FINANCIAL STRUCTURE
45
The certificates, which are non-interest-bearing and are issued and 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 has kept its assets in sterling and has operated in a similar manner to tradi- tional Colonial Currency Boards. The ordinance also made the banknotes legal tender.
At the same time the Government undertook to issue one-dollar currency notes to replace the silver dollars in circulation. In 1960, because of the heavy expense of keeping clean notes in circulation, a dollar coin of cupro-nickel and about the same size as a British florin was re-introduced. Although banks have been asked to withdraw all notes received in the course of business, many still remain unredeemed although few appear to be in active circulation. The dollar notes and coins are backed by security funds which maintain their assets partly in sterling and partly in Hong Kong dollar bank accounts. The Government also issues subsidiary coins of the value of 5 cents, 10 cents and 50 cents, and notes of the value of 1 cent.
三 The total currency in nominal circulation at December 31, 1968
was:
Bank note issue
Government $1 note issue Government $1 coin issue
Subsidiary coins and notes
:
$1,983,661,000
$
13,953,487
$
68,251,934
$
64,659,251
The Colony has been a part of the sterling area since August 1941. Exchange Control is administered under powers conferred by the Defence (Finance) Regulations 1940. The system of control is based on that in force in the United Kingdom, with some modi- fications made necessary by the position of Hong Kong as an entrepôt.
The exchange value of the Hong Kong dollar was established in 1935 at approximately 1s 3d. On the setting up of the International Monetary Fund after World War II, the Hong Kong dollar was given its own gold parity at a rate reflecting this relationship. Hong Kong followed fully Britain's 1949 devaluation, like the greater part of the sterling area. This relationship with sterling was