LET US THINK about a simple piece of economic arithmetic, one of those one-minus-one-equals-zero equations that so mystify our senior government officials. Some countries find themselves notably short of the domestic investment capital they need to build up their economies. They are mostly poor countries and often they have only themselves to blame for the fact that no-one wants to invest in them. Generally, however, they attract foreign investment flows. Now here is the simple arithmetic puzzler. From where do they get that money? Aha, the light dawns. They can only get it from other countries that have more investment capital than they need. In other words, for every dollar of net inward investment flows to needy countries there must be a dollar of net outward investment flows from somewhere else. One minus one equals zero. Put it another way. The world is divided into net recipients and net providers of investment capital and it all balances out in the end. Now look at the first chart. It shows the net external claims of our monetary system in all currencies as a percentage of our gross domestic product. It tells you that, relative to the size of our economy, we are one of the biggest providers of investment capital in the world, that we are fast expanding that role and that we have never been as big in it as we are now. Time for the second chart. It shows a long record of the loan-to-deposit ratio in Hong Kong dollars for our licensed banks. It is at an historic low. Our banks are flush with investment capital for the SAR itself but, despite driving interest rates down to record lows, they just cannot find enough trustworthy borrowers to use all the local deposit money they have taken in. Let us drive that point home once more. When you divide the world into recipients and providers of investment we are firmly in the provider camp. We do not need investment money. We already have it to surfeit and our role is rather to invest it in the needy. This is one of the ways in which we have grown so rich. We live heavily off the proceeds of foreign investment. So why, oh why, do we now have our Government acting as if we are instead desperately short of money, and pitching for it by proposing to grant residency to foreigners who invest at least HK$6.5 million in Hong Kong? Do any of these bureaucrats ever pay any attention to the figures their own Census and Statistics people publish? Why do we feel so compelled to ape countries such as Canada, which offer these sorts of investment lures? They offer them to us and that is exactly the way things should be. We have the money. Canada does not and can largely blame its own official tinkering in its economy for that plight. Same thing goes for Australia and even Singapore. To those who have, more shall be given. That's us. Shortage of money is not one of the causes of our present economic ailments. Graphic: jake28gbz
