ENG-2003 — Page 74

Chart 1

Per cent

15

10

5

THE ECONOMY

Gross Domestic Product (year-on-year rate of change in real terms)

Per capita GDP

0

-5

-10

GDP

42

1983 1985 1987

1989

1991 1993 1995 1997 1999 2001 2003

Over the past two decades, the Hong Kong economy grew at an average annual rate of 5.0 per cent in real terms, outpacing the corresponding growth rate of 2.8 per cent for OECD economies as a whole. In 2003, the economy still attained a 3.3 per cent growth in real terms, despite the impact of SARS.

As another indication of the high degree of external orientation, the stock of inward direct investment in Hong Kong amounted to $2,622 billion in market value at end- 2002, equivalent to 208 per cent of GDP. Hong Kong is the second most favoured destination for inward direct investment in Asia, next only to the Mainland. The corresponding figures for the stock of outward direct investment in Hong Kong were likewise substantial, at $2,413 billion and 192 per cent of GDP, much larger than those for many other economies in Asia. As a major financial centre in the region with huge cross-territory fund flows, Hong Kong's external financial assets and liabilities were also substantial, at $8,033 billion and $5,355 billion respectively at end-2002. The corresponding ratios to GDP in that year were 638 per cent and 425 per cent. Reflecting Hong Kong's sound international investment position, net external financial assets amounted to $2,677 billion at end-2002, equivalent to 213 per cent of GDP. As to gross external debt, which is the sum of the non-equity liability components in international investment, it stood at $2,803 billion at end-2003, equivalent to 227 per cent of GDP. Yet a major proportion of it arose from normal operations of the banking sector, and the Government incurred no external debt at all.

The Gross National Product (GNP), comprising GDP and net external factor income flows, stood at $1,269 billion in 2003. This was higher than the corresponding GDP by 2.8 per cent, owing to sustained net inflow of external factor income. In gross terms, inflows and outflows of external factor income remained substantial in 2003, at $329 billion and $294 billion respectively, equivalent to 27 per cent and 24 per cent of GDP. This was related to the huge volume of both inward and outward investment in Hong Kong.