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Hong Kong's external direct investment (DI) statistics for 2007 are released today (December 12) by the Census and Statistics Department (C&SD).
Stocks of Inward and Outward DI
At the end of 2007, the stock of Hong Kong's inward DI rose markedly by 59.2% from a year earlier to $9,186.5 billion at market value. Its ratio to GDP stood at 568% in 2007. In 2007, the sharp rise in inward DI position was mainly attributable to the surge in market values of some Hong Kong companies, alongside the buoyant local equities market. Amidst significant market correction in 2008, inward DI position at the end of 2008 is not expected to register further appreciable gain.
Analysed by immediate source of investment, the mainland of China (the Mainland) accounted for the largest share of the total stock at end-2007, at 40.7%, reflecting the importance of investment from the Mainland in Hong Kong. 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.
The British Virgin Islands (BVI) and Bermuda took up another 36.6% and 4.2% respectively of the total stock of inward DI at end-2007. 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 5.8% and 3.0% 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 73.6% of the total stock at end-2007. 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 8.8% of the total. Wholesale, retail and import/export trades took up another 7.6%.
At the end of 2007, the stock of Hong Kong's outward DI increased substantially by 49.9% from a year earlier to $7,889.0 billion at market value. Its ratio to GDP was 488% in 2007. Similar to inward DI, the sharp rise in outward DI position in 2007 was mainly attributable to the surge in market values of foreign affiliates of some Hong Kong companies, alongside the buoyant overseas equities markets. Amidst significant market correction in 2008, outward DI position at the end of 2008 is not expected to register further appreciable gain.
Analysed by immediate destination of investment, the BVI remained the most popular tax haven economy for indirect channelling of DI funds, accounting for 47.8% of the total stock of Hong Kong's outward DI at end-2007.
Apart from tax haven economies, the Mainland was the most important destination for Hong Kong's outward DI, with a share of 43.4% of the total stock at end-2007. Guangdong Province remained a popular location for Hong Kong's investment in the Mainland, accounting for 25.6% (or $877.6 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; manufacturing; and investment holding, real estate and various business services.
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 81.0% of the total stock at end-2007. This was followed by wholesale, retail and import/export trades (with a share of 6.8%), and banks and deposit-taking companies (with a share of 3.0%).
Flows of Inward and Outward DI
DI inflow to Hong Kong increased significantly from $350.0 billion in 2006 to $423.9 billion in 2007. The BVI was the most important supplier of Hong Kong's DI inflow in 2007, amounting to $109.3 billion. The Mainland came next, at $104.2 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 2007, at $204.7 billion.
On the other hand, DI outflow from Hong Kong increased substantially from $349.4 billion in 2006 to $476.5 billion in 2007. The Mainland accounted for a predominant part of Hong Kong's DI outflow in 2007, at $283.9 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 $306.0 billion.
Taking DI inflow and outflow together, a net outflow of $52.6 billion was recorded in 2007.
Commentary
A Government spokesman comments that the stocks of inward and outward direct investment surged distinctly in 2007 amid the vibrant economic and stock market performance in that year. They amounted respectively to 5.7 and 4.9 times the size of Hong Kong's GDP in 2007. The spokesman explains further that direct investment flows likewise increased markedly. This underlined Hong Kong's status as a regional business hub and an international financial centre.
The spokesman points out that the Mainland continued to feature distinctly in Hong Kong's external direct investment, both as a source and a destination, indicative of the rapid economic integration between the two places. While the Government will continue to enhance the economic integration with the Mainland, with the strong foundation laid by the Closer Economic Partnership Arrangement (CEPA) and its five supplements, it is also important to step up efforts to further the links with the rest of the world, particularly the emerging markets.
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 2006 and 2007, with breakdowns by major country/territory and by economic activity of HKEGs respectively. Similar statistics on outward DI from Hong Kong for 2006 and 2007 are presented in Tables 3 and 4.
Further details of DI statistics for 2007 are published in a report entitled "External Direct Investment Statistics of Hong Kong 2007". Users can download the 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 the publication will be available for sale at HK$46 per issue by end-December 2008. 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 the 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/Friday, December 12, 2008
Issued at HKT 16:30
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