Hong Kong's First Quarter GNP Up 8%

by Mary Swire, for LawAndTax-News.com

19 June 2006

Hong Kong's first-quarter GNP surged 8% over a year earlier to reach $354.6 billion, while GDP, estimated at $346.6 billion, rose 7.8%, the Census and Statistics Department announced on Friday.

The Department revealed that external factor income inflow and outflow remained sizeable in the first quarter, both equivalent to more than two-fifths of Hong Kong's GDP. This reflected not only the highly externally oriented nature of the Hong Kong economy, but also its position as an international financial centre and a regional business hub in facilitating external investment activities.

Compared with GDP, the value of Hong Kong's GNP was larger by $8.1 billion, representing a net external factor income inflow of the same amount, and equivalent to 2.3% of GDP in that quarter.

After netting out the effect of price changes, Hong Kong's GNP rose 8.3% in real terms over a year earlier, slightly higher than the corresponding increase of 8.2% recorded for GDP in the same quarter.

Total factor income inflow into Hong Kong, estimated at $149.2 billion in the first quarter and equivalent to 43.1% of GDP in that quarter, surged 35.1% over a year earlier.

Meanwhile, total factor income outflow, estimated at $141.2 billion in the first quarter and equivalent to 40.7% of GDP of the same period, went up 36.5% over a year earlier. Taking the inflow and outflow together, the net external factor income inflow was $8.1 billion.

The Mainland continued to be the largest source of Hong Kong's external factor income inflow in the first quarter of 2006, accounting for 28.4%.

The British Virgin Islands came next, with a share of 18.9%, reflecting continued investment income inflow from this low tax economy, where Hong Kong companies had set up a considerable number of holding companies. Other major sources were the US and the UK, at 11.1% and 9%.

The Mainland and the British Virgin Islands were also the most important destinations for Hong Kong's external factor income outflow in the quarter, accounting for 24.4% and 17.1% respectively. Other major destinations included the Netherlands, at 12.4%, and the US, at 9.7%.

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