Hong Kong dollar
The Hong Kong dollar is the official currency of Hong Kong. It is divided into 100 cents. Historically, it was also divided into 1000 mils. The Hong Kong Monetary Authority is the monetary authority of Hong Kong and the Hong Kong dollar.
Three commercial banks are licensed by the Hong Kong Monetary Authority to issue their own banknotes for general circulation in Hong Kong. These banks — HSBC, Bank of China, and Standard Chartered — issue their own designs of banknotes in denominations of HK$20, HK$50, HK$100, HK$150, HK$500, and HK$1000, with all designs being similar to one another in the same denomination of banknote. However, the HK$10 banknote and all coins are issued by the Government of Hong Kong.
the Hong Kong dollar was the ninth-most traded currency in the world. Hong Kong uses a linked exchange rate system, trading since May 2005 in the range US$1:HK$7.75–7.85.
Apart from its use in Hong Kong, the Hong Kong dollar is also used in neighbouring Macau. It is pegged at 1 Hong Kong dollar to 1.03 Macanese patacas, and is generally accepted at par or MOP 1.00 for retail purchases.
History
When Hong Kong was established as a free trading port in 1841, there was no local currency in everyday circulation. Foreign currencies such as Indian rupees, Spanish or Mexican 8 reales, and Chinese cash coins were circulated instead. Since 1825, it had been the policy of the British government to introduce sterling silver coinage to all of its colonies, and to this end, in 1845, the Spanish or Mexican 8 reales coins were set at a legal tender value of 4 shillings, 2 pence sterling. But just as in the case of the British North American colonies, the attempts to introduce the sterling coinage failed to overcome the strong local adherence to the silver Spanish dollar system that had been in wide circulation across the Far East, emanating for centuries from Manila in the Philippines as part of the Spanish East Indies in the Spanish colonial empire through the Manila-Acapulco Galleon Trade with the coins minted in the Spanish Americas in Mexico or Peru or Bolivia.By 1858, the British government gave up all attempts to influence the currency situation in Canada, and by the 1860s, it came to the same realisation in Hong Kong: that there was no point in trying to displace an already existing currency system. In 1863, the Royal Mint in London began issuing special subsidiary coinage for use in Hong Kong within the dollar system, though other national currencies circulated unofficially for years afterwards. In 1866, a local mint was established at Cleveland Street in Causeway Bay on Hong Kong Island for the purpose of minting Hong Kong silver dollar and half dollar coins of the same value and similar likeness to their Spanish/Mexican counterparts. The Chinese did not, however, receive these new Hong Kong dollars well, and in 1868, the Hong Kong Mint was closed down with a loss of $440,000. The machinery at the Hong Kong mint was sold first to Jardine Matheson and, in turn, to the Japanese and used to make the first Yen coins in 1870. In the 1860s, banknotes of the new British colonial banks, the Hong Kong and Shanghai Banking Corporation and the Chartered Bank of India, Australia and China, denominated in dollars, also began to circulate in both Hong Kong and the wider region.
In 1873, the international silver crisis resulted in a devaluation of silver against gold-based currencies. Since the silver dollars in the US and Canada were attached to a gold exchange standard, this meant that the silver dollars circulating along the China coast dropped in value as compared to the U.S. dollar and the Canadian dollar.
Early 20th century
By 1895, the circumstances had changed to the extent that there was now a dearth of Spanish/Mexican dollars and the authorities in both Hong Kong and the Straits Settlements were putting pressure on the authorities in London to take measures to have a regular supply of silver dollar coins. London eventually acquiesced and legislation was enacted in attempts to regulate the coinage. New British trade dollars were coined at the mints in Calcutta and Bombay for use in both Hong Kong and the Straits Settlements. In 1906, the Straits Settlements issued their own silver dollar coin and attached it to a gold sterling exchange standard at a fixed value of 2 shillings and 4 pence. This was the point of departure between the Hong Kong unit and the Straits unit.In British Weihaiwei, the Hong Kong dollar circulated jointly with the Chinese yuan from 1914 to 1930, when Weihaiwei was returned to the Republic of China.
By 1935, only Hong Kong and China remained on the silver standard. In that year, Hong Kong, shortly after China did, abandoned silver and introduced a crawling peg to sterling of £1 = HK$15.36 to HK$16.45. It was from this point in time that the concept of a Hong Kong dollar as a distinct unit of currency came into existence. The One-Dollar Currency Note Ordinance of that year led to the introduction of one-dollar notes by the government and the government acknowledged the Hong Kong dollar as the local monetary unit. It was not until 1937 that the legal tender of Hong Kong was finally unified. In 1939, the Hong Kong dollar was put on a fixed peg of HK$16 = £1.
The discussion about switching from the silver standard to the gold standard began as early as 1930. A commission report was released in May 1931 which concluded that it was important for Hong Kong to facilitate the free flow of capital with China and adhering to the same monetary standard as China was thus preferred. The report also recommended the Hong Kong government only take over the burden of note issuance when the banks failed to do so. In fact, the Hong Kong government was not willing to take up the logistics of note issuance, and some officials even thought that the public had greater degree of confidence in the notes issued by those long-established banks than that by the government.
During the Japanese occupation, the Japanese military yen were the only means of everyday exchange in Hong Kong. When the yen was first introduced on 26 December 1941, the exchange rate was ¥1 = HK$2. However, in August 1942, the rate was changed to HK$4 to ¥1. The yen became the only legal tender on 1 June 1943. The issue of local currency was resumed by the Hong Kong government and authorised local banks after liberation, with the pre-war rate of HK$16 = £1 being restored. The yen was exchanged at a rate of ¥100 = HK$1. On 6 September 1945, all military yen notes used in Japanese colonies were declared void by the Japanese Ministry of Finance.