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The Census and Statistics Department (C&SD) today (June 2) released the international investment position (IIP) statistics for Hong Kong for the reference year of 2008.
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 2008
Summary
At end-2008, Hong Kong's external financial assets and liabilities amounted to $17,566.7 billion and $12,766.2 billion respectively. After netting out the external financial liabilities from the external financial assets, Hong Kong was a net creditor. Hong Kong's net external financial assets amounted to $4,800.5 billion at end-2008, corresponding to 286% of GDP in that year.
The ratios of both Hong Kong's external financial assets and liabilities at end-2008 to GDP in that year remained substantial, at 1 048% and 761% respectively, reflecting that Hong Kong is a highly externally oriented economy and also a major financial centre in the region with considerable cross-territory investment.
Most of the broad IIP components were in net asset positions at end-2008, except direct investment (DI). DI was in 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-2007, the net IIP at end-2008 increased by $1,026.9 billion. This was mainly attributable to the decrease in the net liability position of DI, and the increases in reserve assets (RA) and in the net asset position of portfolio investment (PI) and financial derivatives (FD) which exceeded the decrease in the net asset position of other investment (OI).
External Financial Assets
Hong Kong's external financial assets amounted to $17,566.7 billion at end-2008. DI was the largest component, accounting for 34.2% ($6,014.2 billion) of the total value. 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 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 29.4% ($5,158.2 billion) of the total value at end-2008. Most of the OI assets were held by 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-2008, 24.5% ($4,303.9 billion) of Hong Kong's external financial assets were in the form of PI. Within this, 50.9% was debt securities while the other 49.1% was equity securities.
RA amounted to $1,414.7 billion or 8.1% of Hong Kong's total external financial assets at end-2008.
FD assets held by residents were relatively insignificant, accounting for only 3.8% ($675.8 billion) of the total external financial assets at end-2008.
Comparing end-2008 with end-2007, total external financial assets decreased by $3,627.4 billion or 17.1%. Within this total, DI, PI and OI fell by $1,874.8 billion (23.8%), $1,770.2 billion (29.1%) and $508.5 billion (9.0%) respectively, more than offsetting the increases of $302.2 billion (80.9%) and $224.0 billion (18.8%) in FD and RA respectively.
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $12,766.2 billion at end-2008, in which 50.7% ($6,478.0 billion) 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 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% ($3,962.0 billion) of the total at end-2008. Similar to OI assets, most of the OI liabilities were related to deposits of the banking sector.
At end-2008, PI liabilities accounted for 14.1% ($1,795.5 billion) of Hong Kong's total external financial liabilities. These PI liabilities were concentrated in equity securities, which took up a share of 93.0%.
FD liabilities owed by residents were also relatively insignificant, accounting for only 4.2% ($530.7 billion) of the total external financial liabilities at end-2008.
Comparing end-2008 with end-2007, total external financial liabilities decreased by $4,654.3 billion or 26.7%. Within this total, DI, PI and OI fell by $2,708.5 billion (29.5%), $1,930.5 billion (51.8%) and $292.1 billion (6.9%) respectively, more than offsetting the increase of $276.8 billion (109.1%) in FD.
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 says that Hong Kong's international investment position remained sound and strong. With the level of the net external financial assets increased significantly from the previous year, its ratio to GDP rose markedly to 286% in 2008 from 234% in 2007. This was one of the key factors underpinning the resilience of the economy in the face of the global financial crisis.
The spokesman comments further 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.
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 2008 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 2009. The publication will be available on June 23, 2009. The C&SD has recently conducted a review on the printing of statistical publications and has decided that the print version of the Balance of Payments statistics of Hong Kong will no longer be produced as from the 2009 series. Nevertheless, the publication is still available for downloading free of charge from the website of the C&SD at www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/national_income_and_bop/index.jsp.
Ends/Tuesday, June 2, 2009
Issued at HKT 16:30
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