Hong Kong stood as a net creditor, with net external financial assets amounting to US$446.39 billion (HK$3,481.9 billion) at end-2005. This corresponds to 252% of the territory’s GDP in 2005, according to the international investment position (IIP) statistics released by the Census and Statistics Department of the Hong Kong Special Administrative Region Government (HKSARG).

Hong Kong’s external financial assets and liabilities amounted to US$1,494.42 billion (HK$11,656.5 billion) and US$1,048.03 billion (HK$8,174.7 billion), respectively, at the end of 2005.

The ratios of both Hong Kong’s external financial assets and liabilities at end-2005 to GDP in that year remained substantial, at 843% and 591% respectively, reflecting that Hong Kong is a highly externally oriented economy with considerable cross-territory investment and also a major financial center in the region with considerable cross-territory fund positions.

IIP is a balance sheet showing the stock of external financial assets and liabilities of an economy at a particular time point. External financial assets consist of financial claims on non-residents and other financial assets where no debtor is involved (e.g. monetary gold). External financial liabilities refer to financial claims of non-residents on residents of the economy.

Most of the broad IIP components were in net asset positions at end-2005. The only exception was direct investment, with a net liability position as the amount of direct investment made by non-residents in Hong Kong was greater than that made by Hong Kong residents abroad.

The positive net IIP at end-2005 grew US$23.08 billion (HK$180.1 billion) compared to end-2004. This was mainly attributable to the increases in the net asset position of portfolio investment and other investment, which exceeded considerably the increase in the net liability position of the direct investment and the decrease in the net asset position of financial derivatives.

A HKSARG spokesman noted that Hong Kong’s international investment position remained sound, with net external financial assets amounting to US$446.39 billion (HK$3,481.9 billion) at end-2005, corresponding to 252% of GDP in that year. Both Hong Kong’s external financial assets and liabilities were enormous, particularly so when expressed as ratios to GDP. This signified the diverse roles of Hong Kong as an international financial center, and a conduit for channeling direct investment funds to the rest of the world.

The spokesman added that both external financial assets and liabilities, particularly those related to direct investment, increased noticeably during 2005, reflecting the generally favorable economic environment, as well as the buoyant performance in many overseas stock markets. With the increase in assets higher than that in liabilities, net external financial assets remained on the rise and more than doubled over the past five years.