IDEAS home Printed from
   My bibliography  Save this paper

Outward Portfolio Investment From Mainland China: How Much Do We Expect And How Large a Share Can Hong Kong Expect to Capture?


  • Lillian Cheung

    (Research Department, Hong Kong Monetary Authority)

  • Kevin Chow

    (Research Department, Hong Kong Monetary Authority)

  • Jian Chang

    (Research Department, Hong Kong Monetary Authority)

  • Unias Li

    (Research Department, Hong Kong Monetary Authority)


This paper aims to provide an analytical framework for an educated guess of the potential volume of outward portfolio investment from Mainland China and how large a share Hong Kong could capture, should the Mainland's capital account be as open as any other developed economies. Based on our counterfactual scenario for 2005, total outward portfolio investment from Mainland China is expected to increase from the current 5% of GDP to 15%, should its capital account be as liberalised as in an average OECD country. Assumptions based on our projections for the future suggest that the amount could reach 23% to 54% of GDP. Hong Kong could capture around 10% of such investment. These scenarios appear reasonable when compared with outward portfolio investment position of major economies and past liberalisation experience in Japan. Our findings suggest that while Hong Kong's comparative advantage lies mainly in its proximity and cultural affinity with the Mainland, according to our model estimates, the most important determinant of bilateral portfolio investment is the domestic share of world stock market capitalisation, in which Hong Kong lags behind relative to other major financial markets. Our projections show that an increase in Hong Kong's stock market size to that of Japan could almost double the share captured by Hong Kong. The potential increase in portfolio investment from the Mainland is expected to benefit the financial services industry in Hong Kong, and increase the contribution from this sector to GDP. It would not only boost securities market activities, but could also foster the wealth-management and custodian services industries in Hong Kong.

Suggested Citation

  • Lillian Cheung & Kevin Chow & Jian Chang & Unias Li, 2006. "Outward Portfolio Investment From Mainland China: How Much Do We Expect And How Large a Share Can Hong Kong Expect to Capture?," Working Papers 0613, Hong Kong Monetary Authority.
  • Handle: RePEc:hkg:wpaper:0613

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Frank Leung & Kevin Chow & Jessica Szeto & Dickson Tam, 2008. "Service Exports: The Next Engine of Growth For Hong Kong?," Working Papers 0804, Hong Kong Monetary Authority.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hkg:wpaper:0613. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Chan). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.