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The Census and Statistics Department today (March 28) released the preliminary Balance of Payments (BoP) accounts and External Debt (ED) statistics for the fourth quarter of 2005 and the whole year of 2005.
I. Balance of Payments Account
A BoP account is an integrated statistical statement of an economy's external transactions with the rest of the world. The BoP account released here contains detailed breakdowns for both the current account and the capital and financial account.
Overall Situation
Hong Kong recorded a surplus amounting to $10.7 billion in its BoP account (at 2.9% of GDP) in the fourth quarter of 2005, as compared with a surplus of $3.0 billion (at 0.8% of GDP) in the third quarter of 2005. Reserve assets correspondingly increased by the same amount in the fourth quarter of 2005.
Of the major BoP components, there was a current account surplus of $46.6 billion (at 12.5% of GDP) in the fourth quarter of 2005, larger than that of $42.9 billion (at 12.0% of GDP) in the third quarter of 2005. At the same time, a net outflow of financial non-reserve assets amounting to $39.4 billion (at 10.6% of GDP) was recorded in the fourth quarter of 2005, smaller than that of $45.0 billion (at 12.6% of GDP) in the third quarter of 2005.
For 2005 as a whole, there was a BoP surplus of $10.7 billion (at 0.8% of GDP), as compared with a surplus of $25.5 billion (at 2.0% of GDP) in 2004.
Of the major BoP components, Hong Kong recorded a current account surplus of $153.2 billion (at 11.1% of GDP) in 2005, larger than that of $122.5 billion (at 9.5% of GDP) in 2004. At the same time, a net outflow of financial non-reserve assets amounting to $145.0 billion (at 10.5% of GDP) was recorded in 2005, smaller than that of $156.6 billion (at 12.1% of GDP) in 2004.
Current Account
The current account recorded a surplus of $46.6 billion in the fourth quarter of 2005, smaller than that of $58.0 billion in the fourth quarter of 2004. Compared with the same quarter in 2004, the current account surplus in the fourth quarter of 2005 was characterised by an increase in visible trade deficit, an increase in invisible trade surplus, a reverse net outflow of external factor income, and a continued net outflow of current transfers.
With imports of goods increasing faster than exports of goods, the visible trade deficit increased to $13.1 billion in the fourth quarter of 2005, from $1.8 billion in the same quarter in 2004. The invisible trade surplus increased to $67.3 billion in the fourth quarter of 2005, from $54.7 billion in the same quarter in 2004, with exports of services having increased more than imports of services. Overall, a combined visible and invisible trade surplus of $54.2 billion was recorded in the fourth quarter of 2005, slightly larger than that of $53.0 billion in the same quarter in 2004.
On factor income flows, external factor income inflow and outflow amounted to $135.0 billion and $138.2 billion respectively in the fourth quarter of 2005, thus yielding a net outflow of $3.2 billion in the fourth quarter of 2005, as against a net inflow of $9.2 billion in the same quarter in 2004.
A current transfer outflow of $6.3 billion and an inflow of $1.9 billion were recorded in the fourth quarter of 2005, resulting in a net outflow of $4.4 billion in that quarter, slightly larger than that of $4.2 billion in the same quarter in 2004.
Comparing the fourth quarter of 2005 with the third quarter of 2005, and bearing in mind that this comparison for the main current account components may be affected by seasonal factors, the visible trade deficit increased from $6.9 billion to $13.1 billion, while the invisible trade surplus rose from $60.2 billion to $67.3 billion. Concurrently, the net outflow of external factor income decreased from $6.1 billion to $3.2 billion, while the net outflow of current transfers slightly increased from $4.3 billion to $4.4 billion.
For 2005 as a whole, the current account surplus increased to $153.2 billion, from a surplus of $122.5 billion in 2004. This was the combined result of a decrease in visible trade deficit from $72.5 billion to $59.3 billion, an increase in invisible trade surplus from $187.1 billion to $227.1 billion, a decrease in net inflow of external factor income from $23.4 billion to $2.5 billion, and an increase in net outflow of current transfers from $15.5 billion to $17.0 billion.
Capital and Financial Account
In the fourth quarter of 2005, a net outflow of capital transfers was estimated at $0.4 billion, slightly smaller than that of $0.7 billion in the third quarter of 2005.
An overall net outflow of financial non-reserve assets amounting to $39.4 billion was recorded in the fourth quarter of 2005, smaller than that of $45.0 billion in the third quarter of 2005. The overall net outflow of financial non-reserve assets in the fourth quarter of 2005 was the combined result of a net inflow of direct investment, a net inflow of portfolio investment, a net inflow due to cash settlement of financial derivatives, and a net outflow of other investment.
On direct investment (DI) flows, Hong Kong's DI abroad increased by $19.3 billion and foreign DI in Hong Kong increased by $70.9 billion during the fourth quarter of 2005, resulting in a net DI inflow of $51.6 billion, as against a net DI outflow of $30.6 billion in the third quarter of 2005.
On portfolio investment (PI) flows, assets increased by $9.9 billion and liabilities increased by $23.0 billion in the fourth quarter of 2005. Taken together, there was a net PI inflow amounting to $13.1 billion in the fourth quarter of 2005, as against a net outflow of $19.3 billion in the third quarter of 2005. The rise in PI assets was mainly due to increased holdings of non-resident equity securities by Hong Kong residents. On the other hand, the rise in PI liabilities was mainly attributable to increased holdings of resident equity securities by non-residents.
On financial derivatives (FD) flows, a net inflow of $2.8 billion due to cash settlement of FD was recorded in the fourth quarter of 2005, as compared with a net inflow of $1.0 billion in the third quarter of 2005.
On other investment (OI) flows, both assets and liabilities increased significantly, by $292.9 billion and $186.0 billion respectively, during the fourth quarter of 2005. Taken together, there was a net OI outflow of $106.8 billion in the fourth quarter of 2005, as against a net inflow of $4.0 billion in the third quarter of 2005. The increase in OI assets was mainly due to significant increases in currency and deposit assets and loan assets of the banking sector. On the other hand, the increase in OI liabilities was due to an increase in currency and deposit liabilities of the banking sector.
Change in reserve assets in the BoP account reflects the net change in Hong Kong's foreign currency reserve assets, which come under the management of the Hong Kong Monetary Authority (HKMA). In the fourth quarter of 2005, reserve assets increased by $10.7 billion, as compared with an increase of $3.0 billion in the third quarter of 2005. The accumulation in reserve assets was mainly due to income from foreign currency assets during the quarter.
For 2005 as a whole, a net outflow of capital transfers was estimated at $5.2 billion, larger than that of $2.6 billion in 2004.
For 2005 as a whole, an overall net outflow of financial non-reserve assets amounting to $145.0 billion was recorded, as compared with a net outflow of $156.6 billion in 2004. The overall net outflow of financial non-reserve assets in 2005 was the combined result of a net inflow of direct investment, a net outflow of portfolio investment, a net inflow due to cash settlement of financial derivatives, and a net outflow of other investment.
Both Hong Kong's DI abroad and foreign DI in Hong Kong increased in 2005, by $253.4 billion and $279.2 billion respectively, resulting in a net DI inflow of $25.8 billion in 2005, as against a net DI outflow of $91.0 billion in 2004.
In 2005, PI assets increased by $238.6 billion and PI liabilities increased by $70.5 billion. Taken together, there was a net PI outflow amounting to $168.1 billion in 2005, as compared with a net outflow of $306.4 billion in 2004. The increase in PI assets in 2005 was mainly due to increased holdings of non-resident equity securities by Hong Kong residents, while the increase in PI liabilities was mainly attributable to increased holdings of resident equity securities by non-residents.
A net inflow of $13.8 billion due to cash settlement of FD was recorded in 2005, as compared with a net inflow of $44.3 billion in 2004.
Both OI assets and OI liabilities increased in 2005, by $57.9 billion and $41.4 billion respectively. This resulted in a net OI outflow of $16.5 billion in 2005, as against a net inflow of $196.5 billion in 2004. The increase in OI assets was mainly due to an increase in currency and deposit assets and trade credit assets, while the increase in OI liabilities was mainly attributable to an increase in loan liabilities of other sectors.
In 2005, reserve assets increased by $10.7 billion, as compared with an accumulation of $25.5 billion in 2004.
Table 1 gives the BoP account by standard component. Table 2 gives the detailed current account analysed by sub-account component, while Table 3 gives the detailed capital and financial account analysed by sub-account component.
II. External Debt Statistics
Gross ED, at any point in time, is the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in time in the future and that are owed to non-residents by residents of an economy.
According to this international definition, apart from borrowing from abroad, ED of Hong Kong can also arise through normal trading and banking businesses. For instance, a trade credit extended by an exporter of the United States to an importer in Hong Kong is part of Hong Kong's ED. Likewise, deposits placed by non-residents in a bank in Hong Kong constitute ED of Hong Kong's banking sector.
Overall Situation
At end-December 2005, Hong Kong's gross ED, measuring the total outstanding gross external liabilities other than equity liabilities, amounted to $3,463.5 billion, equivalent to 251% of GDP. Compared with end-September 2005, gross ED increased by $189.6 billion. This was mainly attributable to the increases in ED of the banking sector, other sectors, DI debt liabilities (inter-company lending) and the General Government, which were larger than the decrease in ED of the HKMA.
Sectoral Analysis
At end-December 2005, a major proportion of Hong Kong's ED was due to transactions of the banking sector, accounting for 65.6% of the total. Other ED consisted of debt liabilities to affiliated enterprises and direct investors under DI (with a share of 24.5%), ED of other sectors (9.5%), ED of the General Government (0.4%) and ED of the HKMA (0.05%).
ED of Hong Kong's banking sector, as the largest component of Hong Kong's ED, increased to $2,272.0 billion at end-December 2005 (at 164% to GDP), from $2,150.3 billion at end-September 2005 (at 159% to GDP). Of this, 97.7% ($2,220.7 billion) were short-term liabilities, among which 97.5% ($2,164.6 billion) were held in the form of currency and deposits. This was mainly attributable to inter-bank placements from non-resident banks.
DI debt liabilities (inter-company lending), constituting the second largest component of Hong Kong's ED, increased to $849.2 billion at end-December 2005, from $819.4 billion at end-September 2005. Within this, 76.3% ($648.3 billion) were debt liabilities to direct investors.
ED of other sectors amounted to $328.5 billion at end-December 2005, larger than that of $290.2 billion at end-September 2005. It was mainly attributable to the increases in loans (including both short-term and long-term loans), from $147.0 billion at end-September 2005 to $189.1 billion at end-December 2005, and in other debt liabilities (including both short-term and long-term other debt liabilities), from $58.2 billion at end-September 2005 to $66.9 billion at end-December 2005. Bonds and notes on the other hand decreased from $21.9 billion at end-September 2005 to $10.9 billion at end-December 2005. Such loans and other debt liabilities took up 57.6% and 20.4% of the ED of other sectors respectively, while bonds and notes accounted for another 3.3%.
ED of the General Government amounted to $12.3 billion at end-December 2005. All of them were long-term liabilities. This was mainly attributable to the non-residents' holdings of debt securities issued by the HKSAR Government.
ED of the HKMA stood at $1.6 billion at end-December 2005, smaller than that of $1.8 billion at end-September 2005. This was mainly due to a decrease in short-term borrowings under the repurchase agreements and securities lending arrangements, which took up a share of 64.0% ($1.0 billion) of ED of the HKMA.
Table 4 gives the ED statistics by standard component.
Commentary
A Government Secretariat spokesman noted that Hong Kong's overall balance of payments remained in surplus in the fourth quarter of 2005, leading to a further increase in reserve assets. Notwithstanding a further net external factor income outflow largely reflecting improved investment returns to direct investors in Hong Kong, the current account surplus remained sizeable in the fourth quarter, thanks to continued vibrancy in both merchandise exports and inbound tourism.
The spokesman further noted that driven mainly by a sharp reversal to net outflow in other investment, there was a further net outflow of financial non-reserve assets, despite some offsets coming from reduced holdings of overseas debt securities by Hong Kong residents, increased purchases of local equity securities by non-residents, as well as accelerated inward direct investment.
Hong Kong's external debt position remained sound. A predominant share of this debt arises from the normal operations of the banking sector and inward direct investment.
Further information
For enquiries on the BoP and ED statistics, please call the Balance of Payments Section of the Census and Statistics Department (Tel.: 2116 8660).
The present BoP and ED statistics for the fourth quarter of 2005 and the whole year of 2005 are only preliminary, and are subject to revision upon the availability of more data.
In compiling and presenting the BoP account of Hong Kong, the international standards prescribed in the Fifth Edition of the Balance of Payments Manual of the International Monetary Fund (IMF) are adopted. As for ED statistics, the international standards prescribed in the External Debt Statistics: Guide for Compilers and Users published by the Inter-Agency Task Force on Finance Statistics chaired by the IMF are adopted. These are also in compliance with the Special Data Dissemination Standard of the IMF, to which Hong Kong has subscribed.
More details on the estimates of BoP and ED are published in the publication Balance of Payments Statistics of Hong Kong, Fourth Quarter 2005. This publication is now on sale at HK$27 per issue. Both print version and download version of the publication can be purchased online at the "Statistical Bookstore, Hong Kong" (http://www.statisticalbookstore.gov.hk). Download version of the publication can be purchased at 75% of its original price exclusively at the online Statistical Bookstore. Print version if purchased online is also offered a discount, at 85% of its original price at the Statistical Bookstore as well as the Government Bookstore (http://www.isd.gov.hk/eng/bookorder.htm). For purchase of print version, this can be done through mail order by returning a completed order form which can be downloaded from the C&SD's website (http://www.censtatd.gov.hk/eng/prod_serv/forms_index.html). Purchase can also be made in person at the Publications Unit of the C&SD (Address: 19/F, Wanchai Tower, 12 Harbour Road, Wan Chai; Tel.: 2582 3025).
Ends/Tuesday, March 28, 2006
Issued at HKT 16:15
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