilities were concentrated in equity securities, which took up a share of 91.0%.
FD liabilities owed by residents were also relatively insignificant, accounting for only 1.5% ($256.4 billion) of the total external financial liabilities at end-2007.
Comparing end-2007 with end-2006, total external financial liabilities increased by $6,259.1 billion or 57.1%. Within this total, DI, PI, OI and FD increased by $3,469.3 billion (60.1%), $1,714.1 billion (84.9%), $977.6 billion (32.4%) and $98.1 billion (62.0%) 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 spokesman noted that Hong Kong's international investment position remained sound and strong, with net external financial assets amounting to $4,070.7 billion at end-2007. The level of the net external financial assets increased slightly from the previous year, while its ratio to GDP decreased to 252% in 2007 from 273% in 2006 amidst the strong GDP growth.
The spokesman also pointed out that 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 investment funds to the Mainland and other parts of the world.
The spokesman further commented that both external financial assets and liabilities, particularly those related to direct and portfolio investment, increased sharply during 2007. This mainly reflected the generally favourable economic environment as well as the buoyant performance in many stock markets during the year.
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 2007 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 2008. The publication will be available on June 23, 2008. Users can download the publication free of charge at the website of the C&SD (www.censtatd.gov.hk/products_and_services/products/publications/index.jsp). Print version of the publication will be available for sale at HK$33 per issue. Purchase can be done 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 the publication is also available for sale online at the Government Bookstore of the Information Services Department (www.bookstore.gov.hk).
Ends/Tuesday, June 3, 2008
Issued at HKT 16:15
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