************************************************************
The Census and Statistics Department (C&SD) released today (December 22) the preliminary Balance of Payments (BoP) account, International Investment Position (IIP) statistics and External Debt (ED) statistics for Hong Kong for the third quarter of 2011.
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 $23.6 billion in its BoP account (as a ratio of 4.8% to GDP) in the third quarter of 2011, compared with a surplus of $19.6 billion (as a ratio of 4.4% to GDP) in the second quarter of 2011. Reserve assets correspondingly increased by the same amount in the third quarter of 2011.
Among the major BoP components, there was a current account surplus of $33.7 billion (as a ratio of 6.9% to GDP) in the third quarter of 2011, larger than that of $4.6 billion (as a ratio of 1.0% to GDP) in the second quarter of 2011. At the same time, a net outflow of financial non-reserve assets amounting to $54.5 billion (as a ratio of 11.2% to GDP) was recorded in the third quarter of 2011, compared with a net outflow of $13.7 billion (as a ratio of 3.1% to GDP) in the second quarter of 2011.
Current Account
The current account recorded a surplus of $33.7 billion in the third quarter of 2011, smaller than that of $50.7 billion in the third quarter of 2010. Compared with the same quarter of 2010, the current account surplus in the third quarter of 2011 was characterised by an increase in the visible trade deficit, an increase in the invisible trade surplus, an increase in the net inflow of external factor income, and an increase in the net outflow of current transfers.
With imports of goods increasing faster than exports of goods, the visible trade deficit increased from $60.1 billion in the third quarter of 2010 to $99.9 billion in the same quarter of 2011. On the other hand, the invisible trade surplus increased from $116.1 billion in the third quarter of 2010 to $135.9 billion in the same quarter of 2011, as exports of services increased faster than imports of services. Overall, a combined visible and invisible trade surplus of $36.0 billion was recorded in the third quarter of 2011, smaller than that of $56.1 billion in the same quarter of 2010.
For factor income flows, the external factor income inflow and outflow amounted to $244.7 billion and $238.7 billion respectively, thus yielding a net inflow of $6.1 billion in the third quarter of 2011, compared with a net inflow of $1.5 billion in the same quarter of 2010.
The current transfers outflow and inflow amounted to $10.2 billion and $1.8 billion respectively, resulting in a net outflow of $8.4 billion in the third quarter of 2011, compared with a net outflow of $6.8 billion in the same quarter of 2010.
Capital and Financial Account
In the third quarter of 2011, a net inflow of capital transfers was estimated at $21.6 billion, compared with a net inflow of $12.4 billion in the second quarter of 2011.
An overall net outflow of financial non-reserve assets amounting to $54.5 billion was recorded in the third quarter of 2011, compared with a net outflow of $13.7 billion in the second quarter of 2011. The overall net outflow of financial non-reserve assets in the third quarter of 2011 was the combined result of a net outflow of portfolio investment, partly offset by a net inflow of direct investment, 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 $65.8 billion and $72.6 billion respectively during the third quarter of 2011, resulting in a net DI inflow of $6.8 billion, as against a net outflow of $2.2 billion in the second quarter of 2011.
For portfolio investment (PI) flows, assets increased by $129.5 billion while liabilities increased by $35.0 billion in the third quarter of 2011. Taken together, there was a net PI outflow amounting to $94.5 billion in the third quarter of 2011, compared with a net outflow of $62.8 billion in the second quarter of 2011. The increase in PI assets was mainly due to the increased holdings of non-resident equity securities by Hong Kong residents. On the other hand, the increase in PI liabilities was attributable to the increased holdings of resident equity securities and short-term debt securities by non-residents.
For financial derivatives (FD) flows, a net inflow of $2.3 billion due to the cash settlement of FD was recorded in the third quarter of 2011, as against a net outflow of $4.1 billion in the second quarter of 2011.
For other investment (OI) flows, assets and liabilities increased by $300.1 billion and $330.9 billion respectively during the third quarter of 2011. Taken together, there was a net OI inflow of $30.8 billion in the third quarter of 2011, compared with a net inflow of $55.3 billion in the second quarter of 2011. The increase in OI assets was mainly due to increases in loans and currency and deposits owned by Hong Kong residents. On the other hand, the increase in OI liabilities was mainly due to the 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 third quarter of 2011, reserve assets increased by $23.6 billion, compared with an increase of $19.6 billion in the second quarter of 2011. 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.
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 of an economy 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 third quarter of 2011, Hong Kong's external financial assets and liabilities amounted to $22,869.3 billion and $17,728.2 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 $5,141.1 billion (as a ratio of 276% to GDP) at the end of the third quarter of 2011, compared with $5,322.4 billion (as a ratio of 292% to GDP) at the end of the second quarter of 2011.
The ratios of both Hong Kong's external financial assets and liabilities at the end of the third quarter of 2011 to GDP remained at a very high level, at 1 228% and 952% 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 third quarter of 2011, 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 $22,869.3 billion at the end of the third quarter of 2011. DI was the largest component, accounting for 34.4% ($7,873.4 billion) of the total value. PI and OI contributed 27.0% ($6,180.0 billion) and 26.7% ($6,114.7 billion) respectively.
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $17,728.2 billion at the end of the third quarter of 2011, in which 49.2% ($8,723.5 billion) were in the form of DI. OI and PI contributed 33.4% ($5,918.8 billion) and 14.8% ($2,631.9 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 some 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 third quarter of 2011, Hong Kong's gross ED (measuring total outstanding gross external liabilities other than equity liabilities) amounted to $7,322.7 billion (as a ratio of 393% to GDP). Compared with $7,028.1 billion (as a ratio of 386% to GDP) at the end of the second quarter of 2011, gross ED increased by $294.5 billion. This was mainly attributable to the increases in ED of the banking sector, other sectors and the HKMA which were larger than the decreases in DI debt liabilities (inter-company lending) and ED of the General Government.
Sectoral Analysis
At the end of the third quarter of 2011, a major proportion of Hong Kong's ED was attributable to the banking sector, accounting for 76.4% of the total. Other ED consisted of debt liabilities to affiliated enterprises and direct investors under DI (with a share of 16.4%), ED of other sectors (7.0%), ED of the General Government (0.1%) and ED of the HKMA (0.01%).
ED of Hong Kong's banking sector, as the largest component of Hong Kong's ED, increased from $5,310.1 billion at the end of the second quarter of 2011 (as a ratio of 291% to GDP) to $5,596.6 billion at the end of the third quarter of 2011 (as a ratio of 301% to GDP). DI debt liabilities (inter-company lending), constituting the second largest component of Hong Kong's ED, amounted to $1,203.0 billion at the end of the third quarter of 2011. ED of other sectors, the General Government and the HKMA amounted to $511.5 billion, $10.8 billion and $0.8 billion respectively at the end of the third quarter of 2011.
Relationship between ED and IIP
Being also 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 C&SD (Tel.: 2116 8660; Fax: 2116 0278; e-mail: bop@censtatd.gov.hk).
With the incorporation of the latest data from surveys and other sources, BoP, IIP and ED statistics for 2010 are revised. As regards the BoP, IIP and ED statistics for the third quarter of 2011, they 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, Third Quarter 2011. Users can download the publication free of charge on the website of the C&SD (www.censtatd.gov.hk/products_and_services/products/publications/statistical_report/national_income_and_bop/index.jsp).
Ends/Thursday, December 22, 2011
Issued at HKT 16:30
NNNN
