60
HONG KONG ANNUAL REPORT
Bank)-the Oriental Bank having closed its doors and the Chartered Mercantile Bank of India having reorganized. In 1911 the reorganized Mercantile Bank of India (now the Mercantile Bank) was added to the list of authorized note-issuing banks.
The rising price of silver from 1931 onwards forced China to abandon the silver standard in 1935. Hong Kong followed. By the Currency Ordinance of that year, later renamed the Exchange Fund Ordinance, an exchange fund was set up to which note- issuing banks were obliged to surrender, in exchange for certificates of indebtedness, all silver previously held by them against their note issues. These certificates, which are non-interest-bearing and are issued or redeemed at the discretion of the Financial Secretary, became the_legal backing for the notes issued by the note-issuing banks, apart from their fiduciary issues. The silver surrendered by the banks was used to set up an exchange fund, which in practice keeps its assets in sterling and operates in a similar manner to the normal Colonial Currency Board. The Ordinance also made the banknotes legal tender. At the same time the Government under- took to issue one-dollar currency notes to replace the silver dollars in circulation; these are backed by a Note Security Fund, which maintains its assets partly in sterling and partly in Hong Kong dollar bank accounts. The Government at present also issues subsidiary coins to the value of 5 cents, 10 cents and 50 cents; and, during 1959, decided to re-introduce 1 dollar coins to replace the present 1 dollar notes in the course of time.
Since 1935 the value of the Hong Kong dollar has been main- tained at approximately 1/3d. sterling, although the banks may deal with the public at a few points on either side of this rate, both to allow for a profit margin and, to a slight extent, to meet fluctuations in demand and supply.
The total currency in nominal circulation at 31st December 1959 was:
Bank note issue
Government $1 note issue
Subsidiary notes and coin ...
$
837,565,340
35,741,500
22,692,085
The Colony has been a part of the sterling area since August 1941. Exchange Control is administered under powers conferred