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Hong Kong's external direct investment (DI) statistics for 2008 are released today (December 10) by the Census and Statistics Department (C&SD).
Stocks of Inward and Outward DI
At the end of 2008, the stock of Hong Kong's inward DI decreased by 31.1% from a year earlier to $6,325.8 billion at market value. Its ratio to GDP stood at 377% in 2008. In 2008, the decrease in inward DI position was mainly attributable to the decrease in market values of some Hong Kong enterprises, alongside the correction in the local equities market.
Analysed by immediate source of investment, the mainland of China (the Mainland) accounted for the largest share of the total stock at end-2008, at 36.5%, reflecting the importance of investment from the Mainland in Hong Kong. Mainland's investment in Hong Kong covered a wide range of economic activities, including investment holding, real estate, and various business services; wholesale, retail and import/export trades; and transport and related services.
The British Virgin Islands (BVI) and Bermuda took up another 32.3% and 5.7% respectively of the total stock of inward DI at end-2008. This mirrored partly the common practice of Hong Kong enterprises in setting up non-operating companies in offshore financial centres (commonly known as tax haven economies) for re-channelling DI funds back to Hong Kong, and partly the means by which foreign enterprises channelled their funds to Hong Kong. Other major investor countries/territories included the Netherlands and the United States of America, accounting for 6.5% and 3.9% respectively of the total.
Analysed by economic activity of Hong Kong enterprise groups (HKEGs) having received inward DI, those engaged in investment holding, real estate and various business services attracted the largest share of 67.5% of the total stock at end-2008. A significant proportion of such investment was related to funds originated from Hong Kong and re-channelled through tax haven economies back to Hong Kong. Wholesale, retail and import/export trades also represented a major recipient sector of inward DI, with a share of 11.0% of the total. Banks and deposit-taking companies took up another 9.8%.
At the end of 2008, the stock of Hong Kong's outward DI decreased by 25.1% from a year earlier to $5,906.2 billion at market value. Its ratio to GDP was 352% in 2008. Similar to inward DI, the decrease in outward DI position in 2008 was mainly attributable to the decrease in market values of foreign affiliates of Hong Kong enterprises, alongside the correction in overseas equities markets.
Analysed by immediate destination of investment, the Mainland was the most important destination for Hong Kong's outward DI, with a share of 44.4% of the total stock at end-2008. Guangdong Province remained a popular location for Hong Kong's investment in the Mainland, accounting for 30.4% (or $798.4 billion) of the total stock of outward DI to the Mainland. The most common economic activities undertaken by Hong Kong's direct investment enterprises in the Mainland were communications; investment holding, real estate and various business services; and manufacturing.
The BVI remained the most popular tax haven economy for indirect channelling of DI funds, accounting for 43.8% of the total stock of Hong Kong's outward DI at end-2008.
Analysed by economic activity of HKEGs having made outward DI, those engaged in investment holding, real estate and various business services took up the largest share, at 75.2% of the total stock at end-2008. This was followed by wholesale, retail and import/export trades (with a share of 8.7%), and banks and deposit-taking companies (with a share of 3.5%).
Flows of Inward and Outward DI
DI inflow to Hong Kong increased from $423.9 billion in 2007 to $464.3 billion in 2008. The Mainland was the most important supplier of Hong Kong's DI inflow in 2008, amounting to $179.7 billion. The BVI came next, at $110.5 billion. Analysed by economic activity of HKEGs receiving DI inflow, those engaged in investment holding, real estate and various business services took up the largest share of the total DI inflow in 2008, at $232.4 billion.
On the other hand, DI outflow from Hong Kong decreased from $476.5 billion in 2007 to $393.9 billion in 2008. The Mainland accounted for a predominant part of Hong Kong's DI outflow in 2008, at $215.2 billion. Analysed by economic activity of HKEGs making DI outflow, those engaged in investment holding, real estate and various business services was the most prominent supplier, amounting to $307.4 billion.
Taking DI inflow and outflow together, a net inflow of $70.4 billion was recorded in 2008.
Commentary
A Government spokesman says that the stocks of inward and outward direct investment at end-2008 were both notably lower than their corresponding year-ago levels due to the impact of the financial tsunami, which led to declines in market values of the companies concerned. Yet the spokesman points out that the high ratios of inward and outward direct investment to the size of the Hong Kong economy, at 377% and 352% respectively, continued to underline Hong Kong's status as a regional business hub and an international financial centre.
The spokesman notes that the Mainland continued to feature prominently in Hong Kong's external direct investment, both as a source and a destination. Going forward, the investment links between the Mainland and Hong Kong should continue to go from strength to strength, amidst the rapid economic integration between the two places.
Further Information
DI represents investment which allows investors in one economy to have a lasting interest and a significant degree of influence or an effective voice in the management of an enterprise in another economy. For statistical purpose, an effective voice is taken as equivalent to a holding of 10% or more of the equity in an enterprise.
Hong Kong compiles DI statistics in conformity with the prescriptions in the Fifth Edition of the Balance of Payments Manual of the International Monetary Fund (IMF). The DI statistics are compiled on the basis of data obtained from the Survey of External Claims, Liabilities and Income (SECLI), supplemented by data from other sources.
Tables 1 and 2 show the stock and flow of inward DI in Hong Kong for 2007 and 2008, with breakdowns by major country/territory and by economic activity of HKEGs respectively. Similar statistics on outward DI from Hong Kong for 2007 and 2008 are presented in Tables 3 and 4.
Further details of DI statistics for 2008 are published in a report entitled "External Direct Investment Statistics of Hong Kong 2008". The C&SD has recently conducted a review on the printing of statistical publications and has decided that the print version of the publication will no longer be produced starting from this edition. 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/index.jsp).
Enquiries about the DI statistics may be directed to the Balance of Payments Branch (2) of the C&SD at 2116 5150.
Ends/Thursday, December 10, 2009
Issued at HKT 16:30
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