Chapter 5: Currency and Banking
IN 1841, when Hong Kong was founded, China's currency was based on uncoined silver. The normal unit for foreign trade throughout the Far East was the Spanish or Mexican silver dollar, and by a proclamation of 1842 Mexican or 'other Republican dollars' were declared to be the Colony's legal tender. Until 1862, however, the Government kept its accounts in sterling, and there were several unsuccessful attempts to change the basis of the Colony's money from silver to gold.
A mint producing a Hong Kong equivalent of the Mexican dollar was set up in 1866, but the new coin was not popular and the mint was closed down two years later, the machinery being sold to establish the first modern mint in Japan.
By an Order of the Queen in Council dated 2nd February, 1895, a British trade dollar, équivalent to the Mexican dollar, was authorized to be minted in India, and in Hong Kong this gradually replaced the Mexican dollar, although the latter still remained legal tender and the standard by which other dollars were judged. The sterling or gold value of the dollar varied with the price of silver. This gave Hong Kong a variable exchange relationship with London and the world at large, but a reasonably stable one with China.
In 1845 the Oriental Bank issued the first banknotes in the Colony, and was followed by the Chartered Bank of India, Australia and China, the Chartered Mercantile Bank of India, and the Hongkong and Shanghai Banking Cor- poration. Although not legal tender, these notes became more and more the customary means of payment, because of the inconvenience of dealing with large amounts of silver, and from 1890 onwards they were established by convention