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The Census and Statistics Department (C&SD) today (June 11) released the international investment position (IIP) statistics for Hong Kong for the reference year of 2006.
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 (BPM5) of the International Monetary Fund (IMF) are adopted.
IIP Statistics for 2006
Summary
At end-2006, Hong Kong's external financial assets and liabilities amounted to $15,334.6 billion and $11,183.8 billion respectively. After netting out the external financial liabilities from the external financial assets, Hong Kong stood as a net creditor, with net external financial assets amounting to $4,150.8 billion at end-2006, corresponding to 282% of GDP in that year.
The ratios of both Hong Kong's external financial assets and liabilities at end-2006 to GDP in that year remained substantial, at 1040% and 759% respectively, reflecting that Hong Kong is a highly externally oriented economy with considerable cross-territory investment and also a major financial centre in the region with considerable cross-territory fund positions.
Most of the broad IIP components were in net asset positions at end-2006. The only exception was direct investment (DI), with 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-2005, the positive net IIP at end-2006 increased by $744.7 billion. This was mainly attributable to the increases in the net asset position of portfolio investment (PI) and other investment (OI), which exceeded considerably the increase in the net liability position of DI.
External Financial Assets
Hong Kong's external financial assets amounted to $15,334.6 billion at end-2006. DI was the largest component, accounting for 34.9% ($5,356.8 billion) of the total value at end-2006. 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 partly 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.
PI was the second largest component of Hong Kong's external financial assets, accounting for 30.1% ($4,614.8 billion) of the total value at end-2006. Within this, 59.2% were equity securities while the other 40.8% were debt securities.
At end-2006, 27.1% ($4,150.6 billion) of Hong Kong's external financial assets were in the form of OI. Most of the OI assets were held by the 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.
Reserve assets (RA) amounted to $1,036.0 billion or 6.8% of Hong Kong's total external financial assets at end-2006.
Financial derivatives (FD) assets held by residents were relatively insignificant, accounting for only 1.2% ($176.5 billion) of the total external financial assets at end-2006.
Comparing end-2006 with end-2005, total external financial assets increased by $3,746.3 billion or 32.3%. Within this total, DI, PI, OI, RA and FD rose by $1,702.9 billion (46.6%), $1,230.1 billion (36.3%), $697.8 billion (20.2%), $72.4 billion (7.5%) and $43.2 billion (32.4%) respectively.
External Financial Liabilities
Hong Kong's external financial liabilities amounted to $11,183.8 billion at end-2006. 53.5% ($5,979.2 billion) of this total 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 partly 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 26.8% ($3,001.6 billion) of the total at end-2006. Similar to OI assets, most of the OI liabilities were related to deposits and loans of the banking sector.
At end-2006, PI liabilities accounted for 18.3% ($2,041.9 billion) of Hong Kong's total external financial liabilities. These PI liabilities were concentrated in equity securities, which took up a share of 95.4%.
FD liabilities owed by residents were also relatively insignificant, accounting for only 1.4% ($161.1 billion) of the total external financial liabilities at end-2006.
Comparing end-2006 with end-2005, total external financial liabilities increased by $3,001.6 billion or 36.7%. Within this total, DI, PI, OI and FD increased by $1,922.9 billion (47.4%), $658.5 billion (47.6%), $391.6 billion (15.0%) and $28.5 billion (21.5%) 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.
Commentary
A Government spokesman noted that Hong Kong's IIP remained strong and sound, with net external financial assets amounting to $4,150.8 billion at end-2006. The level of the net external financial assets as well as its ratio to GDP had been generally on the rise. The ratio of net IIP to GDP was 282% in 2006, visibly higher than that of 159% in 2001.
The spokesman also noted 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.
The spokesman further pointed out that both external financial assets and liabilities, particularly those related to direct and portfolio investment, increased sharply during 2006. This mainly reflected the favourable economic environment, as well as the vibrant performance in many stock markets during the year.
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 5158).
The present IIP statistics for the reference year of 2006 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 2007. This publication will be available on June 22, 2007. Users can download this publication free of charge at the Website of the C&SD (www.censtatd.gov.hk/products_and_services/products/publications/index.jsp). Print version of this publication will be available for sale at HK$33 per issue. Purchase can be done in person at the Publications Unit of the C&SD (Address: 19/F Wanchai Tower, 12 Harbour Road, Wan Chai; Tel: 2582 3025) or through mail order by returning a completed order form which can be downloaded from the C&SD's website (www.censtatd.gov.hk/products_and_services/other_services/provision_of_stat/mail_ordering_of_publications/index.jsp). Print version of this publication is also available for sale online at the Statistical Bookstore (www.statisticalbookstore.gov.hk) and the Government Bookstore of the Information Services Department (www.bookstore.gov.hk). Print versions if purchased online are offered a discount, at 85% of their original prices.
Ends/Monday, June 11, 2007
Issued at HKT 16:15
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