Hong Kong recorded a $31.4 billion surplus in its Balance of Payments account (at 9.5% of GDP) in the fourth quarter of 2003, after a deficit of $12.5 billion (at 3.9% of GDP) in the third quarter. Reserve assets correspondingly rose by the same amount.

Of the major BoP components, there was a current account surplus of $42.9 billion (at 13% of GDP) in the fourth quarter, slightly smaller than $43 billion (at 13.5% of GDP) in the third.

At the same time, a net outflow of financial non-reserve assets amounting to $23.6 billion (at 7.1% of GDP) was recorded in the fourth quarter, smaller than the $61.1 billion (at 19.2% of GDP) in the third.

For 2003 as a whole, there was a BoP surplus of $7.6 billion (at 0.6% of GDP), as against a deficit of $18.5 billion (at 1.5% of GDP) in 2002.

Of the major BoP components, Hong Kong recorded a current account surplus of $135.5 billion (at 11% of GDP) in 2003, larger than the $107 billion (at 8.5% of GDP) in 2002.

At the same time, a net outflow of financial non-reserve assets amounting to $135.9 billion (at 11% of GDP) was recorded in 2003, smaller than the $154 billion (at 12.2% of GDP) in 2002.

A sharp Q4 turnaround

The Government said the distinct turnaround in the fourth quarter was mainly underpinned by a sharp reversal to net inflow in other investment, on the back of a strong inflow of funds into the banking sector alongside the further pick-up in the local economy. 

This, together with increased purchase of local equity securities by non-residents, and increased purchase of foreign debt securities by Hong Kong residents, contributed to a visibly smaller net outflow of financial non-reserve assets in the fourth quarter.

The current account surplus remained sizeable in the fourth quarter, with the increases in invisible trade surplus and in net external factor income inflow largely offsetting the widened visible trade deficit.

Thus the strong current account position, being a good manifestation of the external competitiveness of the Hong Kong economy, continued to underpin the overall balance of payments.

As to Hong Kong's external debt position, it remained sound, with a predominant share of its external debt being associated with normal operations of the banking sector and with inward direct investment. The Government has no external debt.