Hong Kong GNP drops in the second quarter

Hong Kong’s gross national product (GNP) fell 2.2 per cent year on year for the second quarter on lower economic activity and a fall in earnings from investment abroad.

The Territory’s Census and Statistics Department said gross national product fell to $HK414.2 billion at current market prices or by 3.7 per cent in real terms.  Gross domestic product (GDP) was $HK392.7 billion, or down 3.8 per cent in real terms and down by 2.2 per cent at current prices.

The effects of the financial crisis were felt in the drop off in earnings from abroad.  Direct investment income fell by 13.1 per cent as some prominent local corporations recorded a fall in overseas investment earnings.  Portfolio investment income fell by 13.2 per cent due to lower dividend income from holdings of non-resident shares listed on the Hong Kong stock exchange and on lower interest income from non-resident debt securities held by Hong Kong residents.

Other investment income slumped by 65 per cent due to lower interest rates in the overseas banking sector.

On the outflow side of the ledger, direct investment income fell by 16 per cent year on year as multinational businesses invested in Hong Kong saw a fall in earnings.  Portfolio investment income fell by 12.3 per cent as non-resident investors got lower dividends.
Outflows of other investment income slid 60.8 per cent because the Hong Kong banking sector lowered interest rates.

Mainland China accounted for 40.3 per cent of Hong Kong’s income inflow from abroad in the quarter, followed by the British Virgin Islands with 29.6 per cent.  The Census Department noted Hong Kong companies had set up a considerable number of holding companies in the Caribbean tax haven.