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IV.
CURRENCY AND BANKING.
At the time of Hong Kong's foundation in 1841 China's currency was on a basis of uncoined silver but the usual standard unit for foreign trade was the Spanish or Mexican dollar. These coins were the first legal tender in the new Colony and apart from one unsuccessful experiment in using United Kingdom coins alongside it the Mexican dollar became and remained until 1895 the standard coin. In 1895, in pursuance of Her Majesty's Order in Council dated 2nd February of that year, a British trade dollar, equivalent to the Mexican dollar, was minted and production of the Mexican dollar ceased, although it remained the standard by which others were judged. Its sterling or gold value varied with the price of silver, giving Hong Kong a variable exchange relationship with London and the world at large but reasonable stability with China. In 1853 the Chartered Bank of India issued the first Hong Kong banknotes, followed in 1866 by those of the Hongkong and Shanghai Banking Corporation. Although not legal tender these notes became more and more the customary means of payment and from 1890 onwards they were established by convention as practically the sole medium of exchange apart from subsidiary coinage. An Ordinance passed in 1895 had the effect of restricting the right of issuing banknotes to the three banks named. In 1935 the silver standard was aban- doned, and by the Currency Ordinance an exchange fund was set up, to which note-issuing banks were obliged to surrender all silver previously deposited against note issues and to deposit full sterling cover for all subsequent issues. Since that date the value of the Hong Kong dollar has been maintained at approximately 1/3d. sterling. At the end of 1950 its value in U.S.$ was 0.1725, and in Australian currency 1/6 d.
Note Issue and Banks
Notes of denominations from five dollars upwards are issued by the Hongkong and Shanghai Banking Corporation, the Chartered Bank of India, Australia and China, and the Mercantile Bank of India. The Government issue comprises notes of one dollar, ten cent, five cent and one cent denominations and coins of ten cent and five cent denominations.
The Colony is included in the sterling area. Exchange control is administered under powers conferred by the Defence (Finance) Regulations 1940. The system of control is based on that in force.
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