************************************************************
Statistics on Hong Kong's Gross National Product (GNP) and external factor income flows (EFIF) for the second quarter of 2006 are released today (September 18) by the Census and Statistics Department (C&SD).
In the second quarter of 2006, Hong Kong's GNP increased by 1.4% over a year earlier to $340.7 billion at current market prices. The Gross Domestic Product (GDP), estimated at $348.3 billion at current market prices in the same quarter, recorded a 5.1% increase during the period. Compared with GDP, the value of Hong Kong's GNP was smaller by $7.6 billion in the second quarter of 2006, representing a net external factor income outflow of the same amount, and equivalent to 2.2% of GDP in that quarter.
After netting out the effect of price changes, Hong Kong's GNP increased by 1.7% in real terms in the second quarter of 2006 over a year earlier. This was lower than the corresponding increase of 5.2% recorded for GDP in the same quarter.
Total factor income inflow into Hong Kong, estimated at $163.8 billion in the second quarter of 2006 and equivalent to 47.0% of GDP in that quarter, increased substantially by 23.1% over a year earlier. At the same time, total factor income outflow, estimated at $171.5 billion in the second quarter of 2006 and equivalent to 49.2% of GDP of the same period, also recorded a marked increase of 33.7% over a year earlier. Taking the inflow and outflow together, a net external factor income outflow of $7.6 billion was recorded in the second quarter of 2006.
Within total factor income inflow, Direct Investment Income (DII) increased by 10.6% over a year earlier, mainly due to increased earnings of some prominent local enterprises from investment abroad. Portfolio Investment Income (PII) rose considerably by 36.5%, mainly attributable to the dividend pay-out of a number of newly listed H-shares and the increase in interest income received from holdings of non-resident debt securities during the period. Other Investment Income (OII) also increased substantially by 46.2% over a year earlier, mainly on account of increased interest income from offshore loans and deposits of the local banking sector, which in turn was the combined result of increases in interest rates and external assets of the local banking sector.
Within total factor income outflow, DII increased substantially by 25.9% over a year earlier, largely attributable to increased earnings of some prominent multinational enterprises from direct investment in Hong Kong during the period. PII increased significantly by 28.5%, mainly due to increased dividend pay-out by a number of resident publicly listed companies. OII surged by 93.5%, largely caused by increased liabilities of the local banking sector and higher interest rates.
Analysed by country/territory, the mainland of China continued to be the largest source of Hong Kong's external factor income inflow in the second quarter of 2006, accounting for 31.4%. This was followed by the British Virgin Islands, with a share of 18.0%, reflecting continued investment income inflow from this tax haven economy where Hong Kong companies had set up a considerable number of holding companies. Other major source countries/territories were the United States of America and the United Kingdom, at 10.1% and 6.9% respectively.
The mainland of China and British Virgin Islands were also the most important destinations for Hong Kong's external factor income outflow in the second quarter of 2006, accounting for 21.5% and 16.0% respectively. Other major destination countries/territories included the United States of America, at 11.2%, and the Netherlands, at 8.9%.
Commentary
A Government Secretariat spokesman noted that both external factor income inflow and outflow were strong in the second quarter, reflecting on the one hand the higher corporate profitability in Hong Kong in tandem with strong domestic economic growth in the recent quarters, and the generally positive external economic environment and higher interest incomes from overseas on the other. The slower growth in GNP than in GDP was largely due to a stronger surge in factor income outflow, in turn signifying the further improved investment returns from Hong Kong brought about by the robust economic performance.
The spokesman further pointed out that the size of external factor inflow and outflow relative to GDP has risen in recent years, with each of them at around 45% of GDP in the first half of 2006, up from around one-quarter five years ago. The robustness of the external investment activities is clear evidence of Hong Kong's status as an international financial and business centre.
Further Information
GDP and GNP are closely related measures of economic performance. GDP is the total value of production of all resident producing units within the territory. GNP denotes the total income earned by residents of a particular territory, regardless of the place in which the economic activities generating the income are undertaken. In other words, GNP is obtained by adding to GDP factor income earned by residents from outside the territory and deducting factor income earned by non-residents within the territory.
The above EFIF figures are compiled based on data obtained from the Survey of External Claims, Liabilities and Income, supplemented by data from other sources.
Figures of GNP and EFIF from the third quarter of 2004 to the second quarter of 2006 analysed by income component are presented in Table A, while the country/territory breakdowns of external factor income inflows and external factor income outflows for the same period are presented in Tables B(1) and B(2) respectively.
Statistics on GNP and EFIF for 2005 and 2006 are preliminary figures. They are subject to revision when more data become available.
Enquiries about GNP and EFIF statistics may be directed to the Balance of Payments Branch (2) of the C&SD at 2116 5102.
Ends/Monday, September 18, 2006
Issued at HKT 16:15
NNNN
