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Hong Kong's external direct investment (DI) statistics for 2006 are released today (December 13) by the Census and Statistics Department (C&SD).
Stock of Inward Direct Investment
At the end of 2006, the stock of Hong Kong's inward DI rose markedly by 42.3% from a year earlier to $5,771.9 billion at market value. Its ratio to GDP stood at 391% in 2006. The substantial increase in the stock of Hong Kong's inward DI in 2006 was mainly attributable to the large gain in market values of some listed prominent resident companies in Hong Kong upon the surge in their share prices and an increase of DI inflow to these Hong Kong affiliates.
Analysed by immediate source of investment, the mainland of China (the Mainland) accounted for the largest share of the total stock at end-2006, at 35.1%, reflecting the importance of investment from the Mainland in Hong Kong. The 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.
British Virgin Islands (BVI) and Bermuda took up another 33.8% and 6.1% respectively of the total stock of inward DI at end-2006. 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 6.8% and 4.8% 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 65.6% of the total stock at end-2006. 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. Banks and deposit-taking companies also represented a major recipient sector of inward DI, with a share of 11.1% of the total. Wholesale, retail and import/export trades took up another 10.8%.
Stock of Outward Direct Investment
At the end of 2006, the stock of Hong Kong's outward DI increased substantially by 44.1% from a year earlier to $5,264.5 billion at market value. Its ratio to GDP was 357% in 2006. The upsurge in the stock of outward DI was due to a sharp rise in market value of foreign affiliates of Hong Kong enterprises and an increase of DI outflow to these foreign affiliates.
Analysed by immediate destination of investment, the BVI remained the most popular tax haven economy for indirect channelling of DI funds, accounting for 46.9% of the total stock of Hong Kong's outward DI at end-2006.
Apart from tax haven economies, the Mainland was the most important destination for Hong Kong's outward DI, with a share of 40.2% of the total stock at end-2006. Guangdong Province remained a popular location for Hong Kong's investment in the Mainland, accounting for 32.2% (or $682.7 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.
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 74.4% of the total stock at end-2006. This was followed by wholesale, retail and import/export trades (with a share of 8.9%), and banks and deposit-taking companies (3.4%).
Flows of Inward and Outward DI
DI inflow to Hong Kong increased significantly from $261.5 billion in 2005 to $350.0 billion in 2006. The Mainland was the most important supplier of Hong Kong's DI inflow in 2006, amounting to $108.7 billion. The BVI came next, at $78.8 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 2006, at $145.1 billion.
On the other hand, DI outflow from Hong Kong increased substantially from $211.5 billion in 2005 to $349.4 billion in 2006. The Mainland accounted for a predominant part of Hong Kong's DI outflow in 2006, at $166.6 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 $218.7 billion.
Taking DI inflow and outflow together, a net inflow of $0.6 billion was recorded in 2006.
Commentary
The Government spokesman noted that the stocks of inward and outward direct investment surged further in 2006, on the back of robust economic performance in Hong Kong and overseas. They amounted to 3.9 and 3.6 times the size of Hong Kong's GDP respectively in 2006, underlining Hong Kong's status as a hub for regional headquarters and businesses, as well as an international financial centre.
The spokesman further noted that the Mainland continued to feature distinctly in Hong Kong's external direct investment, both as a source and as a destination. The Government will continue to work on the economic and financial integration between Hong Kong and the Mainland, with the sound foundation laid by the CEPA and its four supplements. The main cross-boundary infrastructure projects as announced in the 2007-08 Policy Address, when completed, will also enhance the flow of people and goods between the Mainland and Hong Kong, which in turn will serve the cause of enhancing further investment flows.
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 2005 and 2006, with breakdowns by major country/territory and by economic activity of HKEGs respectively. Similar statistics on outward DI from Hong Kong for 2005 and 2006 are presented in Tables 3 and 4.
Further details of DI statistics for 2006 are published in a report entitled "External Direct Investment Statistics of Hong Kong 2006". 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$43 per issue by end-December 2007. 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 Government Bookstore of the Information Services Department (www.bookstore.gov.hk).
Enquiries about the DI statistics may be directed to the Balance of Payments Branch (2) of the Census and Statistics Department at 2116 5150.
Ends/Thursday, December 13, 2007
Issued at HKT 16:15
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