Hong Kong dollar
Encyclopedia
The Hong Kong dollar (sign
: $; code
: HKD) is the currency
of the jurisdiction. It is the eighth most traded currency in the world. In English
, it is normally abbreviated with the dollar sign
$, or alternatively HK$ to distinguish it from other dollar
-denominated currencies. The Hong Kong
dollar is subdivided into 100 cents
.
of the first syllable of "money", although some suggest that the character is a corruption
of 緡. 元 is also used informally. The dollar is divided into 100 cents, with the character 仙 (a transliteration of "cent") used on coins and in spoken Cantonese. 分 is used in Mandarin. The amount of 10 cents is called 1 houh in Cantonese (毫 on coins and in spoken Cantonese, 毫子 in colloquial speech, 角 in Mandarin). The mil was known as the man or tsin in Cantonese (萬 or 千 on coins and in spoken Cantonese and Mandarin).
To express prices in spoken Cantonese, for example $7.80, the phrase is 七個八 (chat go baat, seven units and eight [decimals]); in financial terms, where integer values in cents exist, e.g., $6.75, the phrase is 六個七毫半 (luhk go chat houh bun, six and seven "houh" half) ["bun" in Yale Romanisation sounds like the American pronunciation of "boon"] (fives in cents is normally expressed as "half", unless followed by another five, such as 55 cents when preceded by a dollar value); $7.08 is 七蚊零八仙 (seven dollars "ling" (zero) eight cents).
Some of these terms are also used by overseas Chinese
to refer their local currency.
s, Spanish and Mexican 8 reales
, and Chinese cash coins circulated. 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 and 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 America
n colonies, the attempts to introduce the sterling coinage failed to overcome the strong local adherence to the silver Spanish dollar
system.
By the year 1858, London 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. In 1866, a local mint was established at Sugar 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 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 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 USA 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 US dollar and the Canadian dollar
.
By 1895, the circumstances had changed to the extent that there was now a dearth of 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 as between the Hong Kong unit and the Straits unit.
By 1935, only Hong Kong and China remained on the silver standard In that year, Hong Kong, shortly after China, abandoned silver and introduced a crawling peg to sterling of 1 pound = 15.36 to 16.45 dollars. 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 dollar was put on a fixed peg of 16 dollars = 1 pound (1 dollar = 1 shilling 3 pence).
During the Japanese occupation
, 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 yen = 2 dollars. However, in August 1942, the rate was changed to 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 the authorised local banks after liberation, with the pre-war rate of 16 dollars = 1 pound being restored. The yen was exchanged at a rate of 100 yen = 1 dollar. On 6 September 1945, all yen notes were declared void.
In 1967, when sterling was devalued, the dollar's peg to the pound was increased from 1 shilling 3 pence to 1 shilling 4½ pence (14.5455 dollars = 1 pound) although this did not entirely offset the devaluation. In 1972, the Hong Kong dollar was pegged to the U.S. dollar at a rate of 5.65 H.K. dollar = 1 U.S. dollar. This was revised to 5.085 H.K. dollar = 1 U.S. dollar in 1973. Between 1974 and 1983, the Hong Kong dollar floated. On 17 October 1983, the currency was pegged at a rate of 7.8 H.K. dollar = 1 U.S. dollar, through the currency board system.
As of 18 May 2005, in addition to the lower guaranteed limit, a new upper guaranteed limit was set for the Hong Kong dollar at 7.75 to the American dollar. The lower limit will be lowered from 7.80 to 7.85 in five weeks, by 100 pip
s (0.01) each week. The Hong Kong Monetary Authority indicated this move is to narrow the gap between the interest rates in Hong Kong and those of the United States. A further aim of allowing the Hong Kong dollar to trade in a range is to avoid the HK dollar being used as a proxy for speculative bets on a renminbi revaluation.
The Basic Law of Hong Kong and the Sino-British Joint Declaration
provides that Hong Kong retains full autonomy with respect to currency issuance. Currency in Hong Kong is issued by the government and three local banks under the supervision of the territory's de facto central bank
, the Hong Kong Monetary Authority
. Bank notes are printed by Hong Kong Note Printing Limited
.
A bank can issue a Hong Kong dollar only if it has the equivalent exchange in US dollars on deposit. The currency board system ensures that Hong Kong's entire monetary base is backed with US dollars at the linked exchange rate. The resources for the backing are kept in Hong Kong's exchange fund
, which is among the largest official reserves in the world. Hong Kong also has huge deposits of US dollars, with official foreign currency reserves of 281.7 Billion USD as of October 2011.
In 1863, 1 mil, 1 and 10 cent coins were introduced, followed in 1866 by 5 and 20 cents, ½ and 1 dollar. The 1 mil and 1 cent were struck in bronze, with the 1 mil a holed coin. The remaining coins were struck in silver. Production of the 1 mil ended in 1866, whilst that of the ½ and 1 dollar ceased in 1868, with only the ½ dollar (now with the denomination given as 50 cents) resuming production in 1890. Production of all silver coins was suspended in 1905, only briefly resumed in 1932 and 1933 for the production of 5 cent coins.
In 1934, the last 1 cent coins were issued, but the last minting was 1941. These were not issued because of the Second World War. The following year (1935), cupro-nickel 5 and 10 cents were introduced, replaced by nickel in 1937 and nickel-brass between 1948 and 1949. Copper-nickel 50 cents were issued in 1951, these were changed to Nickel-brass in 1977.
In 1960, cupro-nickel 1 dollar coins were introduced, these were reduced in size in 1978. These were followed in 1975 by nickel-brass 20 cents and cupro-nickel 2 dollars (both scallop shaped), and in 1976 by decagon
al, cupro-nickel 5 dollars, changed to a round thicker shape in 1980. The 5 cent was last issued in 1979, but last struck in 1988. In 1994, a bimetallic 10 dollar coin was introduced.
Starting in 1993, prior to the establishment of the SAR, coins with Queen Elizabeth II
's portrait were gradually withdrawn from circulation. Most of the notes and coins in circulations feature Hong Kong's Bauhinia blakeana
flower or other symbols. Coins with the Queen's portrait are still legal tender and can be seen, but these are slowly being phased out.
Because the redesign was highly sensitive with regard to political and economic reasons, the designing process of the new coins could not be entrusted to an artist but was undertaken by Joseph Yam
, Chief Executive of the Hong Kong Monetary Authority
, himself who found in the bauhinia the requested "politically neutral design" and did a secret scissors and paste job.
The issue of Hong Kong dollar notes is governed today by the Hong Kong Monetary Authority
(HKMA), the governmental currency board of Hong Kong. Under licence from the HKMA, three commercial bank
s issue their own banknotes for general circulation in the region. Notes are also issued by the HKMA itself. In most countries of the world the issue of banknotes is handled exclusively by a single central bank
or government. The arrangements in Hong Kong are unusual but not unique; a comparable system is used in the United Kingdom, where eight banks issue banknotes.
In 1845, the first private bank, the Oriental Bank, was founded. However, banknotes were not produced until the 1860s, when the Oriental Bank, the Chartered Bank of India, Australia and China
and the Hong Kong and Shanghai Banking Company began issuing notes. Denominations issued in the 1860s and 1870s included 1, 5, 10, 25, 50, 100 and 500 dollars. These notes were not accepted by the Treasury for payment of government dues and tax
es, although they were accepted for use by merchants. 25 dollar notes did not survive beyond the end of the 19th century, whilst the 1 dollar notes (only produced by the HSBC) were issued until 1935.
Under the Currency Ordinance of 1935, banknotes in denominations of 5 dollars and above issued by the three authorised local banks, (the Mercantile Bank of India Limited, the Chartered Bank of India, Australia and China and the Hong Kong and Shanghai Banking Corporation, were all declared legal tender. The government took over production of 1 dollar notes. In 1941, the government introduced notes for 1, 5 and 10 cents due to the difficulty of transporting coins to Hong Kong caused by the Second World War (a ship carrying 1941 1 cent coins was sunk, making this unissued coin very rare). Just before the Japan
ese occupation, an emergency issue of 1 dollar notes was made consisting of overprinted Bank of China 5 yuan
notes.
In 1945, paper money production resumed essentially unaltered from before the war, with the government issuing 1, 5 and 10 cents, and 1 dollar notes, and the three banks issuing 5, 10, 50, 100 and 500 dollar notes. 1 dollar notes were replaced by coins in 1960, with only the 1 cent note issued by the government after 1965.
In 1975, the 5 dollar notes were replaced by a coin, whilst 1000 dollar notes were introduced in 1977. The Mercantile Bank was absorbed by the HSBC in 1978 and ceased issuing notes. In 1985, 20 dollar notes were introduced, whilst, in 1993, a 10 dollar coin was introduced and the banks stopped issuing 10 dollar notes. In 1994 the HKMA gave authority to the Bank of China
to issue notes.
After a less-than-successful trial from 1994 to 2002 to move the 10-dollar denomination from the banknote format (issued by the banks) to the coin format (Government-issued), 10 dollar banknotes are currently the only denomination issued by the HKMA, having acquired the note printing plant at Tai Po from the De La Rue Group of the UK on behalf of the Government. The older 10-dollar banknotes are, although rare and being phased out, still circulating.
A commemorative polymer ten dollar note was issued in July 2007 to commemorate the 10th anniversary of Hong Kong's return to China. The new notes will circulate along with other issues for a trial period of two years, though the initial batch released was largely snapped up by collectors.
A new series on banknotes will be issued in 2010 and 2011
The important underpinnings of the linked exchange rate system include the strong official reserves of Hong Kong, a sound and robust banking system, fiscal prudence and a flexible economic structure.
In 2007, Jim Rogers
, a former partner in George Soros
's Quantum Fund
, said the Government should abolish the Hong Kong dollar and adopt the yuan
as the official currency of the territory when the renminbi
is freely convertible.(As of 2007, the renminbi was not, and still is not, freely convertible.) However, in the same year, Rogers changed his position and believe the Hong Kong Government should adopt the renminbi even when it is non-freely convertible. "This is 2007; I don't know why the Hong Kong dollar exists any more.... You have a gigantic neighbor who is becoming the most incredible economy in the world." Rogers also believes the renminbi is going to replace the US dollar as world reserve currency.
Currency sign
A currency sign is a graphic symbol used as a shorthand for a currency's name, especially in reference to amounts of money. They typically employ the first letter or character of the currency, sometimes with minor changes such as ligatures or overlaid vertical or horizontal bars...
: $; code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...
: HKD) is the currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
of the jurisdiction. It is the eighth most traded currency in the world. In English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...
, it is normally abbreviated with the dollar sign
Dollar sign
The dollar or peso sign is a symbol primarily used to indicate the various peso and dollar units of currency around the world.- Origin :...
$, or alternatively HK$ to distinguish it from other dollar
Dollar
The dollar is the name of the official currency of many countries, including Australia, Belize, Canada, Ecuador, El Salvador, Hong Kong, New Zealand, Singapore, Taiwan, and the United States.-Etymology:...
-denominated currencies. The Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
dollar is subdivided into 100 cents
Cent (currency)
In many national currencies, the cent is a monetary unit that equals 1⁄100 of the basic monetary unit. Etymologically, the word cent derives from the Latin word "centum" meaning hundred. Cent also refers to a coin which is worth one cent....
.
Terminology
In formal Cantonese, the 圓 character is used. In spoken Cantonese, 蚊 is used, perhaps a transliterationTransliteration
Transliteration is a subset of the science of hermeneutics. It is a form of translation, and is the practice of converting a text from one script into another...
of the first syllable of "money", although some suggest that the character is a corruption
Corruption (grammar)
Corruption or bastardisation is a way of referring to certain changes in a language and their prescriptive evaluation. The most common way that a word can be said to be corrupted is the change of its spelling through errors and gradual changes in comprehension, transcription, and hearing. This is...
of 緡. 元 is also used informally. The dollar is divided into 100 cents, with the character 仙 (a transliteration of "cent") used on coins and in spoken Cantonese. 分 is used in Mandarin. The amount of 10 cents is called 1 houh in Cantonese (毫 on coins and in spoken Cantonese, 毫子 in colloquial speech, 角 in Mandarin). The mil was known as the man or tsin in Cantonese (萬 or 千 on coins and in spoken Cantonese and Mandarin).
To express prices in spoken Cantonese, for example $7.80, the phrase is 七個八 (chat go baat, seven units and eight [decimals]); in financial terms, where integer values in cents exist, e.g., $6.75, the phrase is 六個七毫半 (luhk go chat houh bun, six and seven "houh" half) ["bun" in Yale Romanisation sounds like the American pronunciation of "boon"] (fives in cents is normally expressed as "half", unless followed by another five, such as 55 cents when preceded by a dollar value); $7.08 is 七蚊零八仙 (seven dollars "ling" (zero) eight cents).
Slang terms
In Hong Kong, the following are slang terms used to refer to various amounts of money:- 辰砂: cents (Rarely used; lit. cinnabarCinnabarCinnabar or cinnabarite , is the common ore of mercury.-Word origin:The name comes from κινναβαρι , a Greek word most likely applied by Theophrastus to several distinct substances...
, groundMortar and pestleA mortar and pestle is a tool used to crush, grind, and mix solid substances . The pestle is a heavy bat-shaped object, the end of which is used for crushing and grinding. The mortar is a bowl, typically made of hard wood, ceramic or stone...
(therefore small-size) which used in Chinese medicine) - 斗零: 5¢ coins (lit. weight of the coin,approximately 1.37g; 5¢ is no longer in circulation.)
- 大餅: $1 (lit. big cracker; Refer to its circular shape.)
- 草／兜／條: $10 (lit. grass/bowl/stripe; Slang terms.)
- 青蟹: $10 (lit. green crab; Refer to the colour of the old style banknotes.)
- 花蟹／公仔紙: $10 (lit. flowery crab, colourful paper; Refer to the colour of the new style banknotes.)
- 舊水: $100 (lit. a lump of water; "Water" stands for money in Cantonese)
- 紅底、紅衫魚: $100 (lit. red back, red snapperRed snapper (fish)The red snapper, Lutjanus campechanus, is a fish found in the Gulf of Mexico and the southeastern Atlantic coast of the United States and, much less commonly, northward as far as Massachusetts. In Latin American Spanish it is known as huachinango or pargo...
; Refer to the red colour of the notes.) - 大牛: $500 (lit. big bullBullBull usually refers to an uncastrated adult male bovine.Bull may also refer to:-Entertainment:* Bull , an original show on the TNT Network* "Bull" , an episode of television series CSI: Crime Scene Investigation...
); Refer to a picture of a bull on the note in pre-war.) - 金牛: $1,000 (lit. golden bull; Refer to the gold colour of the notes.)
- 棟: $1,000 (lit. building; Uncommon slang term.)
- 皮: $10,000 (lit. skin; Slang term.)
- 雞嘢: $10,000 (lit. chicken stuff; Uncommon slang term, can also mean $1)
- 餅: $10,000 (lit. cracker; Uncommon slang term.)
- 球: $1,000,000 (lit. ball; Slang term, usually used in buying stocks.)
- 碼: $1,000,000,000 (lit. yard; )
Some of these terms are also used by overseas Chinese
Overseas Chinese
Overseas Chinese are people of Chinese birth or descent who live outside the Greater China Area . People of partial Chinese ancestry living outside the Greater China Area may also consider themselves Overseas Chinese....
to refer their local currency.
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 rupeeRupee
The rupee is the common name for the monetary unit of account in India, Sri Lanka, Nepal, Pakistan, Mauritius, Seychelles, Maldives, and formerly in Burma, and Afghanistan. Historically, the first currency called "rupee" was introduced in the 16th century...
s, Spanish and Mexican 8 reales
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...
, and Chinese cash coins circulated. Since 1825, it had been the policy of the British government to introduce sterling
Sterling
Sterling may refer to:* Sterling silver, a grade of silver* Pound sterling, the currency of the United Kingdom- Businesses :* Hotel Sterling, a former hotel in Wilkes-Barre, Pennsylvania, United States* Sterling Airlines...
silver coinage to all of its colonies, and to this end, in 1845, the Spanish and Mexican 8 reales coins were set at a legal tender value of 4 shillings 2 pence sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
. But just as in the case of the British North America
British North America
British North America is a historical term. It consisted of the colonies and territories of the British Empire in continental North America after the end of the American Revolutionary War and the recognition of American independence in 1783.At the start of the Revolutionary War in 1775 the British...
n colonies, the attempts to introduce the sterling coinage failed to overcome the strong local adherence to the silver Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...
system.
By the year 1858, London 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
Royal Mint
The Royal Mint is the body permitted to manufacture, or mint, coins in the United Kingdom. The Mint originated over 1,100 years ago, but since 2009 it operates as Royal Mint Ltd, a company which has an exclusive contract with HM Treasury to supply all coinage for the UK...
in London began issuing special subsidiary coinage for use in Hong Kong within the dollar system. In 1866, a local mint was established at Sugar Street
Sugar Street
Sugar Street is a street located in Causeway Bay, Hong Kong. From 1866 to 1868, it was the location the Hong Kong Mint, the only mint in Hong Kong....
in Causeway Bay
Causeway Bay
Causeway Bay is a heavily built-up area of Hong Kong, People's Republic of China, located on the Hong Kong Island, and covering parts of Wan Chai and Eastern districts. The Chinese name is also romanized as Tung Lo Wan as in Tung Lo Wan Road...
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 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 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 USA 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 US dollar and the Canadian dollar
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
.
By 1895, the circumstances had changed to the extent that there was now a dearth of Mexican dollars and the authorities in both Hong Kong and the Straits Settlements
Straits Settlements
The Straits Settlements were a group of British territories located in Southeast Asia.Originally established in 1826 as part of the territories controlled by the British East India Company, the Straits Settlements came under direct British control as a crown colony on 1 April 1867...
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 as between the Hong Kong unit and the Straits unit.
By 1935, only Hong Kong and China remained on the silver standard In that year, Hong Kong, shortly after China, abandoned silver and introduced a crawling peg to sterling of 1 pound = 15.36 to 16.45 dollars. 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
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
of Hong Kong was finally unified. In 1939, the dollar was put on a fixed peg of 16 dollars = 1 pound (1 dollar = 1 shilling 3 pence).
During the Japanese occupation
Japanese occupation of Hong Kong
The Japanese occupation of Hong Kong began after the Governor of Hong Kong, Sir Mark Young, surrendered the territory of Hong Kong to Japan on 25 December 1941 after 18 days of fierce fighting by British and Canadian defenders against overwhelming Japanese Imperial forces. The occupation lasted...
, Japanese military yen
Japanese military yen
Japanese Military Yen , commonly abbreviated as JMY, was the :currency issued to the soldiers of the Imperial Japanese Army and the Imperial Japanese Navy as a salary. The Imperial Japanese government first started issuing the military yen during the Russo-Japanese War in 1904...
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 yen = 2 dollars. However, in August 1942, the rate was changed to 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 the authorised local banks after liberation, with the pre-war rate of 16 dollars = 1 pound being restored. The yen was exchanged at a rate of 100 yen = 1 dollar. On 6 September 1945, all yen notes were declared void.
In 1967, when sterling was devalued, the dollar's peg to the pound was increased from 1 shilling 3 pence to 1 shilling 4½ pence (14.5455 dollars = 1 pound) although this did not entirely offset the devaluation. In 1972, the Hong Kong dollar was pegged to the U.S. dollar at a rate of 5.65 H.K. dollar = 1 U.S. dollar. This was revised to 5.085 H.K. dollar = 1 U.S. dollar in 1973. Between 1974 and 1983, the Hong Kong dollar floated. On 17 October 1983, the currency was pegged at a rate of 7.8 H.K. dollar = 1 U.S. dollar, through the currency board system.
As of 18 May 2005, in addition to the lower guaranteed limit, a new upper guaranteed limit was set for the Hong Kong dollar at 7.75 to the American dollar. The lower limit will be lowered from 7.80 to 7.85 in five weeks, by 100 pip
Percentage in point
In finance, a percentage in point is the smallest commonly quoted change of an exchange rate of a currency pair.The major currencies, except the Japanese yen, are priced to four decimal places. For these currencies a pip is one unit of the fourth decimal point, or 1/100th of one percent...
s (0.01) each week. The Hong Kong Monetary Authority indicated this move is to narrow the gap between the interest rates in Hong Kong and those of the United States. A further aim of allowing the Hong Kong dollar to trade in a range is to avoid the HK dollar being used as a proxy for speculative bets on a renminbi revaluation.
The Basic Law of Hong Kong and the Sino-British Joint Declaration
Sino-British Joint Declaration
The Sino-British Joint Declaration, formally known as the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People's Republic of China on the Question of Hong Kong, was signed by the Prime Ministers, Zhao Ziyang and Margaret...
provides that Hong Kong retains full autonomy with respect to currency issuance. Currency in Hong Kong is issued by the government and three local banks under the supervision of the territory's de facto central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
, the Hong Kong Monetary Authority
Hong Kong Monetary Authority
The Hong Kong Monetary Authority or HKMA is Hong Kong's central banking institution . It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking"...
. Bank notes are printed by Hong Kong Note Printing Limited
Hong Kong Note Printing Limited
Hong Kong Note Printing Limited prints the bank notes of all the three note-issuing banks in Hong Kong.The banknote printing plant was founded in 1984 by Thomas De La Rue in Tai Po. In April 1996, the Hong Kong Government purchased the plant through the Exchange Fund, and operated it under the...
.
A bank can issue a Hong Kong dollar only if it has the equivalent exchange in US dollars on deposit. The currency board system ensures that Hong Kong's entire monetary base is backed with US dollars at the linked exchange rate. The resources for the backing are kept in Hong Kong's exchange fund
Exchange fund
An Exchange Fund or Swap Fund is a mechanism specific to the U.S., first introduced in late 1990s that allows holders of large amount of a single stock to diversify into a basket of other stocks without directly selling their stock....
, which is among the largest official reserves in the world. Hong Kong also has huge deposits of US dollars, with official foreign currency reserves of 281.7 Billion USD as of October 2011.
Coins
In 1863, 1 mil, 1 and 10 cent coins were introduced, followed in 1866 by 5 and 20 cents, ½ and 1 dollar. The 1 mil and 1 cent were struck in bronze, with the 1 mil a holed coin. The remaining coins were struck in silver. Production of the 1 mil ended in 1866, whilst that of the ½ and 1 dollar ceased in 1868, with only the ½ dollar (now with the denomination given as 50 cents) resuming production in 1890. Production of all silver coins was suspended in 1905, only briefly resumed in 1932 and 1933 for the production of 5 cent coins.
In 1934, the last 1 cent coins were issued, but the last minting was 1941. These were not issued because of the Second World War. The following year (1935), cupro-nickel 5 and 10 cents were introduced, replaced by nickel in 1937 and nickel-brass between 1948 and 1949. Copper-nickel 50 cents were issued in 1951, these were changed to Nickel-brass in 1977.
In 1960, cupro-nickel 1 dollar coins were introduced, these were reduced in size in 1978. These were followed in 1975 by nickel-brass 20 cents and cupro-nickel 2 dollars (both scallop shaped), and in 1976 by decagon
Decagon
In geometry, a decagon is any polygon with ten sides and ten angles, and usually refers to a regular decagon, having all sides of equal length and each internal angle equal to 144°...
al, cupro-nickel 5 dollars, changed to a round thicker shape in 1980. The 5 cent was last issued in 1979, but last struck in 1988. In 1994, a bimetallic 10 dollar coin was introduced.
Starting in 1993, prior to the establishment of the SAR, coins with Queen Elizabeth II
Elizabeth II of the United Kingdom
Elizabeth II is the constitutional monarch of 16 sovereign states known as the Commonwealth realms: the United Kingdom, Canada, Australia, New Zealand, Jamaica, Barbados, the Bahamas, Grenada, Papua New Guinea, the Solomon Islands, Tuvalu, Saint Lucia, Saint Vincent and the Grenadines, Belize,...
's portrait were gradually withdrawn from circulation. Most of the notes and coins in circulations feature Hong Kong's Bauhinia blakeana
Bauhinia blakeana
Bauhinia blakeana is an orchid tree of the genus Bauhinia with large thick leaves and striking purplish red flowers. The fragrant, orchid-like flowers are usually across, and bloom from early November to the end of March...
flower or other symbols. Coins with the Queen's portrait are still legal tender and can be seen, but these are slowly being phased out.
Because the redesign was highly sensitive with regard to political and economic reasons, the designing process of the new coins could not be entrusted to an artist but was undertaken by Joseph Yam
Joseph Yam
The Honourable Joseph Yam Chi-kwong, GBM, GBS, CBE, JP is a Hong Kong statistician, economist and civil servant. Yam was the Chief Executive of the Hong Kong Monetary Authority from April 1993 to 1 October 2009.-Biography:...
, Chief Executive of the Hong Kong Monetary Authority
Hong Kong Monetary Authority
The Hong Kong Monetary Authority or HKMA is Hong Kong's central banking institution . It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking"...
, himself who found in the bauhinia the requested "politically neutral design" and did a secret scissors and paste job.
Banknotes
Hong Kong Monetary Authority
The Hong Kong Monetary Authority or HKMA is Hong Kong's central banking institution . It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking"...
(HKMA), the governmental currency board of Hong Kong. Under licence from the HKMA, three commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
s issue their own banknotes for general circulation in the region. Notes are also issued by the HKMA itself. In most countries of the world the issue of banknotes is handled exclusively by a single central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
or government. The arrangements in Hong Kong are unusual but not unique; a comparable system is used in the United Kingdom, where eight banks issue banknotes.
In 1845, the first private bank, the Oriental Bank, was founded. However, banknotes were not produced until the 1860s, when the Oriental Bank, the Chartered Bank of India, Australia and China
Chartered Bank of India, Australia and China
The Chartered Bank of India, Australia and China was a bank founded in London in 1851/1853 by Scotsman James Wilson following the grant of a Royal Charter from Queen Victoria. It opened its first branches in 1858 in Calcutta and Bombay and then in 1863 in Karachi and Shanghai...
and the Hong Kong and Shanghai Banking Company began issuing notes. Denominations issued in the 1860s and 1870s included 1, 5, 10, 25, 50, 100 and 500 dollars. These notes were not accepted by the Treasury for payment of government dues and tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
es, although they were accepted for use by merchants. 25 dollar notes did not survive beyond the end of the 19th century, whilst the 1 dollar notes (only produced by the HSBC) were issued until 1935.
Under the Currency Ordinance of 1935, banknotes in denominations of 5 dollars and above issued by the three authorised local banks, (the Mercantile Bank of India Limited, the Chartered Bank of India, Australia and China and the Hong Kong and Shanghai Banking Corporation, were all declared legal tender. The government took over production of 1 dollar notes. In 1941, the government introduced notes for 1, 5 and 10 cents due to the difficulty of transporting coins to Hong Kong caused by the Second World War (a ship carrying 1941 1 cent coins was sunk, making this unissued coin very rare). Just before the Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese occupation, an emergency issue of 1 dollar notes was made consisting of overprinted Bank of China 5 yuan
Chinese yuan
The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.A yuán is also known colloquially as a kuài . One yuán is divided into 10 jiǎo or colloquially máo...
notes.
In 1945, paper money production resumed essentially unaltered from before the war, with the government issuing 1, 5 and 10 cents, and 1 dollar notes, and the three banks issuing 5, 10, 50, 100 and 500 dollar notes. 1 dollar notes were replaced by coins in 1960, with only the 1 cent note issued by the government after 1965.
In 1975, the 5 dollar notes were replaced by a coin, whilst 1000 dollar notes were introduced in 1977. The Mercantile Bank was absorbed by the HSBC in 1978 and ceased issuing notes. In 1985, 20 dollar notes were introduced, whilst, in 1993, a 10 dollar coin was introduced and the banks stopped issuing 10 dollar notes. In 1994 the HKMA gave authority to the Bank of China
Bank of China
Bank of China Limited is one of the big four state-owned commercial banks of the People's Republic of China. It was founded in 1912 by the Government of the Republic of China, to replace the Government Bank of Imperial China. It is the oldest bank in China...
to issue notes.
After a less-than-successful trial from 1994 to 2002 to move the 10-dollar denomination from the banknote format (issued by the banks) to the coin format (Government-issued), 10 dollar banknotes are currently the only denomination issued by the HKMA, having acquired the note printing plant at Tai Po from the De La Rue Group of the UK on behalf of the Government. The older 10-dollar banknotes are, although rare and being phased out, still circulating.
A commemorative polymer ten dollar note was issued in July 2007 to commemorate the 10th anniversary of Hong Kong's return to China. The new notes will circulate along with other issues for a trial period of two years, though the initial batch released was largely snapped up by collectors.
A new series on banknotes will be issued in 2010 and 2011
Linked exchange rate system
The primary monetary policy objective of the Hong Kong Monetary Authority is to maintain exchange rate stability within the framework of the linked exchange rate system through sound management of the Exchange Fund, monetary operations and other means deemed necessary.The important underpinnings of the linked exchange rate system include the strong official reserves of Hong Kong, a sound and robust banking system, fiscal prudence and a flexible economic structure.
In 2007, Jim Rogers
Jim Rogers
James Beeland Rogers, Jr. is an American investor, author, and occasional financial commentator. He is currently based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc...
, a former partner in George Soros
George Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...
's Quantum Fund
Quantum Group of Funds
The Quantum Group of Funds are privately owned hedge funds based in Curaçao and Cayman Islands. They are currently advised by George Soros through his company Soros Fund Management. Soros started the fund in the early 1970s along with Jim Rogers...
, said the Government should abolish the Hong Kong dollar and adopt the yuan
Chinese yuan
The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.A yuán is also known colloquially as a kuài . One yuán is divided into 10 jiǎo or colloquially máo...
as the official currency of the territory when the renminbi
Renminbi
The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...
is freely convertible.(As of 2007, the renminbi was not, and still is not, freely convertible.) However, in the same year, Rogers changed his position and believe the Hong Kong Government should adopt the renminbi even when it is non-freely convertible. "This is 2007; I don't know why the Hong Kong dollar exists any more.... You have a gigantic neighbor who is becoming the most incredible economy in the world." Rogers also believes the renminbi is going to replace the US dollar as world reserve currency.
Historical exchange rates
| Period | Exchange rate regime | Features |
|---|---|---|
| 1863–1935 | Silver Standard | Silver dollars as legal tender |
| December 1935–June 1972 | Sterling exchange | Standard exchange rate:
|
| July 1972–November 1974 | Fixed exchange rate against the US dollar | Exchange rate:
|
| November 1974–October 1983 | Free floating | Exchange rates on selected days:
|
| 1983–Present | Linked exchange rate system |
(for issue and redemption of Certificates of Indebtedness)
(The HKMA undertakes to convert the HK dollars in licensed banks’ clearing accounts maintained with the HKMA into US dollars at the fixed exchange rate of HK$7.75 to US$1. The rate has been moving to 7.80 by 1 pip each calendar day starting from 1 April 1999 ending 12 August 2000.)
HKMA set up upper and lower guaranteed limit since 18 May 2005 |
See also
- Economy of Hong KongEconomy of Hong KongAs one of the world's leading international financial centres, Hong Kong has a major capitalist service economy characterised by low taxation and free trade, and the currency, Hong Kong dollar, is the ninth most traded currency in the world. Hong Kong has remained as the world's freest economy,...
- Tables of historical exchange rates to the United States dollar
External links
- Hong Kong Banknotes—note: historic bills, not current
- Hong Kong Numismatics
- History of Hong Kong Coins
- Historic Monthly Exchange Rate of HKD since 1975
- SinoBanknote