People’s Republic of China—Hong Kong Special Administrative Region: Staff Report for the 2006 Article IV Consultation Discussions
Author: International Monetary Fund
Publication Date:
08 Jan 2007
eISBN:
9781451816969
Language:
English
Keywords:
ISCR; CR; report; tax reform proposal; staff appraisal; statement report; Hong Kong SAR economy; Hong Kong SAR; exchange rate; fiscal policy; SAR authority; asset price; Global
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This 2006 Article IV Consultation highlights that Hong Kong Special Administrative Region has recovered strongly from a series of shocks in recent years and, as expected, the pace of growth is now moderating. Growth was 6.8 percent (year over year) in the first three quarters of 2006, somewhat slower than the 7.3 percent recorded in 2005. Inflation is expected to firm modestly with the tightening labor market and as rents adjust to previous increases in property prices. The current account surplus is expected to narrow with maturing external demand.

Abstract

This 2006 Article IV Consultation highlights that Hong Kong Special Administrative Region has recovered strongly from a series of shocks in recent years and, as expected, the pace of growth is now moderating. Growth was 6.8 percent (year over year) in the first three quarters of 2006, somewhat slower than the 7.3 percent recorded in 2005. Inflation is expected to firm modestly with the tightening labor market and as rents adjust to previous increases in property prices. The current account surplus is expected to narrow with maturing external demand.

I. Economic Setting: From Recovery to Sustained Growth

1. Hong Kong SAR’s current economic expansion, which began in mid-2003 after the end of the SARS outbreak, has now been sustained for nearly 12 quarters. Initially the turnaround was driven by external demand, but in recent quarters, domestic demand has played the dominant role. The expansion has ended a nearly six-year long deflation, reduced unemployment to its lowest level in more than five years, and helped revive asset prices (Figures 1–4).

Figure 1.
Figure 1.

Real Sector Developments

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, Hong Kong SAR authorities and staff estimates.
Figure 2.
Figure 2.

External Sector Developments

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, Hong Kong SAR authorities and staff estimates.
Figure 3.
Figure 3.

Asset Market Developments

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, World Federation of Exchanges, Hong Kong SAR authorities and staff estimates.
Figure 4.
Figure 4.

Household and Corporate Sectors

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: Thomson Financial, CEIC, Hong Kong SAR authorities and staff estimates.

2. Underlying the recovery was the flexibility of Hong Kong SAR’s labor and product markets, supportive fiscal policy, and continued structural reforms, especially as the Linked Exchange Rate System (LERS) precluded active monetary stimulus. Also key was the strong external environment, particularly the growing and multi-faceted economic integration with China, which has already seen Hong Kong SAR successfully transform itself into the services hub for the Mainland (especially the Pearl River Delta region). Indeed, the initial turnaround was triggered by the confidence building effects of the 2003 Closer Economic Partnership Arrangement (CEPA), a free-trade arrangement with the Mainland.

uA01fig01

GDP by Industry

(In percent of GDP)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

* Guangdong Province (GD) encompasses much of the Pearl River Delta.

3. The pace of growth has, expectedly, begun to moderate. The staff expects GDP growth to slow to 5½–6 percent this year from 7.3 percent last year. This reflects a slowing of external demand largely due to the softening in the U.S. economy, partly offset by strong domestic demand, backed by robust household and corporate balance sheets. Inflation is expected to firm modestly with the tightening labor market and as rents adjust to previous increases in property prices. With the slowdown in external demand, the current account surplus should narrow to around 9¼ percent of GDP this year from around 11½ percent of GDP in 2005. The main near-term risks are an even sharper slowdown in global demand (particularly in the United States), a rise in protectionist pressures against the Mainland, or a disorderly adjustment in the global financial system.1 The risk of an Avian flu outbreak appears less immediate and preparedness for such an eventuality is well advanced. If financial integration with the Mainland is deepened and managed well, and competitive pressures from other regional financial centers withstood, growth could average around 5 percent over the medium term with low inflation and some further narrowing of the current account surplus.

Hong Kong SAR: Medium-Term Projections, 2005-11

(Percentage change from the previous period, unless otherwise indicated)

article image
Sources: CEIC, Hong Kong SAR authorities and staff estimates.

In percent of GDP.

II. Report on Discussions

4. With the economy on a strong footing, this year’s discussions were streamlined, focusing on: the fiscal policy challenges of aging and volatile revenue; and enhancing competitiveness and managing the expanding financial links with the Mainland. These issues reflect the authorities’ priorities as they take advantage of the current favorable environment to initiate reforms in these areas to boost medium-term prospects.

A. Fiscal Policy: Looking Beyond the Good Times

5. Appropriately, this year’s budget continues to take advantage of the strong economy to further strengthen the fiscal position (Figure 5). Last year, strong revenue growth and expenditure restraint helped achieve the first budget surplus (of around 1 percent of GDP) since FY1999/00. The structural balance is also expected to move into surplus, appropriate for this stage of the cycle. In this year’s budget, the authorities resisted calls for broad-based tax cuts and exemptions (which would have increased the budget’s reliance on volatile non-tax revenue) and introduced only modest rate cuts (costing around 1¼ percent of revenue) and spending increases. On current economic and spending trends, this year’s target surplus of ½ percent of GDP could be over performed by a modest margin.

Figure 5.
Figure 5.

Fiscal Developments

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: Hong Kong SAR authorities and staff estimates.

6. Over the medium term, Hong Kong SAR faces two principal fiscal challenges: population aging and volatile revenue. The economy will likely face one of the steepest increases in old-age dependency within the region in coming decades. The fully-funded and privately-managed Mandatory Provident Fund (MPF) should be able to provide a growing source of retirement income for most. However, with current healthcare expenses mostly publicly funded (around 46 percent of out-patient care and about 82 percent of in-patient hospital care), age-related public health spending pressures could rise very sharply from 2015 onwards, adding around 5-6 percentage points of GDP to spending by 2030.2 In response, the authorities have proposed reforming healthcare delivery and financing systems. The planned reforms to the delivery system (on which public consultations were initiated last year) emphasize greater private provision of primary care, and limit the reliance on public hospitals to acute and specialized cases. Financing reform proposals are still being developed, with public consultations planned for mid-2007; options include compulsory or subsidized insurance, premium-based catastrophe coverage, and contributory schemes.

7. Hong Kong SAR’s public revenue is one of the most volatile in the region, due to a narrow tax base and significant dependence on volatile non-tax revenues. To address this, the authorities have launched a public consultation with the proposed introduction of a goods and services tax (GST), which the staff has long supported, as its focal point. Their proposal calls for a low-rate tax with few exemptions and a high registration threshold, in line with past staff advice.3 Staff analysis suggests that under the current revenue structure, significant fiscal reserves, possibly even higher than those already held, may be necessary to provide a sufficient buffer against the type of economic shocks seen over the last decade.4 A low-rated and broad-based GST, would lower the amount of reserves needed for such purposes, especially over time as the consumption-tax base is likely to expand more than the salaries-tax base due to aging.5 However, the proposed GST has run into strong public opposition. The staff met with representatives from a number of political parties that oppose the GST, who, while recognizing the need to broaden the tax base, were concerned about the lack of discussion of alternative measures, and the disproportionate burden such a tax would place on the poor. Staff pointed out that broadening compensation for low-income groups and other offsets could help to mitigate the regressive impact of the tax.6 The authorities intend to develop more concrete alternatives to broaden the tax base, taking into account the concerns raised during the current consultation on the GST, and present them at a later date. The staff suggested that, in addition to a GST, other measures to reduce revenue volatility could be considered, such as negotiating a more stable return on government financial assets, which are managed by the Exchange Fund, compensating the latter for assuming additional risk.7

uA01fig02

Revenue Volatility: 2000-2004

(Coefficient of Variation 1/)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

1/ Estimated after controlling for tax policy changes.

Comparison of VAT Rates and Registration Thresholds1/

article image
Sources: IMF, Fiscal Affairs Department, and staff estimates.

As at end-2005.

Government proposal.

Unweighted average.

Including 1 percent local tax.

uA01fig03

Hong Kong SAR Salaries Tax Base

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Source: CEIC and staff estimates.

B. Exchange Rate Regime: A More Resilient System

8. The staff reiterated their support for the authorities’ commitment to the LERS. In the aftermath of the May 2005 refinements, renminbi-related speculation dampened as exchange rate changes against the U.S. dollar (USD) were effectively limited to a narrow band of Hong Kong dollar (HKD) 7.75–7.85 per USD (Figure 6).8 With the ebbing of appreciation pressures, HKD and USD interest rates realigned. These changes also helped the financial system absorb large capital inflows associated with lumpy IPO activity (including the USD11 billion Bank of China IPO in May and the USD16 billion ICBC IPO in October) in an orderly manner, with no intervention by the monetary authority (HKMA). Although the refined system has not been fully tested, it appears to be sufficiently fortified to withstand shocks, as well as potentially greater renminbi flexibility.9 The demonstrated flexibility of Hong Kong SAR’s markets should facilitate adjustment over the medium term to larger or more lasting shocks.10 Notwithstanding the improved credibility of the LERS, in recent months forward markets appear to be pricing an appreciation of the HKD outside the strong-side convertibility rate (beyond a three month horizon), with HKD interest rates drifting below comparable USD interest rates. Market analysts, bankers, and the authorities attributed this to high HKD liquidity in the banking system related to several factors, including large IPOs. The staff noted that while this was not necessarily a matter of immediate policy concern, a risk was that the HKD-USD interest rate gap could close suddenly, putting pressure on some banks’ interest margins.

Figure 6.
Figure 6.

Monetary and Exchange Rate Developments

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, Hong Kong SAR authorities and staff estimates.
uA01fig04

Spot and Forward Hong Kong Dollar Rates

(HKD/USD)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

uA01fig05

Recent Deviations between HIB OR and LIB OR

(%)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

C. Competitiveness: Building on Traditional Strengths and Financial Development

9. Hong Kong SAR’s external price competitiveness has improved over the past few years (Figures 7 and 8).11 Given the LERS, adjustment to macroeconomic imbalances and external shocks has taken place through changes in the real exchange rate driven by the price flexibility of domestic markets. Following prolonged deflation, these prices now have all turned around, indicating that adjustment to the shocks of the last few years is over. At present, goods and wage inflation is low, equity prices have risen in line with earnings, and property prices have stabilized. Stable price increases across goods, labor, and asset markets suggest that price competitiveness is broadly in line with fundamentals. The continued large current account surplus largely reflects the economic restructuring of the past few years when outward FDI increased as domestic investors relocated existing operations and sought new business opportunities in the Mainland. These trends are unlikely to be reversed any time soon. Thus, over the medium term, the merchandise trade balance will remain in deficit, while the current account continues to generate substantial surpluses reflecting earnings from foreign investments, tourism, and trade and financial intermediation, with the net international investment position (currently 3½ times the size of foreign reserves and 2½ times GDP) strengthening further.

Figure 7.
Figure 7.

Hong Kong SAR’s Balance of Payments Dynamics

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, Hong Kong SAR authorities, and staff estimates.
Figure 8.
Figure 8.

Trends in Competitiveness

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Source: CEIC, World Economic Forum, Hong Kong SAR authorities and staff estimates.
uA01fig06

REER, 1990-2005

(Index, 2000=100)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

10. Beyond the improvement in price competitiveness, Hong Kong SAR’s traditional strengths—flexible markets and strong institutions—have been and will remain key to the economy’s attractiveness as an international business hub. In response to growing calls for a legislated minimum wage, the authorities have begun a voluntary “wage protection movement” for two specific low-wage occupations. The staff reiterated that legislating a minimum wage is a social compact and, when properly designed, should not unduly affect employment. However, as institutional constraints on macroeconomic policies have placed much of the burden of economic adjustment on the flexibility of nominal wages and other prices, care needs to be taken that such legislation does not impair this flexibility and the economy’s competitiveness. In this regard, key considerations include the initial level of the minimum wage, how it is adjusted over time, the extent of differentiation across the age distribution of the working population, and how it interacts with the tax and in-work benefits system.12 Enhancing in-work benefits have been demonstrated elsewhere to be effective in improving the conditions of the working poor, and strengthening existing social safety net programs could help to alleviate poverty among non-working households. Separately, staff welcomes the recent decision to begin a three month public consultation on a general competition law, an initiative it has long supported.

11. In discussions with staff, concerns were raised about the adverse impact of increased pollution on competitiveness. Many private sector representatives noted that the increase in pollution made attracting and retaining high-skilled workers more difficult, especially given the tight labor market. While there was broad support for the government’s growing recognition of these concerns and efforts to address them, many felt that initiatives to reduce cross-border pollution could be speeded up and that greater emphasis could be placed on market-based mechanisms to reduce pollution.

12. There was broad agreement that, in the coming years, increased financial integration with the Mainland would be a major driver of Hong Kong SAR’s economic prospects (Figure 9).13 Fundraising by Mainland-related firms reached new heights this year, while arrangements under CEPA have opened up opportunities for Hong Kong service suppliers, and the easing of controls on outward capital flows by the Mainland should boost the Hong Kong wealth management sector over time. Hong Kong SAR’s capital market has also deepened with the expansion of existing financial instruments, such as equity-derivatives, and the introduction of both exchange traded and over-the-counter Mainland-related non-deliverable products. Together with renminbi business, these are positive signs, but both the government and the market considered increasing the SAR’s role in the direct intermediation of the Mainland’s domestic savings as key for the continued success of its financial center. The staff noted that allowing Mainland financial institutions to issue renminbi-denominated bonds in Hong Kong SAR—a proposal that awaits approval by China’s State Council—was a good example of how Hong Kong SAR’s financial infrastructure could be used to benefit both economies. The authorities added that discussions were ongoing with Mainland authorities on other ways to use Hong Kong SAR’s infrastructure in China’s financial intermediation.

Figure 9.
Figure 9.

Growing Integration with the Mainland

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

Sources: CEIC, Hong Kong SAR authorities, and staff estimates.

Net External Transactions of Hong Kong SAR with Mainland China

(Net inflows (+)/outflows (-); billions of US$)

article image
Source: Shi, J. and A. Tsang, 2006, “Cross-border Fund Flows and Hong Kong Banks’ External Transactions with China,” Research Memorandum 07/2006 (Hong Kong SAR: Hong Kong Monetary Authority).
uA01fig08

Banking NPLs and CARs

(In percent of total loans and total assets respectively)

Citation: IMF Staff Country Reports 2007, 005; 10.5089/9781451816969.002.A001

13. The authorities consider preserving financial stability to be crucial in safeguarding competitiveness, especially as capital markets expand and new businesses emerge. At present, banks remain well capitalized and profitable, a deposit insurance scheme was introduced in September, and progress towards adopting Basel II standards is proceeding well. The authorities noted that the expansion of equity-linked derivatives has not systemically affected volatility in the main equity markets. Nonetheless, they have increased market risk monitoring, tightened issuance rules, and increased transparency. The Hong Kong Exchanges and Clearing Limited (HKEX) is also reviewing listing rules to allow firms incorporated in many other jurisdictions to list domestically. As high listing standards, along with market depth, have been an important reason why firms have sought out listing in Hong Kong SAR, the authorities noted that it is not in their interest to dilute these standards in the review. The authorities are continuing to expand coordination with Mainland authorities in monitoring cross-border risks, especially with the growth in Mainland-related business. They also consider the financial center’s reputation for good governance as another pillar supporting its competitiveness. In this regard, AML/CFT enforcement is being broadened, beyond the present regulator-specific coverage, through a more comprehensive legislative framework. The authorities are also reviewing the Companies Ordinance to reduce business compliance costs and strengthen corporate governance, and are creating an independent Financial Reporting Council to investigate auditing and reporting irregularities.

III. Staff Appraisal

14. After three years of rapid economic growth, the pace of activity is expectedly moderating. A strong external environment, the flexibility of Hong Kong SAR’s markets, along with skillful macroeconomic management and a strengthening of financial market infrastructure, were key factors in the turnaround over the last three years. Staff expects growth to continue, but at a somewhat slower pace, with the main near-term risk being a sharp slowdown in global demand. Over the medium term, much will depend on how well the evolving financial integration with the Mainland is managed and expanded, and competitive pressures from other regional financial centers withstood.

15. Appropriately, this year’s budget continues to take advantage of the strong economy to further strengthen the fiscal position. While there is little current risk to fiscal sustainability, over the medium term the budget will likely face rising age-related spending pressures, and continued revenue volatility will have to be managed. The authorities are judiciously using the space provided by the current favorable economic environment to focus on reforms to the healthcare system and initiating public consultations on ways to broaden the tax base. The staff has long considered a low-rated and broad-based Goods and Services Tax to be an efficient way to broaden the tax base, using targeted compensation to alleviate the resulting burden on low-income households. In addition to a GST, the government could seek ways to stabilize investment income through arrangements with the Exchange Fund.

16. The staff reiterates its support for the authorities’ commitment to the LERS. The May 2005 refinements have strengthened the LERS, and although the refined system has not been fully tested, it appears to be sufficiently fortified to withstand shocks, as well as potential greater renminbi flexibility.

17. The authorities are appropriately focusing on safeguarding Hong Kong SAR’s traditional strengths—flexible markets and strong institutions—which have underlined the economy’s competitiveness. The envisaged competition policy law will enhance these strengths, while the design of labor market regulation needs to ensure that the balance between market flexibility and adequate worker protection is maintained.

18. In coming years, financial integration with the Mainland will be a major driver of Hong Kong SAR’s economic prospects. The government is making commendable efforts to coordinate with the Mainland authorities on ways of using Hong Kong SAR’s advanced financial infrastructure to improve China’s financial intermediation, thereby benefiting both economies. While much will depend on the pace of China’s financial liberalization, the recent proposal to have Mainland financial institutions issue renminbi denominated bonds in Hong Kong SAR is a good example of such coordination.

19. Reinforcing its reputation for strong market infrastructure and supervision is key to Hong Kong SAR’s future as a financial center. Good progress is being made on cross-border cooperation and preparations for Basel II, while the introduction of the deposit insurance scheme should further strengthen the already sound banking system. The Securities and Futures Commission has also been proactive in assessing potential sources of stress in equity markets, including in the fast growing derivatives market, while corporate governance is being strengthened. Ensuring AML/CFT compliance is important to preserving Hong Kong SAR’s reputation as a financial center and the authorities’ plans to broaden enforcement through a comprehensive legislative framework are welcome.

20. It is recommended that the next Article IV consultation discussions take place in accordance with the standard 12-month cycle.

Table 1.

Hong Kong SAR: Selected Economic and Financial Indicators, 2003-2007

article image
Sources: Data provided by the Hong Kong SAR authorities; and staff estimates and projections.

Seasonally adjusted for Q1 and Q2 2006.

Authorities’ FY2006/07 Budget estimates.

Includes Land Fund assets from 1997 (US$17.5 billion at end-1997).

Table 2.

Hong Kong SAR: Standard Vulnerability Indicators

article image
Sources: Hong Kong SAR authorities, BIS, and staff estimates.

Broad Money refers to M2.

Official statistics on Hong Kong SAR’s external debt are available from the first quarter of 2002.

For all authorized institutions, unless otherwise specified.

For all locally incorporated authorized institutions.

Deflated using CPI.

Refers to total gross classified: “substandard”, “doubtful” and “loss”.

For retail banks, which comprise all the locally incorporated banks plus a number of the larger foreign banks whose operations are similar to those of the locally incorporated banks, in that they operate a branch network and are active in retail banking.

Exposure to property sector includes loans to finance property investment and development and residential mortage loans.

Table 3.

Hong Kong SAR: Medium-term Balance of Payments, 2003-2011

article image
Sources: Hong Kong SAR authorities and staff estimates.
Table 4.

Hong Kong SAR: Consolidated Government Account, FY 03/04-FY2010/11 1/

(In percent of GDP, unless otherwise stated)

article image
Sources: Hong Kong SAR Government, and staff estimates.

Fiscal year begins on April 1. FY2006-10 projections are based on authorities’ medium-term fiscal framework.

Indirect tax includes general rates, bets and sweeps tax, stamp duties, fees and charges (tax-loaded fees), hotel accommodation tax, air passenger departure tax, motor vehicle taxes, royalties and estate duty.

Includes non-recurrent operating expenditure.

Overall balance excluding investment income.

Staff estimate used to measure the impact of fiscal policy on domestic demand. It excludes asset transactions and cyclical fluctuations.

1

Staff estimates suggest that a 1 percentage point reduction in U.S. growth (through trade channels) could reduce Hong Kong SAR’s growth by ½–1 percentage point, depending on its spillover impact on China’s economy. The impact through financial channels is difficult to pin down with confidence.

2

Leigh, L., 2006, “Hong Kong SAR: Macroeconomic Impact of an Aging Population in a Highly Open Economy,” IMF Working Paper 06/87 (Washington: International Monetary Fund).

3

The Fund provided technical assistance on designing and implementing the GST in 2001 and 2004.

4

Staff’s analysis in Chapter I of the Selected Issues Paper shows that on current policies, desirable reserves could be as high as 30 percent of GDP for age-related spending and 30 percent of GDP as a buffer against revenue volatility (calculated using Value-at-Risk methodology). At present, the reserve level is just above 20 percent of GDP.

5

Staff estimates indicate that with aging the consumption-tax base could grow by 40 percent more than the salaries-tax base in the coming decades, as the portion of household income from non-wage sources (reflecting large accumulated savings) becomes larger.

6

Offsets proposed in the consultation paper include income tax cuts. The staff also provided examples from countries, such as Singapore, where the government, in addition to offsetting income tax cuts, distributed “Economic Restructuring Shares” at the time of raising the GST rate. These dividend-paying shares could be encashed anytime over a transitional five year period.

7

Staff estimates suggest that fixing returns at their historical rate could reduce the fiscal value-at-risk by as much as 20 percent (Chapter I of the People’s Republic of China – Hong Kong Special Administrative Region: Selected Issues (www.imf.org)).

8

Details of the refinements were discussed in the 2005 Article IV Staff Report (IMF Country Report No. 06/50).

9

The impact of a sizable renminbi appreciation will depend on its impact on China’s exports. A decline in China’s export growth would lower Hong Kong SAR’s re-export growth, but improve the competitiveness of its domestic goods and services exports. On balance, a 5-10 percent appreciation of the renminbi should have a small impact on Hong Kong SAR in the near term.

10

A recent HKMA study simulated a number of China-related shocks, such as a rise in protectionist sentiment and financial instability. Although the magnitude of these shocks is large, in most cases representing more than two-standard deviations of historical volatility, the simulated impact on Hong Kong SAR is moderate. For example, a 20 percentage point decline in China’s export growth in one year slows Hong Kong SAR’s GDP growth by 6 percentage points over two years. None of the simulated shocks resulted in a slowdown similar to that during the Asian crisis, when growth fell more than 10 percentage points in the first year.

11

See Chapter II of the People’s Republic of China – Hong Kong Special Administrative Region: Selected Issues (www.imf.org).

12

For details see Box 2 in the 2005 Article IV Staff Report (IMF Country Report No. 06/50).

13

See Chapter III of the People’s Republic of China – Hong Kong Special Administrative Region: Selected Issues (www.imf.org).

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Cover IMF Staff Country Reports
People’s Republic of China—Hong Kong Special Administrative Region: Staff Report for the 2006 Article IV Consultation Discussions
Author: International Monetary Fund
Volume/Issue:
Volume 2007: Issue 005
Publisher:
International Monetary Fund
ISBN:
9781451816969
ISSN:
1934-7685
Pages:
33
DOI:
https://doi.org/10.5089/9781451816969.002

Real Sector Developments

External Sector Developments

Asset Market Developments

Household and Corporate Sectors

GDP by Industry

(In percent of GDP)

Fiscal Developments

Revenue Volatility: 2000-2004

(Coefficient of Variation 1/)

Hong Kong SAR Salaries Tax Base

Monetary and Exchange Rate Developments

Spot and Forward Hong Kong Dollar Rates

(HKD/USD)

Recent Deviations between HIB OR and LIB OR

(%)

Hong Kong SAR’s Balance of Payments Dynamics

Trends in Competitiveness

REER, 1990-2005

(Index, 2000=100)

Growing Integration with the Mainland

Banking NPLs and CARs

(In percent of total loans and total assets respectively)