************************************************************
Statistics on Hong Kong's Gross National Product (GNP) and external factor income flows (EFIF) for the fourth quarter and the whole year of 2005 are released today (March 17) by the Census and Statistics Department.
In the fourth quarter of 2005, Hong Kong's GNP increased by 4.2% over a year earlier to $369.4 billion at current market prices. The Gross Domestic Product (GDP), estimated at $372.6 billion at current market prices in the same quarter, recorded a 7.9% increase during the period. Compared with GDP, the value of Hong Kong's GNP was smaller by $3.2 billion in the fourth quarter of 2005, representing a net external factor income outflow of the same amount, and equivalent to 0.9% of GDP in that quarter.
After netting out the effect of price changes, Hong Kong's GNP rose by 4.0% in real terms in the fourth quarter of 2005 over a year earlier. This was lower than the corresponding increase of 7.6% recorded for GDP in the same quarter.
Total factor income inflow into Hong Kong, estimated at $135.0 billion in the fourth quarter of 2005 and equivalent to 36.2% of GDP in that quarter, increased significantly by 21.2% over a year earlier. Total factor income outflow, estimated at $138.2 billion in the fourth quarter of 2005 and equivalent to 37.1% of GDP of the same period, also increased substantially by 35.2% over a year earlier. Taking the inflow and outflow together, a net external factor income outflow of $3.2 billion was recorded in the fourth quarter of 2005.
Within total factor income inflow, direct investment income (DII) increased by 19.4% over a year earlier, mainly due to increased earnings of some prominent local enterprises from investment abroad. Portfolio investment income (PII) increased slightly by 4.3%, mainly due to the increase in interest income received from holding of non-resident debt securities during the period. Other investment income (OII) leapt by 60.8%, mainly attributable to increased interest income from offshore loans and deposits, which in turn was the combined result of an increase in external assets of the local banking sector and higher interest rates.
Within total factor income outflow, DII increased by 27.7% over a year earlier, mainly attributable to sustained growth in earnings of some prominent multinational enterprises from direct investment in Hong Kong. PII increased substantially by 41.5%, mainly attributable to increases in dividend pay-outs by a number of resident publicly listed companies. OII surged by 88.1%, mostly on account of increased interests paid by the local banking sector arising from increases in interest rates for external loans and deposits.
Analysed by country/territory, the mainland of China continued to be the largest source of Hong Kong's external factor income inflow in the fourth quarter of 2005, accounting for 28.5%. This was followed by the British Virgin Islands, at 20.1%, 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 10.5% and 7.5% respectively.
The mainland of China and British Virgin Islands remained the most important destinations for Hong Kong's external factor income outflow in the fourth quarter of 2005, accounting for 23.5% and 18.5% respectively of the total outflow in that quarter. Other major destination countries/territories included the Netherlands, at 8.7% and the United States of America, at 8.2%.
For 2005 as a whole, Hong Kong's GNP increased by 5.3% over a year earlier to $1,384.7 billion at current market prices. The difference of $2.5 billion from GDP for the same year (estimated at $1,382.2 billion) represented a net factor income inflow of the same amount and equivalent to 0.2% of GDP in the year. After netting out the effect of price changes, Hong Kong's GNP increased by 5.7% in real terms in 2005 over 2004. The total factor income inflow was estimated at $503.4 billion, or 36.4% of GDP in 2005 while the corresponding outflow at $500.9 billion, or 36.2% of GDP.
Commentary
A Government Secretariat spokesman noted that both the inflow and outflow of external factor income continued to record appreciable growth in the fourth quarter of 2005, reflecting the strong economic upturn locally as well as the robust economic environment in such major markets as the Mainland and the US. With investment income outflow rising faster than inflow resulting in a net external factor income outflow, GNP rose at a relatively more moderate pace than GDP in the fourth quarter of 2005. Direct investment income recorded a distinct net outflow in the fourth quarter of 2005, mainly attributable to the improved investment returns from Hong Kong amidst the strong economic upturn. Meanwhile, there were noticeable net inflows in portfolio investment income and other investment income, mainly resulting from increases in interest incomes from overseas financial assets held by resident investors and the local banking sector.
The spokesman further pointed out that external factor income inflow and outflow remained sizeable in the year 2005, both equivalent to more than one-third of Hong Kong's GDP. This reflected not only the highly externally oriented nature of the Hong Kong economy, but also its positions as an international financial centre and a regional business hub in facilitating external investment activities.
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 first quarter of 2004 to the fourth quarter of 2005 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 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 Census and Statistics Department at 21165102.
Ends/Friday, March 17, 2006
Issued at HKT 16:15
NNNN
