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The Census and Statistics Department (C&SD) released today (March 22) the preliminary Balance of Payments (BoP) account, International Investment Position (IIP) statistics and External Debt (ED) statistics for Hong Kong for the fourth quarter of 2010 and the whole year of 2010.
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 $30.1 billion in its BoP account (as a ratio to 6.3% of GDP) in the fourth quarter of 2010, compared with a surplus of $15.4 billion (as a ratio to 3.4% of GDP) in the third quarter of 2010. Reserve assets correspondingly increased by the same amount in the fourth quarter of 2010.
Among the major BoP components, there was a current account surplus of $32.6 billion (as a ratio to 6.8% of GDP) in the fourth quarter of 2010, smaller than that of $44.1 billion (as a ratio to 9.8% of GDP) in the third quarter of 2010. At the same time, a net outflow of financial non-reserve assets amounting to $30.8 billion (as a ratio to 6.4% of GDP) was recorded in the fourth quarter of 2010, compared with a net outflow of $53.6 billion (as a ratio to 12.0% of GDP) in the third quarter of 2010.
For 2010 as a whole, there was a BoP surplus of $71.1 billion (as a ratio to 4.1% of GDP), compared with a surplus of $549.3 billion (as a ratio to 33.9% of GDP) in 2009.
Among the major BoP components, Hong Kong recorded a current account surplus of $115.0 billion (as a ratio to 6.6% of GDP) in 2010, smaller than that of $139.6 billion (as a ratio to 8.6% of GDP) in 2009. At the same time, a net outflow of financial non-reserve assets amounting to $107.0 billion (as a ratio to 6.1% of GDP) was recorded in 2010, as against a net inflow of $357.7 billion (as a ratio to 22.0% of GDP) in 2009.
Current Account
The current account recorded a surplus of $32.6 billion in the fourth quarter of 2010, larger than that of $30.2 billion in the fourth quarter of 2009. Compared with the same quarter of 2009, the current account surplus in the fourth quarter of 2010 was characterised by an increase in the visible trade deficit, an increase in the invisible trade surplus, a net outflow instead of a 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 from $68.2 billion in the fourth quarter of 2009 to $88.9 billion in the same quarter of 2010. On the other hand, the invisible trade surplus increased from $100.3 billion in the fourth quarter of 2009 to $128.8 billion in the same quarter of 2010, as exports of services increased faster than imports of services. Overall, a combined visible and invisible trade surplus of $39.8 billion was recorded in the fourth quarter of 2010, larger than that of $32.1 billion in the same quarter of 2009.
For factor income flows, the external factor income inflow and outflow amounted to $227.4 billion and $227.9 billion respectively, thus yielding a net outflow of $0.5 billion in the fourth quarter of 2010, as against a net inflow of $4.2 billion in the same quarter of 2009.
The current transfers outflow and inflow amounted to $7.8 billion and $1.1 billion respectively, resulting in a net outflow of $6.7 billion in the fourth quarter of 2010, compared with a net outflow of $6.2 billion in the same quarter of 2009.
For 2010 as a whole, the current account surplus was $115.0 billion, smaller than that of $139.6 billion in 2009. This was the combined result of an increase in the visible trade deficit from $208.2 billion to $333.8 billion, a decrease in the net inflow of external factor income from $42.9 billion to $36.6 billion, and an increase in the net outflow of current transfers from $24.6 billion to $26.2 billion, partly offset by an increase in the invisible trade surplus from $329.5 billion to $438.4 billion.
Capital and Financial Account
In the fourth quarter of 2010, a net inflow of capital transfers was estimated at $10.4 billion, compared with a net inflow of $11.8 billion in the third quarter of 2010.
An overall net outflow of financial non-reserve assets amounting to $30.8 billion was recorded in the fourth quarter of 2010, compared with a net outflow of $53.6 billion in the third quarter of 2010. The overall net outflow of financial non-reserve assets in the fourth quarter of 2010 was the combined result of a net outflow of direct investment and a net outflow of portfolio investment, partly offset by a net inflow due to the cash settlement of financial derivatives and a net inflow of other investment.
For direct investment (DI) flows, Hong Kong's DI abroad and foreign DI in Hong Kong increased by $196.6 billion and $170.5 billion respectively during the fourth quarter of 2010, resulting in a net DI outflow of $26.1 billion, compared with a net outflow of $30.1 billion in the third quarter of 2010.
For portfolio investment (PI) flows, assets and liabilities increased by $252.6 billion and $72.0 billion respectively in the fourth quarter of 2010. Taken together, there was a net PI outflow amounting to $180.6 billion in the fourth quarter of 2010, compared with a net outflow of $105.7 billion in the third quarter of 2010. The increase in PI assets was mainly due to the increased holdings of non-resident equity securities and debt securities by Hong Kong residents. On the other hand, the increase in PI liabilities was attributable to the increased holdings of resident equity securities by non-residents.
For financial derivatives (FD) flows, a net inflow of $4.3 billion due to the cash settlement of FD was recorded in the fourth quarter of 2010, compared with a net inflow of $6.3 billion in the third quarter of 2010.
For other investment (OI) flows, assets and liabilities increased by $204.1 billion and $375.6 billion respectively during the fourth quarter of 2010. Taken together, there was a net OI inflow of $171.6 billion in the fourth quarter of 2010, compared with a net inflow of $75.9 billion in the third quarter of 2010. The increase in OI assets was mainly due to an increase in currency and deposits owned by Hong Kong residents. Similarly, the increase in OI liabilities was also mainly due to an increase in currency and deposits owed to non-residents by Hong Kong residents.
The 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 fourth quarter of 2010, reserve assets increased by $30.1 billion, compared with an increase of $15.4 billion in the third quarter of 2010. The accumulation of reserve assets was mainly due to the purchase of foreign currencies with Hong Kong dollars, income from foreign currency assets and the increase in Certificates of Indebtedness during the quarter.
For 2010 as a whole, a net inflow of capital transfers was estimated at $40.6 billion, compared with a net inflow of $36.2 billion in 2009.
For 2010 as a whole, an overall net outflow of financial non-reserve assets amounting to $107.0 billion was recorded, as against a net inflow of $357.7 billion in 2009. The overall net outflow of financial non-reserve assets in 2010 was the combined result of a net outflow of direct investment and a net outflow of portfolio investment, partly offset by a net inflow due to the cash settlement of financial derivatives and a net inflow of other investment.
Both Hong Kong's DI abroad and foreign DI in Hong Kong increased in 2010, by $591.1 billion and $535.3 billion respectively, resulting in a net DI outflow of $55.7 billion in 2010, compared with a net outflow of $89.9 billion in 2009.
In 2010, PI assets and liabilities increased by $517.7 billion and $44.9 billion respectively. Taken together, there was a net PI outflow amounting to $472.9 billion in 2010, compared with a net outflow of $332.4 billion in 2009. The increase in PI assets in 2010 was mainly due to the increased holdings of non-resident equity securities by Hong Kong residents. The increase in PI liabilities was mainly due to the increased holdings of resident equity securities and debt securities by non-residents.
A net inflow of $29.2 billion due to the cash settlement of FD was recorded in 2010, compared with a net inflow of $24.6 billion in 2009.
Both OI assets and liabilities increased in 2010, by $491.6 billion and $884.1 billion respectively. This resulted in a net OI inflow of $392.5 billion in 2010, compared with a net inflow of $755.4 billion in 2009. The increase in OI assets was mainly due to increases in currency and deposits and loans owned by Hong Kong residents, while the increase in OI liabilities was mainly attributable to an increase in currency and deposits owed to non-residents by Hong Kong residents.
In 2010, reserve assets increased by $71.1 billion, compared with an accumulation of $549.3 billion in 2009.
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. International Investment Position Statistics
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.
Overall Situation
At the end of the fourth quarter of 2010, Hong Kong's external financial assets and liabilities amounted to $22,431.5 billion and $17,037.5 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 $5,394.0 billion at the end of the fourth quarter of 2010 (as a ratio to 309% of GDP).
The ratios of both Hong Kong's external financial assets and liabilities at the end of the fourth quarter of 2010 to GDP remained substantial, at 1 283% and 975% 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 the end of the fourth quarter of 2010, except 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.
External Financial Assets
Hong Kong's external financial assets amounted to $22,431.5 billion at the end of the fourth quarter of 2010. DI was the largest component, accounting for 32.9% ($7,374.1 billion) of the total value. PI and OI contributed 32.2% ($7,222.5 billion) and 23.6% ($5,287.8 billion) respectively.
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $17,037.5 billion at the end of the fourth quarter of 2010, in which 50.1% ($8,533.4 billion) were in the form of DI. OI and PI contributed 29.3% ($4,994.9 billion) and 18.4% ($3,130.6 billion) 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.
Table 4 gives the IIP statistics by broad component.
III. External Debt Statistics
Gross ED, at a particular time point, is the outstanding amount of those actual current, and not contingent, liabilities that are owed to non-residents by residents of an economy, and require payment(s) of principal and/or interest by the debtor at some point(s) in the future.
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 the end of the fourth quarter of 2010, Hong Kong's gross ED (measuring total outstanding gross external liabilities other than equity liabilities) amounted to $6,246.6 billion (as a ratio to 357% of GDP). Compared with the end of the third quarter of 2010, gross ED increased by $390.6 billion. This was mainly attributable to the increases in ED of the banking sector, DI debt liabilities (inter-company lending) and ED of the HKMA which were larger than the decreases in ED of other sectors and ED of the General Government.
Sectoral Analysis
At the end of the fourth quarter of 2010, a major proportion of Hong Kong's ED was attributable to the banking sector, accounting for 76.2% of the total. Other ED consisted of debt liabilities to affiliated enterprises and direct investors under DI (with a share of 17.7%), ED of other sectors (5.8%), ED of the General Government (0.2%) and ED of the HKMA (0.1%).
ED of Hong Kong's banking sector, as the largest component of Hong Kong's ED, increased from $4,362.1 billion at the end of the third quarter of 2010 (as a ratio to 255% of GDP) to $4,761.5 billion at the end of the fourth quarter of 2010 (as a ratio to 272% of GDP). DI debt liabilities (inter-company lending), constituting the second largest component of Hong Kong's ED, amounted to $1,105.5 billion at the end of the fourth quarter of 2010. ED of other sectors, the General Government and the HKMA amounted to $364.9 billion, $11.1 billion and $3.6 billion respectively at the end of the fourth quarter of 2010.
Relationship between ED and IIP
Being also mainly a stock concept, ED of an economy is the sum of the non-equity liability components of the IIP statement of the economy. According to international definitions, shares and other equity participation, and financial derivatives that are owed to non-residents are excluded from ED as they do not require the payment of principal or interest.
Table 5 gives the ED statistics by standard component.
Further information
For enquiries about the BoP, IIP and ED statistics, please contact the Balance of Payments Section of the Census and Statistics Department (Tel.: 2116 8660; Fax: 2116 0278; Email: bop@censtatd.gov.hk).
The present BoP, IIP and ED statistics for the fourth quarter of 2010 and the whole year of 2010 are only preliminary, and are subject to revision upon the availability of more data.
In compiling and presenting the BoP account and IIP statistics 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 of the estimates of BoP, IIP and ED are published in the publication Balance of Payments Statistics of Hong Kong, Fourth Quarter 2010. Users can download the publication free of charge on the website of C&SD (www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/national_income_and_bop/index.jsp).
Ends/Tuesday, March 22, 2011
Issued at HKT 16:32
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