ENG-2006 — Page 70

42 The Economy

Chart 1

Gross Domestic Product

(year-on-year rate of change in real terms)

Per cent

15

10

5

Per capita GDP

0

-5

-10

GDP

1986 1988

1990 1992 1994 1996 1998 2000 2002 2004 2006

Over the past two decades, Hong Kong's economy grew by an average of 5.1 per cent in real terms, outpacing the corresponding growth rates of 3.7 per cent for the world economy and 2.8 per cent for OECD economies as a whole. The economy continued to expand at a brisk pace in 2006, with real GDP leaping by 6.9 per cent.

Hong Kong's economic openness fits well the aspirations of globalisation. Hong Kong's eight-fold increase in merchandise exports and three-fold jump in services exports in the past two decades are due partly to this openness. In 2006, the total value of visible trade (comprising re-exports, domestic exports and imports of goods) reached $5,044 billion, equivalent to 342 per cent of GDP. This was considerably larger than the ratios of 171 per cent in 1986 and 237 per cent in 1996. If the value of exports and imports of services is also taken into account, the ratio is even greater, at 400 per cent in 2006, as compared with 210 per cent in 1986 and 275 per cent in 1996.

The stock of inward direct investment in Hong Kong, amounting to $4,056 billion in market value at the end of 2005, equivalent to 293 per cent of GDP, was another strong indication of Hong Kong's increasing international focus. Hong Kong is the second most favoured destination for inward direct investment in Asia, next only to the Mainland. The corresponding figures of $3,654 billion and 264 per cent for the stock of outward direct investment in Hong Kong were likewise substantial, and were much larger than those of 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 $11,588 billion and $8,182 billion respectively at the end of 2005. The corresponding ratios to GDP in that year were 838 per cent and 592 per cent. Reflecting Hong Kong's sound international investment position, net external assets rose to $3,406 billion at the end of 2005, equivalent to 246 per cent of GDP.