XN000022-1995-11-13 — Page 6

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They account for 97.8% of total OII inflow, or $164.8 billion and 96.7% of total Oll outflow, or $138.4 billion.

The banking sector is also the largest contributor to total external factor income flows. It contributed $204.2 billion or 64.1% to total external factor income inflow, and $201.4 billion or 65.3% to total external factor income outflow.

"As seen from the above statistics, both investments by external investors within Hong Kong and investments by Hong Kong investors outside Hong Kong are very substantial.

"The GNP, which includes these external income flows, is particularly useful for analysing economic phenomena related to aggregate income of residents, such as domestic demand, investment intentions and inflation.

"It provides a very useful measure of Hong Kong's overall economic activity complementary to the GDP," said Mr Ho.

"The purpose of compiling GNP is not to replace GDP, which measures the total value of production of an economy. Both GDP and GNP are important economic indicators and are each useful in their own right.

"Most countries/territories compile both GDP and GNP statistics to support different economic analyses."

Explaining concepts of the GNP, Mr Ho said GNP is a measure of the total income of residents of an economy, irrespective of whether the income was earned from investment and employment within the territory of the economy, or outside. Residents of an economy include individuals and organisations.

For individuals, residents refer to those who normally stay in the territory of the economy, irrespective of their nationalities. For organisations, residents refer to those which ordinarily operate in the territory of the economy. Conceptually, the residence status of individuals and organisations depends on their centre of economic interest. Definitions adopted are economic, and not legal, in nature.

Total income earned by Hong Kong residents from outside Hong Kong includes two types of factor income: investment income and compensation of employees (CE).